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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 31, 2000
BY AND AMONG
ALLIED CAPITAL CORPORATION,
ALLIED CAPITAL B SUB CORPORATION,
AND
BLC FINANCIAL SERVICES, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER; EFFECT OF MERGER................................ A-1
Section 1.1 The Merger.................................................. A-1
Section 1.2 Effective Time of the Merger................................ A-1
Section 1.3 Effects of Merger........................................... A-1
ARTICLE II THE SURVIVING CORPORATION................................... A-2
Section 2.1 Certificate of Incorporation................................ A-2
Section 2.2 By-Laws..................................................... A-2
Section 2.3 Officers and Directors...................................... A-2
ARTICLE III CONVERSION OF SHARES........................................ A-2
Section 3.1 Conversion of Shares........................................ A-2
Section 3.2 Surrender................................................... A-3
Section 3.3 Dividends; Transfer Taxes................................... A-4
Section 3.4 Fractional Securities....................................... A-4
Section 3.5 Closing of Company Transfer Books........................... A-4
Section 3.6 Stockholder Approval........................................ A-4
Section 3.7 Tax Treatment............................................... A-5
Section 3.8 Exercise and Conversion of Vested Stock Options and
Warrants.................................................... A-5
Section 3.9 Redemption or Conversion of Convertible Debentures.......... A-5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-5
Section 4.1 Execution and Delivery...................................... A-5
Section 4.2 Consents and Approvals...................................... A-6
Section 4.3 No Breach................................................... A-6
Section 4.4 Organization, Standing and Authority........................ A-7
Section 4.5 Capitalization of the Company............................... A-7
Section 4.6 Options and Other Stock Rights.............................. A-7
Section 4.7 Subsidiaries................................................ A-8
Section 4.8 Corporate Records........................................... A-8
Section 4.9 Information in Disclosure Documents......................... A-9
Section 4.10 SEC Documents; Financial Statements......................... A-9
Section 4.11 Liabilities................................................. A-10
Section 4.12 No Company Material Adverse Effect.......................... A-10
Section 4.13 Compliance with Laws........................................ A-10
Section 4.14 Permits..................................................... A-10
Section 4.15 Actions and Proceedings..................................... A-10
Section 4.16 Contracts and Other Agreements.............................. A-11
Section 4.17 Loan Portfolios............................................. A-13
Section 4.18 Real Property............................................... A-14
Section 4.19 Intellectual Property....................................... A-15
Section 4.20 Receivables................................................. A-16
Section 4.21 Banking..................................................... A-16
Section 4.22 Liens....................................................... A-16
Section 4.23 Employee Benefit Plans...................................... A-16
Section 4.24 Employee Relations.......................................... A-18
Section 4.25 Insurance................................................... A-18
Section 4.26 Officers, Directors, Employees, Consultants................. A-18
Section 4.27 Transactions with Directors, Officers and Affiliates........ A-19
Section 4.28 Operations of the Company................................... A-19
Section 4.29 Brokerage................................................... A-20
Section 4.30 Taxes....................................................... A-21
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Section 4.31 Environmental Laws.......................................... A-22
Section 4.32 Company Action.............................................. A-23
Section 4.33 Opinion of Financial Advisor................................ A-23
Section 4.34 Cancellation of Certain Agreements.......................... A-23
Section 4.35 Status of Certain Employment Agreements..................... A-23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............ A-24
Section 5.1 Execution and Delivery...................................... A-24
Section 5.2 Consents and Approvals...................................... A-24
Section 5.3 No Breach................................................... A-25
Section 5.4 SEC Documents; Financial Statements......................... A-25
Section 5.5 Shares of Parent Common Stock............................... A-26
Section 5.6 Organization, Standing and Authority of Parent and Sub...... A-26
Section 5.7 Capitalization.............................................. A-26
Section 5.8 Brokerage................................................... A-26
Section 5.9 Information in Disclosure Documents......................... A-26
Section 5.10 No Material Adverse Change.................................. A-27
Section 5.11 Sub Action.................................................. A-27
Section 5.12 Options and Other Stock Rights.............................. A-27
Section 5.13 Tax Information in Disclosure Documents..................... A-27
Section 5.14 Liabilities................................................. A-28
Section 5.15 Compliance with Laws........................................ A-28
Section 5.16 Permits..................................................... A-28
Section 5.17 Actions and Proceedings..................................... A-28
Section 5.18 Loan Portfolio.............................................. A-28
Section 5.19 No Prior Activities......................................... A-29
ARTICLE VI COVENANTS AND AGREEMENTS.................................... A-29
Section 6.1 Conduct of Business......................................... A-29
Section 6.2 Litigation Involving the Company............................ A-30
Section 6.3 Continued Effectiveness of Representations and Warranties of
the Parties................................................. A-30
Section 6.4 Corporate Examinations and Investigations;
Confidentiality............................................. A-31
Section 6.5 Indemnification of Company Officers and Directors........... A-31
Section 6.6 Registration Statement/Proxy Statement...................... A-32
Section 6.7 Compliance with the Securities Act.......................... A-32
Section 6.8 Nasdaq Listing.............................................. A-32
Section 6.9 Acquisition Proposals....................................... A-32
Section 6.10 Parent and Sub Approvals.................................... A-34
Section 6.11 Company Approvals........................................... A-34
Section 6.12 Nomination to Surviving Company Board....................... A-34
Section 6.13 Expenses.................................................... A-35
Section 6.14 Further Assurances.......................................... A-35
Section 6.15 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇........................................... A-35
Section 6.16 SBA Approval................................................ A-35
Section 6.17 Updating Schedules.......................................... A-36
Section 6.18 Employee Benefits........................................... A-36
Section 6.19 Company Recapitalization.................................... A-36
ARTICLE VII CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER.................................................. A-37
Section 7.1 Company Stockholder Approval................................ A-37
Section 7.2 Listing of Shares........................................... A-37
Section 7.3 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇........................................... A-37
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Section 7.4 Effectiveness of Registration Statement..................... A-37
Section 7.5 SBA Approval................................................ A-37
Section 7.6 Litigation.................................................. A-37
Section 7.7 Futuronics Merger; Company Recapitalization................. A-37
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATION OF PARENT AND SUB TO
EFFECT THE MERGER........................................... A-38
Section 8.1 Representations and Covenants............................... A-38
Section 8.2 Absence of Material Adverse Change.......................... A-38
Section 8.3 Receipt of Agreements....................................... A-38
Section 8.4 Exercise and Conversion of Vested Stock Options and
Warrants.................................................... A-38
Section 8.5 Unvested Options............................................ A-38
Section 8.6 Convertible Debentures...................................... A-38
Section 8.7 Tax Opinion................................................. A-38
Section 8.8 Closing Conditions.......................................... A-39
ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
EFFECT THE MERGER........................................... A-39
Section 9.1 Representations and Covenants............................... A-39
Section 9.2 Absence of Material Adverse Change.......................... A-39
Section 9.3 Tax Opinion................................................. A-39
Section 9.4 Closing Conditions.......................................... A-39
ARTICLE X CLOSING..................................................... A-40
ARTICLE XI NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES COVENANTS AND
AGREEMENTS.................................................. A-40
Section 11.1 Non-Survival of Representations, Warranties, Covenants and
Agreements.................................................. A-40
ARTICLE XII TERMINATION OF AGREEMENT.................................... A-40
Section 12.1 Termination................................................. A-40
Section 12.2 Effect of Termination....................................... A-41
ARTICLE XIII DEFINITIONS................................................. A-41
Section 13.1 Definitions................................................. A-41
ARTICLE XIV MISCELLANEOUS............................................... A-47
Section 14.1 Publicity................................................... A-47
Section 14.2 Parent Guaranty............................................. A-47
Section 14.3 Notices..................................................... A-47
Section 14.4 Entire Agreement............................................ A-48
Section 14.5 Waivers and Amendments; Non Contractual Remedies;
Preservation of Remedies; Liability......................... A-48
Section 14.6 GOVERNING LAW............................................... ▇-▇▇
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇; No Assignment............................... A-48
Section 14.8 Third Party Beneficiaries................................... A-49
Section 14.9 Counterparts................................................ A-49
Section 14.10 Exhibits and Schedules...................................... A-49
Section 14.11 Headings.................................................... A-49
Section 14.12 Submission to Jurisdiction; Venue........................... A-49
Section 14.13 Specific Performance........................................ A-49
Section 14.14 Severability................................................ A-50
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
31, 2000, is made by and among Allied Capital Corporation, a Maryland
corporation ("Parent"), Allied Capital B Sub Corporation, a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), and BLC Financial Services,
Inc., a Delaware corporation (the "Company"). Certain terms used in this
Agreement are defined in Article XIII.
WITNESSETH:
WHEREAS, Parent and Sub desire to effect a business combination by means of
the merger of Sub with and into the Company;
WHEREAS, the Board of Directors of Parent and Sub and the stockholder of
Sub and the Board of Directors of the Company have approved the merger of Sub
with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein;
WHEREAS, simultaneously with the execution of this Agreement, the Named
Persons and Parent are entering into a Voting Agreement in the form attached
hereto as Exhibit A (the "Voting Agreement"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:
ARTICLE I
THE MERGER; EFFECT OF MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement and in accordance with the applicable provisions of the Delaware
General Corporation Law, as amended, and any rules and regulations thereunder
(the "Delaware Corporation Law"), Sub shall be merged with and into the Company
and the separate existence of Sub shall thereupon cease. The name of the
Company, as the surviving corporation in the Merger (the "Surviving
Corporation"), shall by virtue of the Merger be changed to such name as Parent,
in its sole discretion, may choose.
SECTION 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time as a properly executed certificate of merger or other
appropriate document is duly filed with the Secretary of State of Delaware,
which filing shall be made as soon as practicable following fulfillment or
waiver of the conditions set forth in Articles VII, VIII and IX hereof or such
later time as is specified in such filing (the "Effective Time").
SECTION 1.3 EFFECTS OF MERGER. The Merger shall have the effects set forth
in Section 259 of the Delaware Corporation Law.
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ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 CERTIFICATE OF INCORPORATION. The certificate of incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, and thereafter may be
amended in accordance with its terms and as provided by the Delaware Corporation
Law.
SECTION 2.2 BY-LAWS. The by-laws of the Company as in effect immediately
prior to the Effective Time shall be the by-laws of the Surviving Corporation,
and thereafter may be amended in accordance with their terms and as provided by
the Delaware Corporation Law.
SECTION 2.3 OFFICERS AND DIRECTORS. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation after the Effective Time and the directors of Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation after
the Effective Time, in each case until their respective successors are duly
elected and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 CONVERSION OF SHARES. (a) At the Effective Time, by virtue of
the Merger and without any action on the part of any Company stockholder:
(1) Conversion of Company Common Stock. Each share of Company Common Stock
outstanding after giving effect to the Company Recapitalization shall
be converted into 0.180 fully paid and nonassessable shares of Parent
Common Stock (the "Exchange Ratio").
(2) Each share of Company Class B Stock outstanding upon consummation of
the Company Recapitalization shall be converted into one validly
issued, fully paid and nonassessable share of Company Common Stock.
(3) Cancellation of Company Treasury Stock. All shares of Company Common
Stock which are held in the treasury of the Company upon consummation
of the Company Recapitalization shall be canceled and shall cease to
exist.
(b) If at any time prior to the Effective Time, the outstanding shares
of Parent Common Stock shall be changed into a different number of shares
or a different class by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or if a stock
dividend thereon shall be declared with a record date within such period,
the Exchange Ratio shall be correspondingly adjusted. The issuance of
shares of Parent Common Stock pursuant to Parent's dividend reinvestment
plan consistent with past practices shall not constitute a stock dividend
for this purpose.
(c) Each issued and outstanding share of capital stock of Sub shall be
converted into that number of validly issued, fully paid and non-assessable
shares of Company Common Stock as shall result in (i) the sum of the
aggregate number of shares of Company Common Stock issued to Parent upon
such conversion plus (ii) the aggregate number of shares of Company Common
Stock issued to Futuronics pursuant to Section 3.1(a)(2) being equal to
94.9 percent of the total number of shares of Company Common Stock issued
pursuant to Section 3.1(a)(2) and this Section 3.1(c).
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(d) All Company Common Stock outstanding immediately after the Company
Recapitalization and immediately prior to the Effective Time (the "Canceled
Company Stock") shall cease to exist, and each certificate previously
representing such Canceled Company Stock shall (subject to Section 3.3)
thereafter represent for all corporate purposes the shares of Parent Common
Stock into which such shares of Canceled Company Stock have been converted
pursuant to the Merger. Certificates previously representing such shares of
Canceled Company Stock shall be exchanged for a confirmation of ownership
of Parent Common Stock issued in consideration therefor upon surrender in
accordance with Section 3.2, without interest.
(e) The Parent shall issue shares of Parent Common Stock to be issued
in the Merger in uncertificated form, and in accordance with Section 3.2
shall send to each person entitled to receive such shares the information
required under Section 2-210(c) of the Maryland General Corporation Law
with respect to such shares (a "Confirmation").
SECTION 3.2 SURRENDER. (a) Prior to the Closing, Parent shall select a
person or persons to act as exchange agent for the Merger (the "Exchange
Agent"), which person or persons shall be reasonably acceptable to the Company,
for the purpose of exchanging certificates representing Canceled Company Stock
for Confirmations as to the Share Consideration. On the Closing Date, the
Surviving Corporation shall deliver to the Exchange Agent, in trust for the
benefit of the holders of Canceled Company Stock immediately prior to the
Effective Time (the "Converting Stockholders"), the Share Consideration and
related information. As soon as reasonably practicable after the Effective Time
but in no event more than five Business Days after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to send a notice and a
letter of transmittal to each Converting Stockholder advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent for cancellation such holder's certificates representing Canceled Company
Stock ("Certificates"), in exchange for the Share Consideration. Each Converting
Stockholder will be entitled to receive, upon surrender to the Exchange Agent
for cancellation of one or more Certificates, a Confirmation representing the
number of shares of Parent Common Stock into which such shares are converted in
the Merger. Parent Common Stock into which Canceled Company Stock shall be
converted in the Merger shall be deemed to have been issued at the Effective
Time (the "Share Consideration"). In the event that any Converting Stockholder's
Certificates have been lost, stolen or destroyed, such Converting Stockholder
will be entitled to receive the Share Consideration only after providing an
affidavit of loss and indemnity bond, in form satisfactory to the Exchange
Agent.
(b) Converting Stockholders shall be entitled, at and after the
Effective Time, to vote the number of shares of Parent Common Stock into
which their shares of Canceled Company Stock shall have been converted so
long as they remain record holders of such shares of Parent Common Stock,
regardless of whether the Certificates formerly representing the Canceled
Company Stock shall have been surrendered in accordance with this Section
3.2 or a Confirmation with respect to such shares of Parent Common Stock
shall have been issued.
(c) Any Converting Stockholder who has not exchanged his Certificates
for Parent Common Stock in accordance with subsection (a) within six months
after the Effective Time shall have no further claim upon the Exchange
Agent, and shall thereafter look only to Parent and the Surviving
Corporation for payment in respect of his shares of Canceled Company Stock.
Until so surrendered, Certificates shall represent solely the right to
receive the Share Consideration. If any Certificates entitled to payment
pursuant to Section 3.1 shall not have been surrendered for such payment
prior to such date on which any
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payment in respect thereof would otherwise escheat to or become the
property of any Governmental Entity, the shares of Canceled Company Stock
represented thereby shall, to the extent permitted by applicable law, be
deemed to be canceled and no money or other property will be due to the
holder thereof.
SECTION 3.3 DIVIDENDS; TRANSFER TAXES. No dividends that are declared or
made with respect to Parent Common Stock will be paid to persons entitled to
receive Confirmations representing Parent Common Stock pursuant to this
Agreement until such persons surrender their Certificates, together with a
properly completed letter of transmittal. Such dividends shall instead be paid
to the Exchange Agent on behalf of, and as nominee for, such person, and held by
the Exchange Agent in a non-interest bearing account. Upon such surrender, there
shall be paid to the person in whose name the Confirmation representing such
Parent Common Stock shall be issued dividends which shall have become payable
with respect to such Parent Common Stock in respect of any record date occurring
after the Effective Time. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. Dividends paid to
the Exchange Agent pursuant to this Section 3.3 that remain unclaimed by the
holders of Canceled Company Stock shall not revert or be returned to the Parent,
and the Parent hereby waives any rights it may have to such assets. In the event
that any portion of the Share Consideration for any shares of Parent Common
Stock is to be delivered to a person other than that in which the Certificates
surrendered in exchange therefor are registered, it shall be a condition of such
delivery that the Certificate or Certificates so surrendered shall be properly
endorsed or be otherwise in proper form for transfer (including signature
guarantee) and that the person requesting such delivery shall pay to the
Exchange Agent any transfer or other taxes required by reason of such delivery
to a person 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. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
shares of Canceled Company Stock for any shares of Parent Common Stock or
dividends thereon delivered to a public official pursuant to any applicable
escheat laws.
SECTION 3.4 FRACTIONAL SECURITIES. Parent shall issue fractional shares of
Parent Common Stock to the extent the conversion results in a fraction of a
share, in which case such fraction shall be rounded to the nearest
one-thousandth of a share (rounding upward from the mid-point between
thousandths of a share).
SECTION 3.5 CLOSING OF COMPANY TRANSFER BOOKS. Immediately prior to the
Effective Time, the Company Common Stock transfer books shall be closed and no
transfer of Canceled Company Stock shall thereafter be made.
SECTION 3.6 STOCKHOLDER APPROVAL. The Company shall take all action
necessary, in accordance with applicable law and its Certificate of
Incorporation and By-Laws, to convene a special meeting of the holders of
Company Common Stock (the "Company Meeting") as promptly as practicable for the
purpose of considering and taking action upon this Agreement and the Company
Recapitalization. The Board of Directors of the Company has approved the Merger
and the Company Recapitalization and adopted this Agreement and recommended that
holders of Company Common Stock vote in favor of and approve the Merger and the
Company Recapitalization and the adoption of this Agreement at the Company
Meeting. Notwithstanding the foregoing, nothing in this Section 3.6 shall
preclude or limit the Board of Directors of the Company from complying with its
fiduciary duties under applicable law.
SECTION 3.7 TAX TREATMENT. The Merger is intended to constitute a
reorganization under Section 368(a) of the Code, and Parent and the Company
shall not report the transaction on
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any tax return in a manner or take any action in any audit or other judicial or
administrative proceeding or otherwise that is inconsistent therewith.
SECTION 3.8 EXERCISE AND CONVERSION OF VESTED STOCK OPTIONS AND
WARRANTS. The Company shall use all reasonable efforts to cause all vested
Company Stock Options and all Company Warrants to be fully exercised for the
purchase of Company Common Stock prior to the Effective Time, and may make full
recourse loans to the holders of such Company Stock Options or otherwise arrange
for the cashless exercise thereof.
SECTION 3.9 REDEMPTION OR CONVERSION OF CONVERTIBLE DEBENTURES. The
Company shall use all reasonable efforts to redeem all outstanding Company
Convertible Debentures prior to the Effective Time in accordance with the terms
thereof to the extent not converted into Company Common Stock in accordance with
the terms thereof prior to such time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except as set
forth in the disclosure schedule attached hereto (the "Company Disclosure
Schedule"), which Company Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and may be amended from time to time pursuant to the provisions hereof:
SECTION 4.1 EXECUTION AND DELIVERY. The Company has the corporate power
and authority to enter into this Agreement and each other agreement, document or
instrument contemplated hereby or to be executed in connection herewith to which
the Company is a party (the "Company Documents") and, subject to approval of
this Agreement by the holders of the Company Common Stock, to carry out its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and the Company Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Company's Board of Directors. This Agreement constitutes the
valid and binding obligation of the Company and the Company Documents, when
executed and delivered, will constitute the valid and binding obligations of the
Company, in each case enforceable in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought. Except for the approval of the holders of a majority of the
outstanding shares of Company Common Stock, no other corporate proceedings on
the part of the Company are necessary after the date of this Agreement to
authorize this Agreement and the Company Documents and the transactions
contemplated hereby and thereby.
SECTION 4.2 CONSENTS AND APPROVALS. The execution and delivery by the
Company of this Agreement and the Company Documents, the performance by the
Company of its obligations hereunder and thereunder, and the consummation by the
Company of the transactions contemplated hereby and thereby, as the case may be,
do not require the Company to obtain any consent, approval or action of, or make
any filing or registration with, or give any notice to, any person or any
Governmental Entity, other than (i) in connection, or in compliance, with the
provisions of the H-S-R Act, if applicable, and the Exchange Act, which will be
duly obtained or made, as the case may be, on or prior to the Closing, and will
be in full force and effect on the Closing Date, (ii) in the case of the
performance by the
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Company of its obligations hereunder and under the Company Documents and the
consummation by the Company of the transactions contemplated hereby and by the
Company Documents, the approval of the holders of the Company Common Stock as
specified in Section 4.1, (iii) the approval of the United States Small Business
Administration (the "SBA"), (iv) the filing of the Certificate of Merger with
the Secretary of State of Delaware and (v) any approvals from any party required
under any of the Company's or its Subsidiaries' existing financing agreements as
set forth on Section 4.2(v) of the Company Disclosure Schedule.
SECTION 4.3 NO BREACH. Except as set forth in Section 4.3 of the Company
Disclosure Schedule and for filings, notices, consents and approvals as may be
required by Delaware Corporation Law, the Securities Act, the Exchange Act and
the 1940 Act, the execution, delivery and performance by the Company of this
Agreement and the Company Documents and the consummation by the Company of the
transactions contemplated hereby and thereby in accordance with the terms and
conditions hereof and thereof will not (i) violate any provision of the
Certificate of Incorporation or By-Laws of the Company; (ii) violate, conflict
with or result in the breach of any of the terms of, result in any modification
of the effect of, otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both, constitute) a
default under, any contract or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by or to which the assets or
properties of the Company or any of its Subsidiaries may be bound or subject;
(iii) violate any order, judgment, injunction, award or decree of any
Governmental Entity against, or binding upon, or any agreement with, or
condition imposed by, any Governmental Entity, binding upon the Company or any
of its Subsidiaries, or upon the securities, assets or business of the Company
or any of its Subsidiaries; (iv) violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to the Company or any of
its Subsidiaries, or to the securities, assets or business of the Company or any
of its Subsidiaries; (v) result in the creation or imposition of any lien or
other encumbrance or the acceleration of any indebtedness or other obligation of
the Company or any of its Subsidiaries; or (vi) result in the breach of any of
the terms or conditions of, constitute a default under, or otherwise cause a
violation of, any Permit of the Company or any of its Subsidiaries; except in
the case of (ii) through (vi) above, for violations, conflicts, breaches,
defaults, modifications, impairments, liens or other encumbrances that would
not, individually or in the aggregate, have a material adverse effect on the
funding, management, business, properties, assets, condition (financial or
otherwise), liabilities or operations of the Company and its Subsidiaries, taken
as a whole, or adversely affect the consummation of the transactions
contemplated hereby in any material respect, but excluding therefrom any such
change, effect, event, occurrence or state of facts resulting from or arising in
connection with (A) changes or conditions generally affecting the industries in
which the Company or its Subsidiaries operate, except to the extent the changes
or conditions referred to in this Clause (A) affect the funding of the Company
and its Subsidiaries or (B) this Agreement, the transactions contemplated hereby
or the announcement thereof (a "Company Material Adverse Effect").
SECTION 4.4 ORGANIZATION, STANDING AND AUTHORITY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its assets, properties and business and to
carry on its business as now being conducted or currently proposed to be
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of such activities make
such qualification necessary, except where the failure to so qualify would not,
individually or in the aggregate, have a Company Material Adverse Effect. All
such jurisdictions are set forth on Section 4.4 of the
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Company Disclosure Schedule. The copies of the Certificate of Incorporation and
By-Laws of the Company included as part of Section 4.4 of the Company Disclosure
Schedule constitute accurate and complete copies of such organizational
instruments and accurately reflect all amendments thereto through the date
hereof.
SECTION 4.5 CAPITALIZATION OF THE COMPANY. The authorized capital stock of
the Company consists of 35,000,000 shares of Company Common Stock. As of the
date of this Agreement there were 22,061,443 shares of Company Common Stock
outstanding. Except as set forth in Section 4.5 of the Company Disclosure
Schedule, as of the date hereof there are no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which the Company's
stockholders may vote issued or outstanding. Section 4.5 of the Company
Disclosure Schedule sets forth a true and complete list as of the date indicated
of the holders of all (i) outstanding vested and unvested Company Stock Options,
(ii) outstanding Company Convertible Debentures and (iii) outstanding Company
Warrants, showing as to each such holder the number of Company Stock Options
(vested or unvested), Company Convertible Debentures or Company Warrants so
held, such holder's mailing address and in the case of Company Stock Options,
the date of grant, vesting schedules and exercise price of all such Company
Stock Options. All outstanding shares of Company Common Stock are duly
authorized and are validly issued, fully paid and non-assessable and free of
preemptive rights. All Company Convertible Debentures were issued in compliance
with the Securities Act.
SECTION 4.6 OPTIONS AND OTHER STOCK RIGHTS. Except as set forth in Section
4.6 of the Company Disclosure Schedule, there is no (i) outstanding option,
warrant, call, unsatisfied preemptive right or other agreement of any kind
binding upon the Company to purchase or otherwise to receive from the Company
any of the outstanding, authorized but unissued, unauthorized or treasury shares
of Company Common Stock or any other security of the Company, (ii) outstanding
security of any kind binding upon the Company convertible into any security of
the Company, and (iii) outstanding contract or other agreement binding upon the
Company or any of its Subsidiaries to purchase, redeem or otherwise acquire any
outstanding shares of Company Common Stock or any other security of the Company.
SECTION 4.7 SUBSIDIARIES. (a) Section 4.7 of the Company Disclosure
Schedule sets forth (i) the name of each Subsidiary of the Company; (ii) the
name of each corporation, limited liability company, partnership, joint venture
or other entity (other than such Subsidiaries) in which the Company or any of
its Subsidiaries has, or pursuant to any agreement has the right or obligation
to acquire at any time by any means, directly or indirectly, an equity interest
or investment; (iii) in the case of each such corporations described in clauses
(i) and (ii) above, (A) the jurisdiction of incorporation and (B) the
capitalization thereof and the percentage of each class of capital stock
(including any rights, options or warrants outstanding or other agreements to
acquire shares of capital stock) and issuance of outstanding debt owned by the
Company or any of it Subsidiaries and by any other Person.
(b) Except as set forth in Section 4.7(b) of the Company Disclosure
Schedule, each Subsidiary of the Company listed in Section 4.7(a) of the
Company Disclosure Schedule has been duly organized, is validly existing
and in good standing under the laws of the jurisdiction of its
organization, has the corporate power and authority to own and lease its
properties and to conduct its business and is duly registered, qualified
and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization,
except where the failure to be so qualified would not reasonably be
expected to have a Company Material Adverse Effect. All of the issued and
outstanding equity or other participating interests of each Subsidiary have
been duly authorized and validly
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issued, are fully paid and nonassessable, and, to the extent owned by the
Company as indicated in Section 4.7 of the Company Disclosure Schedule, are
owned free and clear of any mortgage, pledge, lien, encumbrance, security
interest, claim or equity, except as set forth in Section 4.7 of the
Company Disclosure Schedule.
(c) As of the date hereof, excluding assets acquired as a result of
loan foreclosures and receivables on assets acquired as a result of loan
foreclosures and except as listed in Section 4.7 or Section 4.17 of the
Company Disclosure Schedule, the Company has not made any investments in,
and does not own any securities of or other interests in, any other Person.
SECTION 4.8 CORPORATE RECORDS. The Company has heretofore delivered to
Parent true and complete copies of the minute books of the Company and each of
its Subsidiaries for the five years prior to the date hereof through and
including the date hereof, all as in effect on the date hereof. The minute books
of the Company and its Subsidiaries reflect all actions taken at all meetings
and consents in lieu of meetings of stockholders, and all actions taken at all
meetings and consents in lieu of meetings of the Company's or each of its
Subsidiaries' Board of Directors and all committees thereof.
SECTION 4.9 INFORMATION IN DISCLOSURE DOCUMENTS. None of the information
with respect to the Company and its Subsidiaries to be included in (i) the joint
prospectus/proxy statement of the Company and Parent (the "Proxy Statement")
required to be mailed to the stockholders of the Company in connection with the
Merger and (ii) the Registration Statement to be filed with the Commission by
Parent on Form N-14 under the Securities Act for the purpose of registering the
shares of Parent Common Stock to be issued in the Merger (the "Registration
Statement") will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Company Meeting, or,
in the case of the Registration Statement, at the time it becomes effective 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
were made, not misleading; provided, however, that this provision shall not
apply to statements or omissions in the Registration Statement or Proxy
Statement based upon information furnished by Parent for use therein. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. No representation or
warranty made by the Company contained in this Agreement and no statement
contained in any certificate delivered pursuant to Article VII or any exhibit to
this Agreement and the Company Disclosure Schedule, as the same may be amended
pursuant to the provisions hereof, contains any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.10 SEC DOCUMENTS; FINANCIAL STATEMENTS. (a) The Company and its
Subsidiaries have to the Company's Knowledge filed and will file with the SEC
all forms, reports, schedules, statements, exhibits and other documents
(collectively, the "Company SEC Documents") required to be filed on or before
the date hereof or the Closing Date, respectively, by it under the Securities
Act or the Exchange Act. The Company has furnished or made available to Parent
true and correct copies of all Company SEC Documents filed by the Company and
its Subsidiaries since July 1, 1998 and will promptly furnish to Parent any
other Company SEC Document filed by or on behalf of the Company with the SEC
from the date hereof to the Closing Date. At the time filed, the Company SEC
Documents filed by the Company and its Subsidiaries since July 1, 1998 (i) did
not contain any untrue statement of a
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material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (ii) complied in all material
respects with the applicable requirements of the Securities Act or Exchange Act,
as the case may be.
(b) The audited consolidated financial statements of the Company and
its Subsidiaries for the three years ended June 30, 2000, together with the
reports and opinions thereon of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Company LLP (the
"Company Audited Financial Statements"), which are included in the Company
SEC Documents and have previously been delivered to Parent and the
unaudited consolidated financial statements of the Company and its
Subsidiaries for the three months ended September 30, 2000 (the "Company
Interim Financial Statements"), which will be included in the Company SEC
Documents and will be delivered to Parent as soon as they are filed, are
collectively referred to herein as the "Company Financial Statements". The
Company Financial Statements comply as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto; and fairly present, in all
material respects, on a consolidated basis, the financial position of the
Company at, and the results of its operations for, each of the periods then
ended and were prepared in conformity with GAAP applied on a consistent
basis, except as otherwise disclosed therein and, subject, in the case of
the Company Interim Financial Statements, to normal recurring year-end
adjustments, the absence of footnote disclosures, and any other adjustments
described therein.
SECTION 4.11 LIABILITIES. To the Company's Knowledge, the Company and its
Subsidiaries do not have any direct or indirect liability, contingent or
otherwise, that is required by GAAP to be reflected or reserved for on the
financial statements of the Company (collectively, the "Liabilities"), that was
not adequately reflected or reserved against on the Company Audited Financial
Statements for the 12-month period ended June 30, 2000 or on the Company Interim
Financial Statements for the three-month period ended September 30, 2000, other
than (i) liabilities set forth in Section 4.11 of the Company Disclosure
Schedule, (ii) liabilities incurred in the ordinary course of business since
June 30, 2000 consistent with past practices, or (iii) liabilities permitted by
this Agreement to be incurred in connection with the transactions contemplated
by this Agreement.
SECTION 4.12 NO COMPANY MATERIAL ADVERSE EFFECT. Except as disclosed in
Section 4.12 of the Company Disclosure Schedule, since July 1, 2000, there has
not been any change, event, occurrence or state of facts that has caused, or
would reasonably be expected to cause, a Company Material Adverse Effect.
SECTION 4.13 COMPLIANCE WITH LAWS. To the Company's Knowledge, except as
disclosed in Section 4.13 of the Company Disclosure Schedule, neither the
Company nor its Subsidiaries are in violation in any material respect of any
applicable order, judgment, injunction, award or decree, law, ordinance or
regulation or any other requirement of any Governmental Entity applicable to the
Company or any of its businesses. Neither the Company or its Subsidiaries
received notice that any such material violation has been alleged or is being
investigated. This Section 4.13 shall not apply to Taxes.
SECTION 4.14 PERMITS. To the Company's Knowledge, except as set forth in
Section 4.14 of the Company Disclosure Schedule, (i) the Company and its
Subsidiaries have obtained all Permits that are necessary for the ownership and
conduct of their respective businesses as presently conducted or currently
proposed to be conducted, other than any Permits, the absence of which would
not, individually or in the aggregate, have a Company Material
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Adverse Effect; (ii) to the Company's Knowledge, such Permits are in full force
and effect and are sufficient for the ownership and conduct of such businesses
as presently conducted or currently proposed to be conducted; no violations
exist or have been recorded in respect of any material Permit; and (iii) no
proceeding is pending or, to the Knowledge of the Company or its Subsidiaries,
threatened, that would suspend, revoke or limit any material Permit.
SECTION 4.15 ACTIONS AND PROCEEDINGS. Except as disclosed in Section 4.15
of the Company Disclosure Schedule or the Company SEC Documents, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company, any of its Subsidiaries or
any of its or their directors, officers or employees (in their capacities as
such). Except as disclosed in Section 4.15 of the Company Disclosure Schedule or
the Company SEC Documents, as of the date of this Agreement there is no claim,
action, suit, litigation, legal, administrative or arbitration proceeding,
whether formal or informal (including, without limitation, any claim or notice
of intent to institute any matter) (a "Proceeding"), which is pending or, to the
Company's Knowledge, threatened against or involving the Company, any of its
Subsidiaries or any of its or their directors, officers or employees (in their
capacities as such) or properties, capital stock or assets.
SECTION 4.16 CONTRACTS AND OTHER AGREEMENTS. (a) Other than (1) contracts
and other agreements disclosed in Section 4.16 of the Company Disclosure
Schedule or (2) contracts between the Company and its direct or indirect wholly
owned Subsidiaries or between the Company's direct or indirect wholly owned
Subsidiaries, none of the Company or any of its Subsidiaries is a party to or
bound by any:
(i) contracts and other agreements with, or loans to, any current or
former officer, director, employee, consultant, agent or other
representative of the Company or its Subsidiaries, or any current
stockholder of the Company, or any affiliate (excluding the Company
and its Subsidiaries) or Family Member of the foregoing persons,
other than pursuant to Plans described in Section 4.23 of the
Company Disclosure Schedule;
(ii) contracts and other agreements with any labor union or association
representing any employee;
(iii) contracts and other agreements for the purchase or sale of
equipment or services, which involve the receipt or payment by the
Company or its Subsidiaries of an amount in excess of $20,000 per
month (in the aggregate in the case of any related series of
contracts and other agreements);
(iv) contracts and other agreements for the sale of any of the assets or
properties of the Company or its Subsidiaries or for the grant to
any person of any preferential rights to purchase any of the assets
or properties of the Company or its Subsidiaries, which involve the
receipt or payment by the Company or its Subsidiaries of an amount
in excess of $20,000 (in the aggregate in the case of any related
series of contracts and other agreements);
(v) contracts and other agreements calling for an aggregate purchase
price or payments in any one year of more than $100,000 payable by
the Company or its Subsidiaries in any one case (in the aggregate in
the case of any related series of contracts and other agreements);
(vi) contracts and other agreements, whether or not currently in effect,
relating to the acquisition by the Company or its Subsidiaries of
any business of, or the
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disposition of any business involving the Company or its
Subsidiaries to, any other person;
(vii) contracts relating to the disposition or acquisition of any
investment or of any interest in any person, which involved the
receipt or payment by the Company or its Subsidiaries of an amount
in excess of $20,000 (in the aggregate in the case of any related
series of contracts and other agreements);
(viii) joint venture and similar agreements which would involve the
receipt or payment by the Company or its Subsidiaries of an amount
in excess of $50,000 (in the aggregate in the case of any related
series of contracts or other agreements);
(ix) contracts and other agreements, whether or not currently in effect,
under which the Company or its Subsidiaries agreed to indemnify any
party or to share tax liability of any party, which could involve
the payment by the Company or its Subsidiaries of an amount in
excess of $20,000 (in the aggregate in the case of any related
series of contracts or other agreements);
(x) contracts and other agreements containing covenants of the Company
or its Subsidiaries, or, to the Company's Knowledge, its officers,
directors or employees, not to compete in or solicit employees in
any line of business or with any person in any geographical area or
covenants of any other person not to compete with or solicit
employees from the Company in any line of business or in any
geographical area;
(xi) contracts and other agreements relating to any loan or other
extension of credit by the Company or its Subsidiaries to a
stockholder, officer or director of the Company or its Subsidiaries
or from a stockholder of the Company to the Company;
(xii) contracts and other agreements relating to the borrowing of money
by, or indebtedness of, the Company or its Subsidiaries or the
direct or indirect guaranty by the Company or its Subsidiaries of
any obligation or indebtedness of any other person or Governmental
Entity (other than any accounts receivable or accounts payable of
the Company or its Subsidiaries), including, without limitation,
any (a) agreement or arrangement relating to the maintenance of
compensating balances, (b) agreement or arrangement with respect to
lines of credit, (c) agreement to advance or supply funds to any
other person other than in the ordinary course of business, (d)
agreement to pay for property, products or services of any other
person even if such property, products or services are not
conveyed, delivered or rendered, (e) keep-well, make-whole or
maintenance of working capital or earnings or similar agreement,
and (f) guaranty with respect to any lease or other similar
periodic payments to be made by any such person;
(xiii) contracts and other agreements relating to the provision by or to
the Company or its Subsidiaries of third party management or
administration services, which involve the receipt or payment by
the Company or its Subsidiaries of an amount in excess of $50,000
(in the aggregate in the case of any related series of contracts
and other agreements);
(xiv) each lease of personal property which requires annual lease payments
in excess of $50,000 and each Lease;
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(xv) contracts and other agreements pursuant to which the Company or any
of its Subsidiaries obtains or grants insurance or reinsurance;
(xvi) contracts and other agreements between the Company or its
Subsidiaries and any Governmental Entity;
(xvii) contracts and other agreements which require payments generated by
a change in control of the Company; and
(xviii) contracts and other agreements, whether or not currently in effect,
relating to disposal of any controlled or hazardous substance or
waste.
(b) Each such contract and other agreement is valid, in full force and
effect and binding upon the Company and its Subsidiaries, except for
failures to be in full force and effect that would not, individually or in
the aggregate, have a Company Material Adverse Effect and, to the Company's
Knowledge, the other parties thereto in accordance with its terms, and
neither the Company nor any of its Subsidiaries is in default under any of
them, except for defaults that would not, individually or in the aggregate,
have a Company Material Adverse Effect, and the Company has no Knowledge of
any threat of cancellation or termination thereunder, nor will the
consummation of the transactions contemplated by this Agreement result in a
default under any such contract or other agreement or the right to
terminate such contract or other agreement, except for cancellations,
terminations, defaults, or rights to terminate that would not, individually
or in the aggregate, have a Company Material Adverse Effect. No Permits or
other documents or agreements with, or issued by or filed with, any person,
have been granted to any other person that provide the right to use any
real or tangible personal property comprising any portion of the assets of
the Company except for grants that would not, individually or in the
aggregate, have a Company Material Adverse Effect. Neither the Company nor
any of its Subsidiaries is a party to any contract, commitment, arrangement
or agreement which would, following the Closing, restrain or restrict
Parent or any affiliate of Parent, from operating the business of the
Company in the manner in which it is currently operated, except for
contracts, commitments, arrangements or agreement that would not
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 4.17 LOAN PORTFOLIOS. The Company's and its Subsidiaries'
outstanding loan portfolios were originated or acquired in the ordinary course
of business, and a true and complete list of such portfolios, as of the date
hereof, with information included thereon as to the principal terms of, interest
rate, and maturity date thereof, as of such date, is listed in Section 4.17 of
the Company Disclosure Schedule, provided that such Section shall not include
loans that are written off. Except as disclosed in Section 4.17 of the Company
Disclosure Schedule, to the Company's Knowledge, as of September 30, 2000, none
of the loans included in such portfolios is in default in the payment of
principal or interest or materially impaired. All loans included in such
portfolio comply with all laws and regulations of each of the states to which
the Company is subject thereto except for noncompliances that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 4.18 REAL PROPERTY. (a) Section 4.18 of the Company Disclosure
Schedule sets forth (i) a list and summary description of all leases, subleases,
licenses, occupancy agreements or other agreements, written and oral, together
with any amendments or modifications thereto (each a "Lease" and collectively,
the "Leases") with respect to (A) all real property leased by the Company or its
Subsidiaries (whether as lessor or lessee and including those in the names of
nominees or other entities) and used or occupied in connection with the business
of the
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Company or its Subsidiaries (the "Leased Real Property") and (B) all real
property leased or subleased by the Company or its Subsidiaries, as lessor or
sublessor, to third parties (such Section 4.18 of the Company Disclosure
Schedule to include the date of each Lease, the address of the respective Leased
Real Property, the amount of square feet of such Leased Real Property, the Lease
term commencement date, the Lease term expiration date, any renewal options and
any early termination provisions in each case with respect to each portion of
the Leased Real Property); and (ii) a list and summary description of all real
property owned by the Company or its Subsidiaries (the "Owned Real Property").
(b) Each Lease is, with respect to the Company and its Subsidiaries,
in full force and effect, and to the Company's Knowledge, is in full force
and effect with respect to each other party thereto except for failures to
be in full force and effect that would not, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and each of
its Subsidiaries have performed all obligations required to be performed by
it to date under, and is not in default in respect of, any Lease, and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default by the Company or its Subsidiaries, except for
defaults that would not, individually or in the aggregate, have a Company
Material Adverse Effect. To the Knowledge of the Company, there is no
default asserted thereunder by any other party thereto, except for defaults
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. All material rentals and other payments due under each such
Lease have been duly paid.
(c) The Company's or its Subsidiaries', as the case may be, title to
the Owned Real Property and improvements thereon is as set forth on Section
4.18(c) of the Company Disclosure Schedule, subject only to the title
exceptions specified therein. None of the Owned Real Property is subject to
any right or option of any other person, to purchase or otherwise obtain
title to such property. No person other than the Company or its
Subsidiaries, as the case may be, has any right to use, occupy or lease all
or any portion of the Owned Real Property except for rights that would not,
individually or in the aggregate, result in a Company Material Adverse
Effect.
(d) The Company has not received any notice of any violation of any
applicable building, zoning, land use or other similar statutes, laws,
ordinances, regulations, permits or other requirements (including, without
limitation, the Americans with Disabilities Act) in respect of the Leased
Real Properties, which has not been heretofore remedied, and there does not
exist any such violations which, individually or in the aggregate, could
have a Company Material Adverse Effect. The Company has not received any
notice that any operations on or uses of the Leased Real Properties
constitute non-conforming uses under any applicable building, zoning, land
use or other similar statutes, laws, ordinances, regulations, permits or
other requirements which would result, individually or in the aggregate, in
a Company Material Adverse Effect. The Company has no Knowledge of nor has
received any notice (other than published notice not actually received) of
any pending or contemplated rezoning proceeding affecting the Leased Real
Properties which would, individually or in the aggregate, result in a
Company Material Adverse Effect.
(e) Neither the Company nor any of its Subsidiaries has received
notice from any insurance carrier regarding defects or inadequacies in the
Leased Real Properties, which, if not corrected, would result in
termination of the Company's or its Subsidiaries' insurance coverage
therefor or an increase in the cost thereof which defects, inadequacies or
terminations would result, individually or in the aggregate, in a Company
Material Adverse Effect.
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(f) To the Knowledge of the Company, there is no pending or
threatened: (i) condemnation of any part of the Leased Real Properties by
any Governmental Entity; (ii) special assessment against any part of the
Leased Real Properties; or (iii) litigation against the Company or any of
its Subsidiaries for breach of any restrictive covenant affecting any part
of the Leased Real Properties which in the case of each of clauses (i),
(ii) and (iii) would result, individually or in the aggregate, in a Company
Material Adverse Effect.
(g) The improvements at the Leased Real Properties are in good
condition and repair, ordinary wear and tear excepted, and have not
suffered any casualty or other damage which has not been repaired which
would result, individually or in the aggregate, in a Company Material
Adverse Effect.
(h) Neither the Company nor any of its Subsidiaries own any real
property other than foreclosed real property as set forth in Schedule 4.18
of the Company Disclosure Schedule.
SECTION 4.19 INTELLECTUAL PROPERTY. (a) The Company and its Subsidiaries
own or otherwise possess all rights as are necessary to use, all patents (and
applications therefor), patent rights and disclosures, trademarks, trademark
rights, service marks, service ▇▇▇▇ rights, trade names, trade name rights,
registered copyrights (and applications therefore), process know-how,
inventions, discoveries, systems, scientific, technical, engineering and
marketing data, technology, trade secrets software programs and codes (both
source and object), formulae and techniques used in or necessary for the conduct
of its business and other proprietary information except as would not,
individually or in the aggregate, have a Company Material Adverse Effect
(collectively, the "Intellectual Property Rights"). Section 4.19 of the Company
Disclosure Schedule sets forth a true and complete list of the Company's and its
Subsidiaries' material Intellectual Property Rights.
(b) To the Company's Knowledge, neither the Company or any of its
Subsidiaries has received notice or otherwise has reason to know of any
conflict or alleged conflict with the rights of others pertaining to the
Intellectual Property Rights. To the Company's Knowledge, the businesses of
the Company and its Subsidiaries, as presently conducted, do not infringe
upon or violate any intellectual property rights of others. The Company and
its Subsidiaries have the unrestricted right to use, free and clear of any
rights or claims of others, all trade secrets, processes, customer lists
and other rights incident to its businesses as now conducted other than
restrictions that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries is currently
obligated or under any existing liability to make royalty or other payments
to any owner of, licensor of, or other claimant to, any patent, trademark,
service names, trade names, copyrights, or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business as now conducted or otherwise except for obligations or
liabilities that would not, individually or in the aggregate, have a
Company Material Adverse Effect. To the Company's Knowledge, no employee of
the Company or its Subsidiaries has violated any employment agreement or
proprietary information agreement which he had with a previous employer or
any patent policy of such employer, or is a party to or threatened by any
litigation concerning any patents, trademarks, trade secrets, service
names, trade names, copyrights, licenses and the like except for violations
that would not result in a Company Material Adverse Effect.
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SECTION 4.20 RECEIVABLES. All accounts receivable and vendor receivables
which exceed $200,000 for a single receivable reflected in the Company Interim
Financial Statements, and all accounts receivable and vendor receivables which
exceed $200,000 for a single receivable arising subsequent to September 30,
2000, represent bona fide transactions that have arisen in the ordinary course
of business and are valid and existing.
SECTION 4.21 BANKING. Section 4.21 of the Company Disclosure Schedule
contains a complete list of all of the bank accounts and lines of credit owned
or used by the Company and its Subsidiaries, and the names of all persons with
authority to withdraw funds from, or execute drafts or checks on, each such
account.
SECTION 4.22 LIENS. Except as set forth in Section 4.22 of the Company
Disclosure Schedule, the Company and its Subsidiaries have good title to all of
its respective assets and properties, in each case free and clear of any lien or
other encumbrance, except for (i) liens or other encumbrances securing taxes,
assessments, governmental charges or levies, or the claims of materialmen,
carriers, landlords and like persons, all of which are not yet delinquent or
which are being contested in good faith or (ii) liens or other encumbrances of a
character that do not materially detract from the value of the property subject
thereto or impair the use of or the access to the property subject thereto, or
impair the operation of the Company or its Subsidiaries or detract from its
business.
SECTION 4.23 EMPLOYEE BENEFIT PLANS. (a) Section 4.23(a) of the Company
Disclosure Schedule sets forth all "employee benefit plans", as defined in
Section 3(3) of ERISA, and all severance pay, sick leave, vacation pay,
disability, retirement benefits, deferred compensation, bonus pay, incentive
pay, stock options, hospitalization insurance, medical insurance, life
insurance, scholarships or tuition reimbursement plans or agreements, maintained
by the Company or to which the Company has any liability (contingent or
otherwise) thereunder for current or former employees of the Company. Each of
the employee benefit plans, practices and arrangements set forth in Section 4.23
of the Company Disclosure Schedule shall hereafter be referred to as a "Plan"
(or "Plans" as the context may require).
(b) None of the Plans is a "multiemployer plan," as defined in Section
3(37) of ERISA or a "defined benefit plan," as defined in Section 3(35) of
ERISA.
(c) Each of the Plans that is intended to qualify under Section 401(a)
of the Code, and the trusts maintained pursuant thereto, has been
determined to be exempt from federal income taxation under Section 501 of
the Code by the IRS (or remain within the remedial amendment period for
obtaining an initial determination of exemption from tax), and nothing has
occurred with respect to the operation of any such Plan which could cause
the loss of such qualification or exemption and thereby result in a Company
Material Adverse Effect.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under
the Plans or by law to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof (including any
valid extensions), except for any failure to contribute that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(e) Intentionally Omitted.
(f) True, correct and complete copies of the following documents, with
respect to each of the Plans, have been delivered to Parent by the Company:
(i) the most recent plan document and related trust documents, and
amendments thereto; (ii) the most recent IRS
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Forms 5500; (iii) the last IRS determination letter; and (iv) the most
recent summary plan descriptions.
(g) To the Company's Knowledge, there are no pending actions, claims
or lawsuits which have been asserted or instituted against the Plans, the
assets of any of the trusts under such plans or the plan sponsor or the
plan administrator, or against any fiduciary of the Plans with respect to
the operation of such Plans (other than routine benefit claims or actions
seeking qualified domestic relations orders), nor does the Company have
Knowledge of any threatened claim or lawsuit.
(h) To the Company's Knowledge, the Plans have in all material
respects been maintained in accordance with their terms and with all
provisions of ERISA and the Code (including applicable regulations
thereunder) and other applicable federal and state laws and regulations,
and the Company has not engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or 4975 of the Code that would result in
liability to the Company or Parent. To the Company's Knowledge, no
fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any Plan.
(i) None of the Plans provide retiree life or retiree health benefits
coverage except as may be required under applicable state law, Section
4980B of the Code or Section 601 of ERISA or at the expense of the
participant or the participant's beneficiary or death benefits under the
Company's retirement plan.
(j) Except pursuant to the Employment Agreements or pursuant to
Section 6.18 and except as disclosed in Section 4.23(i) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i)
result in any payment becoming due to any employee (current, former or
retired) of the Company, (ii) increase any benefits otherwise payable under
any Plan or (iii) result in the acceleration of the time of payment or
vesting of any benefits under any Plan.
SECTION 4.24 EMPLOYEE RELATIONS. (a) The Company and its Subsidiaries are
in compliance with all laws regarding employment, wages, hours, equal
opportunity and collective bargaining, except for non-compliances that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
To the Company's Knowledge, (i) neither the Company nor any of its Subsidiaries
is engaged in any unfair labor practice or discriminatory employment practice,
(ii) no complaint of any such practice against the Company or its Subsidiaries
has been filed or threatened to be filed with or by the National Labor Relations
Board, the Equal Employment Opportunity Commission or any other administrative
agency, federal or state, that regulates labor or employment practices, and
(iii) no grievance has been filed or, threatened to be filed, against the
Company or its Subsidiaries by any employee pursuant to any collective
bargaining or other employment agreement to which the Company is a party or is
bound. The Company and its Subsidiaries are in compliance with all applicable
foreign, federal, state and local laws and regulations regarding occupational
safety and health standards, except for non-compliances that would not,
individually or in the aggregate, have a Company Material Adverse Effect, and
has received no complaints from any foreign, federal, state or local agency or
regulatory body alleging violations of any such laws and regulations.
(b) Except as set forth in Section 4.24(b) of the Company Disclosure
Schedule, the employment of all persons employed by the Company and its
Subsidiaries is terminable at will. To the Company's Knowledge, all
employees of the Company and its Subsidiaries are
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either United States citizens or resident aliens specifically authorized to
engage in employment in the United States in accordance with all applicable
laws.
SECTION 4.25 INSURANCE. Section 4.25 of the Company Disclosure Schedule
sets forth a list of all policies or binders of errors and omissions, fire,
liability, product liability, workmen's compensation, vehicular and other
insurance (excluding Plans) held by or on behalf of the Company or its
Subsidiaries (collectively, the "Insurance Policies"). Such Insurance Policies
are in full force and effect. In addition, Section 4.25 of the Company
Disclosure Schedule sets forth in respect of the Insurance Policies (i) a
description of occurrences reported involving amounts in excess of $10,000 and
(ii) the aggregate amount paid out under each such policy during the period from
July 1, 1999 through the date hereof. There have been no disputes regarding
denial or nonpayment of claims under any Insurance Policy since July 1, 1999,
other than routine disputes under Insurance Policy coverage provided under the
Plans.
SECTION 4.26 OFFICERS, DIRECTORS, EMPLOYEES, CONSULTANTS. Section 4.26 of
the Company Disclosure Schedule sets forth (i) the name of each officer and
director of the Company or its Subsidiaries and the amount of compensation paid
during fiscal 2000 and the amount reasonably expected to be paid during fiscal
2001, (ii) the name of each other employee or class of employees of the Company
or its Subsidiaries who either (x) received compensation in fiscal 2000 in
excess of $100,000 or (y) is anticipated to receive, based on current
compensation levels, compensation in fiscal 2001 in excess of $100,000,
indicating the amount of such compensation for such persons for fiscal 2000 and
fiscal 2001; and (iii) a list of all employees employed by the Company at
September 30, 2000. Except as disclosed in Section 4.26 of the Company
Disclosure Schedule, the Company or any of its Subsidiaries does not employ any
individual as a consultant, whose employment cannot be terminated on not less
than 30 days' notice without penalty.
SECTION 4.27 TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES. Except
as disclosed in Section 4.27 of the Company Disclosure Schedule or in the
Company SEC Documents, since July 1, 1999, there have been no transactions
between the Company and any director, officer, employee, stockholder or other
affiliate of the Company or loans, guarantees or pledges to, by or for the
Company from, to, by or for any of such persons. Since July 1, 1999, other than
as disclosed in the Company SEC Documents or in Section 4.27 of the Company
Disclosure Schedule, none of the officers, directors or employees of the
Company, or any spouse or relative of any of such persons, has been a director
or officer of, or has had any direct or indirect interest in, any person or
business enterprise which during such period has been a supplier, customer or
sales agent of the Company or has competed with or been engaged in any business
of the kind being conducted by the Company.
SECTION 4.28 OPERATIONS OF THE COMPANY. Except as disclosed in Section
4.16 or 4.28 of the Company Disclosure Schedule and except as may result from
the transactions contemplated by this Agreement, since July 1, 2000, the Company
has not:
(i) amended its certificate of incorporation or by-laws or merged with or
into or consolidated with any other Person, subdivided or in any way
reclassified any shares of its capital stock or changed or agreed to
change in any manner the rights of its outstanding capital stock or
the character of its business;
(ii) (A) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue
or sell or purchase, any shares of its capital stock or any of its
bonds, notes, debentures or other evidences of indebtedness or (B)
modified the terms of its options, rights or any contracts or
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commitments to issue or sell or purchase any shares of its capital
stock or any of its bonds, notes, debentures or other evidences of
indebtedness;
(iii) entered into or amended any agreement with any labor union or
association representing any employee, or, except for Plans referred
to in Section 4.23 of the Company Disclosure Schedule, made any wage
or salary increase or bonus, or increase in any other direct or
indirect compensation, for or to any of its officers, directors,
employees, individuals who are consultants, agents or other
representatives in each case in excess of $10,000 for any such
individual, or commitment or agreement to make or pay the same;
(iv) except in the ordinary course of business consistent with past
practice, declared or made any Distributions to any stockholder or
made any direct or indirect redemption, retirement, purchase or other
acquisition of any shares of its capital stock;
(v) made any change in its accounting methods or practices or made any
change in depreciation or amortization policies, except as required
by law or GAAP;
(vi) made any loan or advance to its stockholders or to any of the
directors, officers or employees of the Company, consultants, agents
or other representatives, or otherwise than in the ordinary course of
business made any other loan or advance;
(vii) except in the ordinary course of business consistent with past
practice, (A) entered into any Lease; (B) sold, abandoned or made
any other disposition of any of its assets or properties; (C)
granted or suffered any lien or other encumbrance on any of its
assets or properties; (D) entered into or amended any contract or
other agreement to which it is a party, or by or to which it or its
assets or properties are bound or subject which if existing on the
date hereof would need to be disclosed in Section 4.16 of the
Company Disclosure Schedule;
(viii) made or entered into any agreement to make any acquisition of all or
a substantial part of the assets, properties, securities or business
of any other person;
(ix) paid, directly or indirectly, any of its Liabilities before the same
became due in accordance with its terms or otherwise than in the
ordinary course of business;
(x) terminated or failed to renew, or received any written threat (that
was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the assets,
liabilities, properties, business, operations, condition (financial
or otherwise), operations or prospects of the Company;
(xi) made any revaluation of any assets or write-down of the value of any
loans or receivables of the Company in excess of $50,000;
(xii) except in the ordinary course of business consistent with past
practice, accelerated the collection, or sale to third parties, of
any receivables of the Company, or delayed the payment of any
payables of the Company;
(xiii) entered into any other contract or other agreement or other
transaction that obligates the Company to pay an amount in excess of
$50,000, which contract is not terminable by the Company upon not
more than 30 days' notice; or
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(xiv) suffered any damage, destruction or loss, whether covered by
insurance or not, which has had or could have a Company Material
Adverse Effect.
SECTION 4.29 BROKERAGE. Except for Josephthal & Co., Inc., no broker,
agent or finder has acted, directly or indirectly, for the Company or, to the
Knowledge of the Company, any of the Company stockholders, nor has the Company
or, to the Knowledge of the Company, any of the Company stockholders, incurred
any obligation to pay any brokerage fee, agent's commission or finder's fee or
other commission in connection with the transactions contemplated by this
Agreement. The Company has furnished to Parent a copy of any engagement letter
relating to such broker, agent or finder.
SECTION 4.30 TAXES. (a) The Company and, as applicable, each of its
Subsidiaries (i) have duly and timely filed (or there have been filed on their
behalf) all material Tax Returns required to be filed (after taking into account
all available extensions), (ii) have timely paid or adequately provided for in
accordance with GAAP all Taxes due in respect of the periods covered by such Tax
Returns, and (iii) have withheld and, if due, paid all Taxes required to have
been withheld and, if due, paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party,
except, in each case, where the failure so to file, pay or provide, or withhold
and pay would not, individually or in the aggregate, have a Company Material
Adverse Effect.
(b) Except as set forth in Section 4.30 of the Company Disclosure
Schedule, as of the date of this Agreement (i) no material claim for
assessment or collection of Taxes is presently being asserted against the
Company or its Subsidiaries, (ii) neither the Company nor any of its
Subsidiaries is a party to any pending action, proceeding, or investigation
by any governmental taxing authority relating to a material Tax, and (iii)
the Company does not have Knowledge of any such threatened action,
proceeding or investigation.
(c) Except as set forth in Section 4.30 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is, or has ever
been, a party to or bound by any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar allocation agreement or
similar contract or arrangement.
(d) Except as set forth in Section 4.30 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any income Tax Return which return
has not since been filed, nor has the Company or any of its Subsidiaries
waived the running of any statute of limitations with respect to any income
Taxes.
(e) Except as set forth in Section 4.30(e) of the Company Disclosure
Schedule, the Company has delivered to Parent true and correct copies of
all filed income Tax Returns (including information returns and Forms 1120)
of the Company and its Subsidiaries which refer to any period of time from
January 1, 1995 through the date of this Agreement or to any event which
occurred during that period of time. Neither the Company nor any of its
Subsidiaries has filed an election under Section 341(f) of the Code that is
applicable to the Company, any of its Subsidiaries or any asset held by the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries has agreed, or is required, to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise. Neither the Company nor any of its Subsidiaries is subject to or
a member of any joint venture, partnership or other arrangement or contract
which is treated as a partnership for federal income tax purposes. The
Company has not been a United States real property holding corporation
within the meaning of
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Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(f) Section 4.30 of the Company Disclosure Schedule lists each state
in which the Company and its Subsidiaries are required to file Tax Returns.
No written claim has been made after January 1, 1995 by any authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
SECTION 4.31 ENVIRONMENTAL LAWS. Except as disclosed in the Company SEC
Documents or as set forth in Section 4.31 of the Company Disclosure Schedule:
(a) The Company and its Subsidiaries (i) are in compliance in all
material respects with all Environmental Laws; (ii) have obtained and
currently maintain in full force and effect all Environmental Permits, the
failure to obtain or maintain would, individually or in the aggregate, have
a Company Material Adverse Effect; and (iii) are in compliance with all
terms and conditions of such Environmental Permits except for
noncompliances that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(b) To the Company's Knowledge, no event has occurred which, upon the
passage of time, the giving of notice, or failure to act would reasonably
be expected to give rise to material liability to the Company or any of its
Subsidiaries under any Environmental Law.
(c) To the Company's Knowledge, no Hazardous Material has been
released, spilled, discharged, dumped, disposed of, or otherwise come to be
located in, at or beneath any of the Owned Real Property or the Leased Real
Property or any properties or assets formerly owned, operated or otherwise
controlled by the Company or its Subsidiaries and used in the conduct of
the Company's and its Subsidiaries' businesses (i) in material violation of
any Environmental Law, or (ii) in such manner as would reasonably be
expected to cause a material environmental liability of the Company or its
Subsidiaries.
(d) To the Company's Knowledge, there are no: (i) aboveground or
underground storage tanks or surface impoundments containing Hazardous
Materials; (ii) asbestos containing materials or (iii) PCBs or
PCB-containing equipment, located within any portion of the Owned Real
Property or the Leased Real Property, the presence which individually or in
the aggregate could have a Company Material Adverse Effect.
(e) To the Company's Knowledge, no liens have been placed upon any
Owned Real Property or Leased Real Property in connection with any actual
or alleged liability under any Environmental Law.
(f) There is no pending or, to the Knowledge of the Company,
threatened, material claim, litigation or administrative proceeding against
the Company arising under any Environmental Law;
(g) Neither the Company nor any of its Subsidiaries has received any
notice, claim, demand, suit or request for information from any
Governmental Entity or private entity with respect to any liability or
alleged liability under any Environmental Law which is outstanding and if
adversely decided could reasonably be expected to result in the Company
incurring material liability under Environmental Laws, nor, to the
Knowledge of the Company, has any other entity whose liability therefor, in
whole or in part, may be attributed to the Company or any of its
Subsidiaries, received such notice, claim, demand, suit or request for
information. Neither the Company nor any of its Subsidiaries, nor, to the
Company's Knowledge, any prior owner or operator of the Leased Real
Property has
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generated, disposed of, or arranged for the disposal of any Hazardous
Material except in material compliance with Environmental Law.
(h) Neither the Company nor any of its Subsidiaries has, and, to the
Knowledge of the Company, no other entity whose liability therefor, in
whole or in part, may be attributed to the Company or its Subsidiaries,
disposed of any Hazardous Material at any location which is identified on
the current or proposed (i) National Priorities List under 40 C.F.R. ▇▇▇
▇▇▇▇▇▇▇▇ ▇ or (ii) CERCLIS, in each case except as would not, individually
or in the aggregate, have a Company Material Adverse Effect.
(i) The Company has made available to Parent all material
environmental studies and reports pertaining to the Owned Real Property or
the Leased Real Property, the operations conducted thereon that are in the
Company's possession.
SECTION 4.32 COMPANY ACTION. The Board of Directors of the Company (at a
meeting duly called and held) has by the requisite vote of all directors present
(a) determined that the Merger is advisable and fair and in the best interests
of the Company and its stockholders, (b) approved the Merger in accordance with
the applicable provisions of the Delaware Corporation Law and (c) recommended
the approval of this Agreement and the Merger by the holders of the Company
Common Stock and directed that the Merger be submitted for consideration by the
Company's stockholders at the Company Meeting.
SECTION 4.33 OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received, on the date of this Agreement, the oral opinion of ▇▇▇▇,
▇▇▇▇ & Co., Inc., to be confirmed in writing, to the effect that, as of such
date and subject to the assumptions and qualifications contained therein, the
Exchange Ratio in the Merger is fair to the holders of the Company Common Stock
from a financial point of view. A copy of the written opinion of ▇▇▇▇, ▇▇▇▇ &
Co., Inc. will be delivered to Parent as soon as practicable after the date of
this Agreement.
SECTION 4.34 CANCELLATION OF CERTAIN AGREEMENTS. Except as set forth in
Section 4.34 of the Company Disclosure Schedule, the Company has terminated each
of the agreements referred to therein, without any payment of consideration in
any form by the Company and without further obligation under such agreement or
arising from such termination, provided that such termination may be contingent
on the consummation of the Merger so long as the Company does not make any
further payment of consideration in any form while this Agreement is in effect,
and provided further that nothing in this Section 4.34 shall preclude the
Company from paying any consideration under any such agreement to the extent
earned prior to the date hereof in accordance with the terms of such agreement.
SECTION 4.35 STATUS OF CERTAIN EMPLOYMENT AGREEMENTS. The Company has
provided to Parent a true and correct copy of the employment agreement between
the Company or one of its Subsidiaries, as applicable, and each person listed in
Section 4.35 of the Company Disclosure Schedule, and each such agreement is as
of the date of this Agreement in full force and effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company that, except as set
forth in the disclosure schedule attached hereto (the "Parent Disclosure
Schedule"), which Parent
▇-▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article V:
SECTION 5.1 EXECUTION AND DELIVERY. Each of Parent and Sub has the
corporate power and authority to enter into this Agreement and each other
agreement, document or instrument contemplated hereby or to be delivered in
connection herewith to which such person is a party (the "Parent Documents") and
to carry out its respective obligations hereunder and thereunder. The execution,
delivery and performance by Parent and Sub of this Agreement and the Parent
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Parent and Sub, as applicable (and, in the case of this Agreement,
by the Board of Directors of Sub and by Parent as the sole stockholder of Sub).
This Agreement constitutes the valid and binding obligation of Parent and Sub
and the Parent Documents will constitute the valid and binding obligations of
Parent and Sub, when executed by such person, in each case, enforceable in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought. No other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or the Parent Documents and the transactions contemplated hereby and
thereby.
SECTION 5.2 CONSENTS AND APPROVALS. The execution and delivery by Parent
and Sub of this Agreement and the Parent Documents to which such person is a
party, the performance by Parent and Sub of their respective obligations
hereunder and thereunder and the consummation by Parent and Sub of the
transactions contemplated hereby and thereby do not require Parent or Sub to
obtain any consent, approval or action of, or make any filing or registration
with or give any notice to, any Governmental Entity, other than (i) in
connection, or in compliance, with the provisions of the H-S-R Act, the
Securities Act, the Exchange Act, the 1940 Act and the corporation, securities
or blue sky laws or regulations of various states, all of which will be duly
obtained or made, as the case may be, on or prior to the Closing, and will be in
full force and effect on the Closing Date, (ii) the approval of the SBA, (iii)
the filing of the Certificate of Merger with the Secretary of State of Delaware
and (iv) as to which the failure to so obtain, file or register would not have a
material adverse effect on the funding, management, business, properties,
assets, condition (financial or otherwise), liabilities, or operations of Parent
and its Subsidiaries, taken as a whole, or adversely affect the consummation of
the transactions contemplated hereby in any material respect, but excluding
therefrom any such change, effect, event, occurrence or state of facts resulting
from or arising in connection with (A) changes or conditions generally affecting
the industries in which Parent or its Subsidiaries operate, except to the extent
the changes or conditions referred to in this Clause (A) affect the funding of
the Parent and its Subsidiaries or (B) this Agreement, the transactions
contemplated hereby or the announcement thereof (a "Parent Material Adverse
Effect").
SECTION 5.32 NO BREACH. Except for filings, notices, consents and
approvals as may be required by Delaware Corporation Law, the Securities Act,
the Exchange Act and the 1940 Act, the execution, delivery and performance by
Parent and Sub of this Agreement and the Parent Documents to which either is a
party and the consummation of the transactions contemplated hereby and thereby
in accordance with the terms and conditions hereof and thereof will not (i)
violate any provision of the Certificate of Incorporation or By-Laws of Parent
or Sub; (ii) violate, conflict with or result in the breach of any of the terms
of, result in any modification of the effect of, otherwise give any other
contracting party the right to terminate,
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or constitute (or with notice or lapse of time or both, constitute) a default
under, any contract or other agreement or instrument to which Parent or any of
its Subsidiaries is a party or by or to which the assets or properties of Parent
or any of its Subsidiaries may be bound or subject; (iii) violate any order,
judgment, injunction, award or decree of any Governmental Entity against, or
binding upon, or any agreement with, or condition imposed by, any Governmental
Entity, binding upon Parent or any of its Subsidiaries, or upon the securities,
assets or business of Parent or any of its Subsidiaries; (iv) violate any
statute, law or regulation of any jurisdiction as such statute, law or
regulation relates to Parent or any of its Subsidiaries, or to the securities,
assets or business of Parent or any of its Subsidiaries; (v) result in the
creation or imposition of any lien or other encumbrance or the acceleration of
any indebtedness or other obligation of Parent or any of its Subsidiaries; or
(vi) result in the breach of any of the terms or conditions of, constitute a
default under, or otherwise cause an impairment of, any Permit of Parent or any
of its Subsidiaries; except in the case of (ii) through (vi) for violations,
conflicts, breaches, defaults, modifications, impairments, liens or other
encumbrances that would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
SECTION 5.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. (a) Parent has filed to
Parent's Knowledge, and will file with the SEC all forms, reports, schedules,
statements, exhibits and other documents (collectively, the "Parent SEC
Documents") required to be filed on or before the date hereof or the Closing
Date, respectively, by it under the Securities Act or the Exchange Act. Parent
has furnished or made available to the Company true and correct copies of all
Parent SEC Documents filed by Parent since January 1, 1999 and will promptly
furnish to the Company any other Parent SEC Document filed by or on behalf of
Parent with the SEC from the date hereof to the Closing Date. At the time filed,
the Parent SEC Documents filed by Parent since January 1, 1999 (i) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with the applicable
requirements of the Securities Act or Exchange Act, as the case may be.
(b) The audited consolidated financial statements of Parent for the
period from January 1, 1999 to December 31, 1999, together with the report
and opinion thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP which are included in the Parent
SEC Documents and have previously been delivered to the Company and the
unaudited consolidated financial statements of Parent as of and for the
nine months ended September 30, 2000 (the "Parent Interim Financial
Statements"), which will be included in the Parent SEC Documents and will
be delivered to the Company as soon as they are filed, are collectively
referred to herein as the "Parent Financial Statements". The Parent
Financial Statements comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto; and fairly present, in all material
respects, on a consolidated basis, the financial position of Parent at, and
the results of its operations for, each of the periods then ended and were
prepared in conformity with GAAP applied on a consistent basis, except as
otherwise disclosed therein and, subject, in the case of the Parent Interim
Financial Statements, to normal recurring year-end adjustments, the absence
of footnote disclosures, and any other adjustments described therein.
SECTION 5.5 SHARES OF PARENT COMMON STOCK. The shares of Parent Common
Stock will, when issued and delivered to the Company stockholders pursuant to
Section 3.1(a), be duly authorized, validly issued, fully paid, non-assessable,
and free of all liens and other encumbrances of any kind or nature whatsoever.
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SECTION 5.6 ORGANIZATION, STANDING AND AUTHORITY OF PARENT AND SUB. Each of
Parent and Sub is a corporation duly organized, validly existing and in good
standing under the laws of Maryland (in the case of Parent) or Delaware (in the
case of Sub), and has all requisite power and authority to own, lease and
operate its assets, properties and businesses and to carry on its businesses as
now being conducted or currently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of such activities make such qualification necessary, except
where the failure to so qualify would not, individually or in the aggregate,
have a Parent Material Adverse Effect. Sub has not engaged in any business
(other than certain organizational matters) since the date of its incorporation.
The copies of the Certificate of Incorporation and By-Laws of Parent and Sub
included as part of Section 5.6 of the Parent Disclosure Schedule constitute
accurate and complete copies of such organizational instruments and accurately
reflect all amendments thereto through the date hereof.
SECTION 5.7 CAPITALIZATION. (a) The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, par value $0.0001 per
share. As of October 27, 2000, there were 81,014,451 shares of Parent Common
Stock outstanding and there have been no material changes in such numbers
through the date hereof. As of the date hereof, there are no bonds, debentures,
notes or other indebtedness issued or outstanding having the right to vote on
any matters on which Parent's stockholders may vote. All outstanding shares of
Parent Common Stock are duly authorized and are validly issued, fully paid and
nonassessable.
(b) The authorized capital stock of Sub consists of 1,000 shares of
Sub Common Stock, all of which are duly authorized, validly issued, fully
paid and nonassessable.
SECTION 5.8 BROKERAGE. Other than ▇▇▇▇▇▇ Merchant Partners, no broker,
agent or finder has acted, directly or indirectly, for Parent or Sub, nor have
Parent and Sub incurred any obligation to pay any brokerage fees, agent's
commissions or finder's fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 5.9 INFORMATION IN DISCLOSURE DOCUMENTS. None of the information
supplied by Parent or Sub for inclusion in the Registration Statement and the
Proxy Statement will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, or, in the case of the Registration
Statement, at the time it becomes effective 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 were made, not
misleading; provided, however, that this provision shall not apply to statements
or omissions in the Registration Statement or Proxy Statement based upon
information furnished by the Company for use therein. The Registration Statement
will comply as to form in all material respects with the provisions of the
Securities Act, and the rules and regulations promulgated thereunder. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. No representation or
warranty made by Parent contained in this Agreement and no statement contained
in any certificate delivered pursuant to Article VII or any exhibit to this
Agreement and the Parent Disclosure Schedule, contains any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
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SECTION 5.10 NO MATERIAL ADVERSE CHANGE. Since January 1, 2000, there has
not been any change, event, occurrence or state of facts that has caused, or
would reasonably be expected to cause, a Parent Material Adverse Effect.
SECTION 5.11 SUB ACTION. The Board of Directors of Sub (at a meeting duly
called and held) has by the requisite vote of all directors present approved the
Merger in accordance with the provisions of Section 251 of the Delaware
Corporation Law. The sole stockholder of Sub has taken all actions necessary to
adopt the Merger.
SECTION 5.12 OPTIONS AND OTHER STOCK RIGHTS. Except for options to
purchase Parent Common Stock outstanding under Parent's Amended Stock Option
Plan, as amended to date, there is no (i) outstanding option, warrant, call,
unsatisfied preemptive right or other agreement of any kind to purchase or
otherwise to receive from Parent any of the outstanding, authorized but
unissued, unauthorized or treasury shares of Parent Common Stock, Parent
Preferred Stock or any other security of the Parent, (ii) outstanding security
of any kind convertible into any security of Parent, and (iii) outstanding
contract or other agreement to purchase, redeem or otherwise acquire any
outstanding shares of Parent Common Stock, Parent Preferred Stock or any other
security of Parent.
SECTION 5.13 TAX INFORMATION IN DISCLOSURE DOCUMENTS. (a) Parent and, as
applicable, each of its Subsidiaries (i) have duly and timely filed (or there
have been filed on their behalf) all material Tax Returns required to be filed
(after taking into account all available extensions), (ii) have timely paid or
adequately provided for in accordance with GAAP all Taxes due in respect of the
periods covered by such Tax Returns, and (iii) have withheld, and if due, paid
all Taxes required to be withheld, and if due, paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party, except, in each case, where the failure so to file, pay or
provide, or withhold and pay would not, individually or in the aggregate, have a
Parent Material Adverse Effect.
(b) As of the date of this Agreement (i) no material claim for
assessment or collection of Taxes is presently being asserted against the
Parent or its Subsidiaries, (ii) neither the Parent nor any of its
Subsidiaries is a party to any pending action, proceeding, or investigation
by any governmental taxing authority relating to a material Tax, and (iii)
the Parent does not have Knowledge of any such threatened action,
proceeding or investigation.
SECTION 5.14 LIABILITIES. To Parent's Knowledge, neither Parent nor any of
its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise that is required by GAAP to be reflected or
reserved for on the financial statements of the Parent, except (a) liabilities
or obligations disclosed or reserved against in the unaudited consolidated
interim financial statements of Parent as of and for the nine months ended
September 30, 2000 included in Parent SEC Documents or disclosed in the
footnotes thereto or in the footnotes to the audited consolidated financial
statements of Parent as of and for the fiscal year ended December 31, 1999
included in Parent SEC Documents or otherwise disclosed in Parent's 1999 Form
10-K or in Parent's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000, and (b) liabilities or obligations which do not,
individually or in the aggregate, have a Parent Material Adverse Effect.
SECTION 5.15 COMPLIANCE WITH LAWS. To Parent's Knowledge, Parent is not in
violation of any applicable order, judgment, injunction, award or decree, law,
ordinance or regulation or any other requirement of any Governmental Entity
applicable to Parent or any of its
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businesses; Parent has not received notice that any such material violation has
been alleged or is being investigated.
SECTION 5.16 PERMITS. To Parent's Knowledge, Parent has obtained all
Permits that are necessary for the ownership and conduct of its businesses as
presently conducted or currently proposed to be conducted, other than any
Permits, the absence of which would not, individually or in the aggregate, have
a Parent Material Adverse Effect; such Permits are in full force and effect and
are sufficient for the ownership and conduct of such businesses as presently
conducted or currently proposed to be conducted; to Parent's Knowledge, no
violations exist or have been recorded in respect of any material Permit; and no
proceeding is pending or, to the Knowledge of Parent, threatened, that would
suspend, revoke or limit any Permit.
SECTION 5.17 ACTIONS AND PROCEEDINGS. There are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against or
involving Parent or any of its directors, officers or employees (in their
capacities as such). Except as disclosed in the Parent SEC Documents, as of the
date of this Agreement there is no Proceeding which is pending or, to Parent's
Knowledge, threatened against or involving Parent, any of its Subsidiaries, or
any of their directors, officers or employees (in their capacities as such) or
properties, capital stock or assets, except where the failure of any of the
foregoing to be true does not individually or in the aggregate have a Parent
Material Adverse Effect on Parent.
SECTION 5.18 LOAN PORTFOLIO. Parent's loan portfolio was acquired in the
ordinary course of business. All loans included in such portfolio comply with
all laws and regulations of each of the states to which Parent is subject
relating thereto except for noncompliances that would not, individually or in
the aggregate, have a Parent Material Adverse Effect.
SECTION 5.19 NO PRIOR ACTIVITIES. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Sub has
neither incurred any obligation or liability nor engaged in any business or
activity of any type or kind or entered into any agreement or arrangement with
any person.
ARTICLE VI
COVENANTS AND AGREEMENTS
Each of Parent, Sub and the Company (as applicable) covenant and agree as
follows:
SECTION 6.1 CONDUCT OF BUSINESS. (a) Prior to the Effective Time, except as
set forth in Section 6.1 of the Company Disclosure Schedule or unless Parent
shall otherwise agree in writing:
(i) The Company shall and, shall cause its Subsidiaries to, carry on their
respective business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall use
its reasonable efforts to preserve and cause its Subsidiaries to
preserve intact their present business organizations, keep available
the services of their present officers and employees and preserve
their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time, except such
impairment as would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company shall and shall cause its
Subsidiaries to (i) maintain insurance coverages and their books,
accounts and records in the usual
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manner consistent with prior practices; (ii) comply in all material
respects with all laws, ordinances and regulations of Governmental
Entities applicable to the Company and its Subsidiaries; (iii)
maintain and keep their properties and equipment in good repair,
working order and condition, ordinary wear and tear excepted; and (iv)
perform in all material respects its obligations under all contracts
and commitments to which it is a party or by which it is bound, in
each case other than where the failure to so maintain, comply or
perform, either individually or in the aggregate, would result in a
Company Material Adverse Effect.
(ii) The Company shall not and shall cause its Subsidiaries not to
undertake any of the actions specified in Section 4.28; provided that
this Section 6.1(a)(ii) shall not prohibit the Company or any of its
Subsidiaries from (A) revaluing or writing down any loan or receivable
as required by any Governmental Entity or in accordance with GAAP or
(B) making or committing to make loans in the ordinary course of
business consistent with past practice.
(b) Neither Parent, Sub nor the Company shall take or cause to be
taken any action or omit to take any action, whether before or after the
Effective Time, and Parent and Sub have not taken any action or omitted to
take any action, in each case which would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code. The
Company, on the one hand, and Parent and Sub, on the other hand, shall
execute and deliver to legal counsel to the Company and Parent certificates
substantially in the form of Exhibits 6.1(b)-1 and 6.1(b)-2, respectively,
at such time or times as reasonably requested by such legal counsel in
connection with the delivery of opinions in accordance with Sections 8.7
and 9.3 hereof, or as required in connection with any filings with the SEC,
and the Company and Parent shall each provide a copy thereof to the other
parties hereto. The parties agree to make such changes to the certificates
as they reasonably agree are necessary in connection with the delivery of
such opinions. Prior to the Effective Time, none of the Company, Parent or
Sub shall take or cause to be taken any action that would cause to be
untrue (or fail to take or cause not to be taken any action that would
cause to be untrue) any of the representations in Exhibits 6.1(b)-1 or
6.1(b)-2.
(c) Prior to the Effective Time, unless the Company shall otherwise
consent in writing (which shall not be unreasonably withheld), Parent shall
in all material respects carry on its respective businesses in the usual,
regular and ordinary course, provided, that for purposes of this Section
6.1(c), "ordinary course" shall mean any activities or business related,
directly or indirectly, to lending, financing, leasing and the like.
SECTION 6.2 LITIGATION INVOLVING THE COMPANY. Prior to the Closing Date,
the Company shall notify Parent of any actions or proceedings of the type
required to be described in Sections 4.15, 4.30 or 4.31 that are threatened or
commenced against the Company, any of its Subsidiaries, or against any officer
or director, property or asset of the Company, or with respect to the Company's
affairs, promptly upon the Company becoming aware thereof, and of any requests
of the Company or, to the Knowledge of the Company, any Company stockholder, for
additional information or documentary materials by any Governmental Entity in
connection with the transactions contemplated hereby promptly upon the Company
becoming aware thereof. As to compliance with such requests for such
information, the Company shall consult with and obtain the consent of Parent,
which consent shall not be withheld unreasonably; provided that such consent
shall be unnecessary where such information is required by law to be provided.
▇-▇▇
▇▇
▇▇▇▇▇▇▇ 6.3 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES OF
THE PARTIES. From the date hereof through the Closing Date, (a) the Company
shall use all reasonable efforts to conduct its affairs in such a manner so
that, except as otherwise contemplated or permitted by this Agreement, the
representations and warranties of the Company contained in Article IV shall
continue to be true and correct in all material respects (or in all respects in
the case of any representation or warranty which refers to a Company Material
Adverse Effect or otherwise includes a concept of materiality) on and as of the
Closing Date as if made on and as of the Closing Date, except that any such
representations and warranties that are given as of a particular date and relate
solely to a particular date or period shall be true and correct in all material
respects (or in all respects in the case of any representation or warranty which
refers to a Company Material Adverse Effect or otherwise includes a concept of
materiality) as of such date or period; (b) Parent and Sub shall use their
respective reasonable efforts to conduct their affairs in such a manner so that,
except as otherwise contemplated or permitted by this Agreement, the
representations and warranties contained in Article V shall continue to be true
and correct in all material respects (or in all respects in the case of any
representation or warranty which refers to a Parent Material Adverse Effect or
otherwise includes a concept of materiality) on and as of the Closing Date as if
made on and as of the Closing Date, except that any such representations and
warranties that are given as of a particular date and relate solely to a
particular date or period shall be true and correct in all material respects (or
in all respects in the case of any representation or warranty which refers to a
Parent Material Adverse Effect or otherwise includes a concept of materiality)
as of such date or period; (c) the Company shall promptly notify Parent and Sub
of any event, condition or circumstance occurring from the date hereof through
the Closing Date of which the Company becomes aware that would cause any
material revisions to the Company Disclosure Schedule provided by the Company
pursuant to this Agreement, or that would constitute a violation or breach of
this Agreement by the Company; and (d) Parent and Sub shall promptly notify the
Company of any event, condition or circumstance occurring from the date hereof
through the Closing Date of which it becomes aware that would cause any material
revisions to the Parent Disclosure Schedule provided by Parent or Sub pursuant
to this Agreement, or that would constitute a violation or breach of this
Agreement by Parent or Sub. No such notification shall be deemed an amendment to
the Disclosure Schedules to this Agreement, except as otherwise provided by this
Agreement.
SECTION 6.4 CORPORATE EXAMINATIONS AND INVESTIGATIONS;
CONFIDENTIALITY. (a) The Company shall cooperate with Parent as Parent shall
reasonably request in connection with the Parent's due diligence review of the
Company, to the extent necessary to confirm the accuracy of the Company's
representations and warranties. Notwithstanding the foregoing, Parent will not
contact, in connection with the transactions contemplated by the Agreement, any
customers, suppliers or employees of the Company without obtaining the prior
consent of the Company, which consent shall not be unreasonably withheld.
(b) If this Agreement terminates, the Confidentiality Agreement shall
remain in full force and effect in accordance with its terms. If this
Agreement is not terminated, the Confidentiality Agreement shall expire and
be of no further force or effect following the Effective Time.
SECTION 6.5 INDEMNIFICATION OF COMPANY OFFICERS AND DIRECTORS. (a) Parent
agrees, for a period of six years following the Effective Time, not to amend the
indemnification provisions set forth in the Certificate of Incorporation or
By-Laws of the Surviving Corporation in a manner that would adversely affect the
rights of the Company's officers, directors and employees to indemnification
thereunder and agrees to cause the Surviving Corporation to
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fulfill and honor such obligations to the maximum extent permitted by law;
provided, however, that nothing in this Section 6.5 shall prevent Parent from
effecting any merger, reorganization or consolidation of the Surviving
Corporation, provided that, Parent agrees to satisfy any amounts that would have
been payable by the Surviving Corporation (or any successor) and that were not
otherwise paid pursuant to the indemnification provisions set forth in the
Certificate of Incorporation or By-Laws of the Surviving Corporation for a
period commencing at the Effective Time and continuing six years thereafter.
(b) Parent shall cause to be maintained, for a period of not less than
six (6) years after the Effective Time, all of Company's and its
Subsidiaries' current directors' and officers' insurance and
indemnification policies to the extent that such policies provide coverage
for events occurring prior to the Effective Time (collectively, the "D&O
Insurance") for all current or former directors, officers or employees of
the Company or its Subsidiaries; provided, however, that Parent may, in
lieu of maintaining such existing D&O Insurance as provided above, and
shall, if the existing D&O Insurance expires or is terminated or canceled
during such six (6) year period, cause comparable coverage to be provided
under any policy maintained for the benefit of the directors, officers and
employees of Parent or any of its Subsidiaries; and provided, further, that
(i) the issuer thereof shall have a claims-paying rating at least equal to
the issuer of the existing D&O Insurance; and (ii) the terms thereof shall
be no less advantageous to the directors, officers and employees of Company
and its Subsidiaries than the existing D&O Insurance.
SECTION 6.6 REGISTRATION STATEMENT/PROXY STATEMENT. As promptly as
practicable after the execution of this Agreement, the Company and Parent shall
prepare and file with the SEC preliminary proxy materials which shall constitute
the preliminary Proxy Statement and a preliminary prospectus with respect to the
Parent Common Stock to be issued in connection with the Merger. As promptly as
practicable after comments are received from the SEC with respect to the
preliminary proxy materials and after the furnishing by the Company and Parent
of all information required to be contained therein, the Company shall file with
the SEC the definitive Proxy Statement and Parent shall file with the SEC the
definitive Proxy Statement and the Registration Statement and Parent and the
Company shall use all reasonable efforts to cause the Registration Statement to
become effective as soon thereafter as practicable.
SECTION 6.7 COMPLIANCE WITH THE SECURITIES ACT. (a) Prior to the Effective
Time the Company shall deliver to Parent a list of names and addresses of each
person who, in the Company's reasonable judgment, is an affiliate within the
meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act (the "Affiliates").
(b) The Company shall use its reasonable efforts to obtain a written
agreement from each person who is identified as a possible Affiliate
pursuant to clause (a) above, in the form previously approved by the
parties and attached hereto as Exhibit 6.7(b), that he or she will not
offer to sell, sell or otherwise dispose of any of the Parent Common Stock
issued to him or her pursuant to the Merger, except in compliance with Rule
145 or another exemption from the registration requirements of the
Securities Act. The Company shall deliver such written agreements to Parent
on or prior to the Effective Time.
SECTION 6.8 NASDAQ LISTING. Parent shall use its reasonable efforts to
list on the Nasdaq National Market, the Parent Common Stock to be issued
pursuant to the Merger.
SECTION 6.9 ACQUISITION PROPOSALS. (a) The Company agrees that neither it
nor any of its Subsidiaries, nor any of the officers and directors of any of
them shall, and that it shall direct and use its reasonable efforts to cause its
and its Subsidiaries' employees, agents and
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representatives (including any investment banker, attorney or accountant
retained by them or any of their Subsidiaries) not to, directly or indirectly,
initiate, solicit or encourage any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation or
similar transaction, or any purchase of all or 10% or more of the assets or any
equity securities of the Company or any of its Subsidiaries (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"), it being
understood that any such activities engaged in prior to the date of this
Agreement do not violate this Section 6.9. The Company further agrees that from
and after the date hereof neither it nor any of its Subsidiaries nor any of the
officers and directors of any of them shall, and that it shall direct and use
its reasonable efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by them or any of their Subsidiaries) not to, directly or indirectly,
knowingly engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise knowingly facilitate any effort or attempt to
make or implement an Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent the Company or its Board of Directors
from (A) complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal; (B) providing information in response to
a request therefor by a Person who has made a bona fide written Acquisition
Proposal that was not solicited in violation of this Section 6.9(a) if the Board
of Directors receives from the Person so requesting such information an executed
confidentiality agreement on terms substantially similar to those contained in
the Confidentiality Agreement; (C) engaging in any negotiations or discussions
with any person who has made an unsolicited bona fide written Acquisition
Proposal that was not solicited in violation of this Section 6.9(a); or (D)
recommending such an Acquisition Proposal to the shareholders of the Company, if
and only to the extent that, (i) in each such case referred to in clause (B),
(C) or (D) above, the Board of Directors of the Company determines in good faith
after consultation with outside legal counsel that such action is consistent
with its directors' fiduciary duties under applicable law and (ii) in each case
referred to in clause (C) or (D) above, the Board of Directors of the Company
determines in good faith (after consultation with its financial advisor) that
such Acquisition Proposal would, if consummated, result in a transaction or a
combination of transactions more favorable to the Company's shareholders from a
financial point of view than the transactions contemplated by this Agreement
(any such more favorable Acquisition Proposal being referred to in this
Agreement as a "Superior Proposal"). The Company agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. The Company agrees that it will take the necessary steps
to promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.9. The Company agrees
that it will notify Parent by the end of the next business day following receipt
if any such inquiries, proposals or offers relating to an Acquisition Proposal
are received by, any such information is requested from, or any such discussions
or negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
person (unless disclosure of such name is precluded by the terms of the proposal
or offer in question) and the material terms and conditions of any proposals or
offers and thereafter shall keep Parent informed, on a current basis, on the
status and terms of any such proposals or offers and the status of any such
discussions or negotiations. The Company also agrees that it will promptly
request each Person that has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring it or any of its Subsidiaries to
return or destroy all confidential information heretofore furnished to such
Person by or on behalf of it or any of its Subsidiaries.
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(b) Notwithstanding anything in this Section 6.9 to the contrary, if,
at any time prior to obtaining the Company stockholders' approval of the
Merger, the Company's Board of Directors determines in good faith, on the
basis of the advice of its financial advisors and outside counsel, in
response to an Acquisition Proposal that did not result from a breach of
Section 6.9(a), that such proposal is a Superior Proposal, the Company or
its Board of Directors may terminate this Agreement if, and only if, the
Company shall substantially concurrently with such termination enter into a
definitive agreement containing the terms of a Superior Proposal; provided,
however, that the Company shall not terminate this Agreement pursuant to
this sentence, and any purported termination pursuant to this sentence
shall be void and of no force or effect, unless the Company shall have
complied with (i) all the provisions of this Section 6.9, including the
notification provisions in this Section 6.9, (ii) the following proviso,
and (iii) the payment of the termination fee described in Section 12.2(b)
prior to or concurrently with such termination; and provided further,
however, that the Company shall not exercise its right to terminate this
Agreement pursuant to this Section 6.9 until after five Business Days
following Parent's receipt of written notice (a "Notice of Superior
Proposal") advising Parent that the Company's Board of Directors has
received such a Superior Proposal and that such Board of Directors will,
subject to any action taken by Parent pursuant to this sentence, cause the
Company to accept such Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and (unless disclosure of such name is
precluded by the terms of the proposal or offer in question) identifying
the person making such Superior Proposal (it being understood and agreed
that any amendment to the price or any other material term of such a
Superior Proposal shall require an additional Notice of Superior Proposal
and a new five Business Day period).
SECTION 6.10 PARENT AND SUB APPROVALS. Parent and Sub shall take all
reasonable steps necessary or appropriate to obtain as promptly as practicable
all necessary approvals, authorizations and consents of any person or
Governmental Entity required to be obtained by Parent and Sub to consummate the
transactions contemplated hereby, and will cooperate with the Company in seeking
to obtain all such approvals, authorizations and consents. Parent and Sub shall
use all reasonable efforts to provide such information to such persons, bodies
and authorities as such persons, bodies or authorities or the Company may
reasonably request.
SECTION 6.11 COMPANY APPROVALS. The Company shall take all reasonable
steps necessary or appropriate to obtain as promptly as practicable all
necessary approvals, authorizations and consents of any third party or
Governmental Entity required to be obtained by the Company to consummate the
transactions contemplated hereby and will cooperate with Parent in seeking to
obtain all such approvals, authorizations and consents. The Company shall use
all reasonable efforts to provide such information to such persons, bodies and
authorities as such persons, bodies and authorities or Parent may reasonably
request.
SECTION 6.12 NOMINATION TO SURVIVING COMPANY BOARD. Promptly after the
Effective Time, Parent shall cause ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ and one additional
individual designated by him to be nominated and elected as director of the
Surviving Corporation.
SECTION 6.13 EXPENSES. Except as otherwise specifically provided herein,
Parent, Sub and the Company shall bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of investment bankers, agents, representatives, counsel and
accountants. In any action, suit or proceeding under or to enforce any provision
of this Agreement, the prevailing party shall be entitled to recover its
reasonable attorney's fees and other out-of-pocket expenses from the losing
party.
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SECTION 6.14 FURTHER ASSURANCES. (a) Each of Parent, Sub and the Company
shall execute such documents and other papers and take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby. Each of Parent, Sub and the Company shall
use all reasonable efforts to cause all actions to effectuate the Closing for
which such party is responsible under this Agreement to be taken as promptly as
practicable, including using all reasonable efforts to obtain all necessary
waivers, consents and approvals (including, but not limited to, if applicable,
filings under the H-S-R Act and with all applicable Governmental Entities) and
to lift any injunction or other legal bar to the Merger (and, in each case, to
proceed with the Merger as expeditiously as possible). Notwithstanding the
foregoing, there shall be no action required to be taken and no action will be
taken in order to consummate and make effective the transactions contemplated by
this Agreement if such action, either alone or together with another action,
would result in a Company Material Adverse Effect or a Parent Material Adverse
Effect.
(b) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers and/or directors of Parent and the Surviving Corporation
shall take all such necessary action.
(c) The Company shall cure, or cause to be cured, any defects or
noncompliances in its Subsidiaries' organization or qualification as
identified in Section 4.7(b) of the Company Disclosure Schedule.
SECTION 6.15 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Each of the Company and Parent (i) shall
use their reasonable efforts to file, and to cause their "ultimate parent
entities" to file, as soon as practicable a "Notification and Report Form For
Certain Mergers and Acquisitions" under the H-S-R Act with respect to the Merger
and the transactions contemplated hereby, (ii) shall take all other actions as
may be necessary, desirable or convenient to obtain the required approval under
the H-S-R Act and (iii) will comply at the earliest practicable date with any
request for additional information received by it from the FTC or Justice
pursuant to the H-S-R Act.
SECTION 6.16 SBA APPROVAL. Each of the Company and Parent (i) shall use
its reasonable efforts, and shall take all actions as may be necessary,
desirable or convenient, to obtain the approval of the SBA with respect to the
Merger and the transactions contemplated hereby and (ii) will comply at the
earliest practicable date with any request for additional information received
by it from the SBA.
SECTION 6.17 UPDATING SCHEDULES. In connection with the Closing, Parent,
Sub and the Company will, promptly upon becoming aware of any fact requiring
supplementation or amendment of the Schedules, supplement or amend the various
Schedules to this Agreement to reflect any matter which, if existing, occurring
or known on the date of this Agreement, would have been required to be set forth
or described in such Schedules which was or has been rendered inaccurate
thereby. No such supplement or amendment to the Schedules shall have any effect
for the purpose of determining satisfaction of the conditions set forth in
Articles VII, VIII and IX hereof, or the compliance by any party hereto with its
covenants and agreements set forth herein.
SECTION 6.18 EMPLOYEE BENEFITS. (a) Effective at the Effective Time, the
Surviving Corporation shall establish a nonqualified deferred compensation plan
(the "Surviving Corporation Plan") covering employees of the Surviving
Corporation who remain as employees of the Company at the Effective Time and
who, as of the Effective Time, held options to purchase shares of Company Common
Stock, which options were not vested as of the Effective Time (the "Unvested
Options"). Under the Surviving Corporation Plan, each
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covered employee shall have an account to which will be credited a number of
shares of Parent Common Stock (including fractional shares thereof). The number
of shares of Parent Common Stock credited to a covered employee's account shall
be equal to (1) the product of (x) the difference between $3.50 per share and
the exercise price per share of the covered employee's Unvested Options
multiplied by (y) the number of Unvested Options held by such employee, divided
by (2) $19.39. In addition, the amount of any dividends paid on shares of Parent
Common Stock equal to shares of Parent Common Stock credited to a covered
employee's plan account shall be credited to that account. Shares and
accumulated dividends shall be paid to covered employees in accordance with the
vesting schedule to be established under the Surviving Corporation Plan (which
vesting schedule shall be no less favorable to the covered employee than the
schedule under his or her Unvested Options) or, pursuant to the separate
election of each covered employee with respect to the period after vesting,
payment may be deferred until a date or event specified by such employee or
allocated to a type of investment fund specified by such employee. In exchange
for the credits made under the Surviving Corporation Plan, the covered employees
shall surrender all rights to any Unvested Options. A copy of the Surviving
Corporation Plan shall be provided to the Company prior to the Closing Date.
(b) The Company shall use all reasonable efforts to cause the holders
of each Unvested Option to surrender all of the Unvested Options to the
Company for cancellation prior to the Effective Time; provided, however,
that the Unvested Options shall not be deemed canceled until the holders
thereof have been credited shares of Parent Common Stock under the
Surviving Corporation Plan in accordance with Section 6.18(a) after the
Effective Time.
SECTION 6.19 COMPANY RECAPITALIZATION. The Company shall use all
reasonable efforts to consummate the Company Recapitalization, subsequent to the
consummation of the Futuronics Merger and immediately prior to the Effective
Time, including the obtaining of the necessary consents of the Company's
stockholders thereto.
ARTICLE VII
CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION
TO EFFECT THE MERGER
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing of the following
conditions, any one or more of which may be waived by them, to the extent
permitted by law:
SECTION 7.1 COMPANY STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved and adopted by the
requisite vote of the Company's stockholders.
SECTION 7.2 LISTING OF SHARES. The shares of Parent Common Stock issuable
in the Merger shall have been approved for listing on the Nasdaq National
Market.
SECTION 7.3 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. All applicable waiting periods with respect
to any "Notification and Report Form For Certain Mergers and Acquisitions"
required to be filed by Parent, the Company or any of their "ultimate parent
entities" in compliance with the H-S-R Act in connection with the transactions
contemplated hereby shall have passed, or early termination of such waiting
periods shall have been granted.
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SECTION 7.4 EFFECTIVENESS OF 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 remain in effect.
SECTION 7.5 SBA APPROVAL. The SBA shall have approved the Merger, this
Agreement and the transactions contemplated hereby; provided, that if such
approval is subject to any conditions, such conditions shall be reasonably
acceptable to Parent and shall not prevent the continued operation of Company
substantially as currently conducted.
SECTION 7.6 LITIGATION. No action, suit or proceeding shall have been
instituted and be continuing or be threatened by any Governmental Entity to
restrain, modify or prevent the carrying out of the transactions contemplated
hereby and no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the Merger or
limiting or restricting Parent's conduct or operation of the business of the
Company after the Merger shall have been issued.
SECTION 7.7 FUTURONICS MERGER; COMPANY RECAPITALIZATION. The Futuronics
Merger and the Company Recapitalization shall have been consummated no later
than the Effective Time of the Merger.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF
PARENT AND SUB TO EFFECT THE MERGER
The obligation of Parent and Sub to effect the Merger shall be subject to
the satisfaction on or prior to the Closing of the following additional
conditions, any one or more of which may be waived by them, to the extent
permitted by law:
SECTION 8.1 REPRESENTATIONS AND COVENANTS. The representations and
warranties of the Company contained in this Agreement (including those contained
in the Company Disclosure Schedule, as the same may be amended from time to time
pursuant to the provisions hereof) shall be true and correct on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date, (except that any such representations and warranties that are
given as of a particular date and relate solely to a particular date or period
shall be true and correct as of such date or period), except where the failure
of such representations and warranties to be true and correct (without giving
effect to any materiality or Company Material Adverse Effect limitations
therein) would not have, and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
and the Company stockholders who are parties to the Voting Agreement, shall have
performed and complied, respectively, in all material respects with all
covenants and agreements required by this Agreement and the Voting Agreement to
be performed or complied with by the Company or such Company stockholders on or
prior to the Closing Date. The Company shall have delivered to Parent and Sub
certificates, dated the Closing Date, and signed by an Executive Officer of the
Company to the foregoing effect.
SECTION 8.2 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date hereof,
there shall not have been any change, event, occurrence or state of facts that
has caused or would reasonably be expected to cause a Company Material Adverse
Effect.
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SECTION 8.3 RECEIPT OF AGREEMENTS. On the date hereof, Parent shall have
received executed originals of (i) the Voting Agreement and (ii) the Agreements
with Specified Shareholders. On or prior to the Closing Date, Parent shall have
received executed originals of each of the Employment Agreements.
SECTION 8.4 EXERCISE AND CONVERSION OF VESTED STOCK OPTIONS AND
WARRANTS. All vested Company Stock Options and all Company Warrants shall have
been fully exercised for the purchase of Company Common Stock.
SECTION 8.5 UNVESTED OPTIONS. All Unvested Options shall have been
surrendered and canceled pursuant to Section 6.18.
SECTION 8.6 CONVERTIBLE DEBENTURES. Not more than $250,000 in aggregate
principal amount of Company Convertible Debentures shall be outstanding
immediately prior to the Effective Time.
SECTION 8.7 TAX OPINION. Parent shall have received the opinion, based on
the representations of the Company, Parent and Sub, (which representations shall
be in substantially the form attached hereto as Exhibits 6.1(b)-1 and 6.1(b)-2
respectively), of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to Parent and Sub
(or, if such counsel does not render such opinion, such other counsel as shall
be reasonably acceptable to Parent) to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code and
such opinion shall not have been withdrawn or modified in any material respect.
Parent may not waive this condition without the consent of the Company.
SECTION 8.8 CLOSING CONDITIONS. Documentation or other information shall
have been received in a form reasonably satisfactory to Parent and Sub which
evidences that the conditions set forth in this Article VIII have been
satisfied.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO EFFECT THE MERGER
The obligation of the Company to effect the Merger shall be subject to the
satisfaction on or prior to the Closing of the following additional conditions,
any one or more of which may be waived by the Company, to the extent permitted
by law:
SECTION 9.1 REPRESENTATIONS AND COVENANTS. The representations and
warranties of Parent and Sub contained in this Agreement (including those
contained in the Parent Disclosure Schedule, as the same may be amended from
time to time pursuant to the provisions hereof) shall be true and correct on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date, (except that any such representations and warranties that
are given as of a particular date and relate solely to a particular date or
period shall be true and correct as of such date or period), except where the
failure of such representations and warranties to be true and correct (without
giving effect to any materiality or Parent Material Adverse Effect limitations
therein) would not have, and could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Parent and
Sub shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by Parent or Sub on or prior to the Closing Date. Parent and Sub shall have
delivered to the Company certificates of an Executive Officer of Parent and Sub,
dated the Closing Date, to the foregoing effect.
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SECTION 9.2 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date hereof,
there shall not have been any change, event, occurrence or state of facts that
has caused or would reasonably be expected to cause a Parent Material Adverse
Effect.
SECTION 9.3 TAX OPINION. The Company shall have received the opinion of
Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to the Company (or, if such counsel does not
render such opinion, such other counsel as shall be reasonably acceptable to the
Company), based on the representations of the Company, Parent and Sub, (which
representations shall be in substantially the form attached hereto as Exhibits
6.1(b)-1 and 6.1(b)-2 respectively), to the effect that the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Code and
such opinion shall not have been withdrawn or modified in any material respect.
The Company may not waive this condition without the consent of Parent.
SECTION 9.4 CLOSING CONDITIONS. Documentation or other information shall
have been received in a form reasonably satisfactory to the Company which
evidences that the conditions set forth in this Article IX have been satisfied.
ARTICLE X
CLOSING
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, at 10:00 a.m. local time
on the Closing Date or at such other time and place as the parties may mutually
agree.
ARTICLE XI
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
SECTION 11.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding any right of Parent and Sub to investigate fully the
affairs of the Company, or any right of the Company to investigate fully the
accuracy of the representations and warranties of Parent and Sub, and
notwithstanding any knowledge of facts determined or determinable by Parent, Sub
or the Company, as the case may be, pursuant to such investigation or right of
investigation, Parent, Sub and the Company, as the case may be, have the right
to rely fully upon the representations, warranties, covenants and agreements of
the Company, Parent and Sub, as the case may be, contained in this Agreement. No
representations, warranties, covenants or agreements in this Agreement, except
the covenants and agreements contained in Articles III, XIII and XIV and
Sections 4.29, 5.8, 6.1(b), 6.5, 6.12, 6.13 and 6.18, shall survive the
Effective Time.
ARTICLE XII
TERMINATION OF AGREEMENT
SECTION 12.1 TERMINATION. This Agreement may be terminated prior to the
Closing as follows:
(a) by either Parent or the Company if the Merger shall not have been
consummated on or before April 30, 2001;
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(b) by the Company if any of the conditions specified in Article VII
or IX have not been met or waived by the Company at such time as any such
condition is no longer capable of satisfaction;
(c) by Parent if any of the conditions specified in Article VII or
VIII have not been met or waived by Parent at such time as any such
condition is no longer capable of satisfaction;
(d) by Parent if the Company or the Company stockholders who are
parties to the Voting Agreement shall have breached any of their respective
obligations under Article VI of this Agreement or the Voting Agreement in
any material respect and such breach continues for a period of ten days
after the receipt of notice of the breach from Parent;
(e) by the Company if Parent or Sub shall have breached any of their
respective obligations under Article VI of this Agreement in any material
respect and such breach continues for a period of ten days after the
receipt of notice of the breach from the Company;
(f) by the Company if its Board of Directors, in the exercise of its
fiduciary duties, accepts an Acquisition Proposal in accordance with
Section 6.9;
(g) at any time on or prior to the Closing Date, by mutual written
consent of Parent, Sub and the Company.
SECTION 12.2 EFFECT OF TERMINATION. (a) Subject to Section 12.2(b), if
this Agreement is terminated and the transactions contemplated hereby are not
consummated as described above, this Agreement shall become void and be of no
further force and effect and there shall be no obligation on the part of Parent,
Sub or the Company, except for the provisions of this Agreement relating to the
obligations of parties under Sections 6.4(b), 6.13, 12.1 and 12.2(b) and
Articles XIII and XIV. None of the parties hereto shall have any liability in
respect to a termination of this Agreement prior to Closing, except to the
extent that termination results from the intentional, willful or knowing
violation of the representations, warranties, covenants or agreements of such
party under this Agreement and except as provided in Section 12.2(b) hereof.
(b) In the event that this Agreement is terminated by the Company
pursuant to Section 12.1(f), then the Company shall, promptly, but in no
event later than one Business Day after the date of such termination, pay
to the Parent a termination fee of $2,750,000 (the "Termination Fee")
payable by wire transfer of same day funds.
ARTICLE XIII
DEFINITIONS
SECTION 13.1 DEFINITIONS. The following terms when used in this Agreement
shall have the following meanings:
"Acquisition Proposal" has the meaning set forth in Section 6.9.
"affiliate" (or "affiliates" as the context may require), with respect to
any person, means any other person controlling, controlled by or under common
control with such person.
"Affiliates" has the meaning set forth in Section 6.7(a).
"Agreement" has the meaning set forth in the preamble.
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"Agreements with Specified Shareholders" means agreements between Parent
and each of the Named Persons pursuant to which such persons agree to certain
restrictions on their ability to transfer Parent Common Stock received in the
Merger for a specified period after the Effective Time.
"Business Day" means any day other than a Saturday or a Sunday, or a day on
which banking institutions in the State of New York are obligated by law or
executive order to close.
"Canceled Company Stock" has the meaning set forth in Section 3.1(d).
"CERCLA" shall mean the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et seq. as amended.
"Certificates" has the meaning set forth in Section 3.2(a).
"Closing" has the meaning set forth in Article X.
"Closing Date" means (a) the day on which the last of all conditions to the
consummation of the transactions contemplated hereby (other than conditions
which contemplate only delivery or filing of one or more documents
contemporaneously with the Closing) have been satisfied or waived, or (b) such
other date as the parties hereto agree in writing.
"Code" has the meaning set forth in the recitals.
"Company" has the meaning set forth in the preamble.
"Company Audited Financial Statements" has the meaning provided in Section
4.10.
"Company Class B Stock" means Class B common stock, par value $0.01 per
share, of the Company created pursuant to the Company Recapitalization and
having powers and rights identical to the Company Common Stock and voting
together with the Company Common Stock as a single class.
"Company Common Stock" means, the common stock of the Company, having a par
value of $.01 (one cent) per share.
"Company Convertible Debentures" means the Company's 9% Convertible
Subordinated Notes Due 2003, Conversion Price $2.75 Per Share and the Company's
9 1/4% Convertible Subordinated Notes Due 2001, Conversion Price $2.00 Per
Share.
"Company Disclosure Schedule" has the meaning set forth in the preamble to
Article IV.
"Company Documents" has the meaning set forth in Section 4.1.
"Company Financial Statements" has the meaning set forth in Section 4.10.
"Company Interim Financial Statements" has the meaning set forth in Section
4.10.
"Company Material Adverse Effect" has the meaning set forth in Section 4.3.
"Company Meeting" has the meaning set forth in Section 3.6.
"Company Recapitalization" means a recapitalization of the Company
immediately prior to the Effective Time, pursuant to which (A) the Company Class
B Stock will be created, (B) each share of Company Common Stock held by
Futuronics will be exchanged for one share of Company Class B Stock, and (C) a
number of shares of Company Common Stock (the "Executive Shares") equal to 5.1
percent of the total number of shares of Company
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Common Stock outstanding immediately prior to the Company Recapitalization shall
be exchanged with certain individuals for a corresponding number of shares of
Company Class B Stock as follows: (i) a number of shares of Company Common Stock
held by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ equal to 72.2 percent of the Executive Shares
will be exchanged for a corresponding number of shares of Company Class B Stock,
(ii) a number of shares of Company Common Stock held by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ equal to
10.3 percent of the Executive Shares will be exchanged for a corresponding
number of shares of Company Class B Stock, (iii) a number of shares of Company
Common Stock held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ equal to 10.3 percent of the Executive
Shares will be exchanged for a corresponding number of shares of Company Class B
Stock and (iv) a number of shares of Company Common Stock held by ▇▇▇▇▇▇▇▇
▇.▇▇▇▇▇▇▇▇▇ equal to 7.2 percent of the Executive Shares will be exchanged for a
corresponding number of shares of Company Class B Stock.
"Company SEC Documents" has the meaning set forth in Section 4.10.
"Company Stock Option" means any option for the purchase of Company Common
Stock.
"Company Warrant" means any warrant for the purchase of Company Common
Stock.
"Confidentiality Agreement" means the Mutual Nondisclosure Agreement dated
as of August 3, 2000, between Parent and the Company.
"Confirmation" has the meaning set forth in Section 3.1(e).
"contracts and other agreements" mean all contracts, agreements, supply
agreements, undertakings, indentures, notes, bonds, loans, instruments, leases,
mortgages, commitments or other binding arrangements.
"Converting Shareholder" has the meaning set forth in Section 3.2(a).
"Delaware Corporation Law" has the meaning set forth in Section 1.1.
"Distribution" means any distribution of cash, securities or property on or
in respect of the Company Common Stock whether as a dividend or otherwise.
"Effective Time" has the meaning set forth in Section 1.2.
"Employment Agreements" means employment agreements, satisfactory in form
and substance to Parent, between the Surviving Corporation, on the one hand, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, respectively, on the other, to
become effective at the Effective Time.
"Environmental Laws" means all applicable federal, state, and local laws,
ordinances, rules, regulations, codes, duties under the common law or orders,
including, without limitation, any requirements imposed under any Permits,
licenses, judgments, decrees, agreements or recorded covenants, conditions,
restrictions or easements, the purpose of which is to protect the environment.
"Environmental Permits" shall mean all Permits, licenses, approvals,
authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation by the
Company or its Subsidiaries of their properties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the regulations and rulings issued thereunder.
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"Exchange Agent" has the meaning set forth in Section 3.2(a).
"Exchange Ratio" has the meaning set forth in Section 3.1(a)(1).
"Executive Officers" means, as to Parent and the Company, respectively, its
chairman of the board, its president, any vice president (executive, senior or
other), secretary, treasurer or chief financial officer, if any, or any other
officer or employee having supervisory responsibility for a principal business
function.
"Family Member" means, with respect to any person, a parent, spouse,
sibling or lineal descendent of such person.
"FTC" means the Federal Trade Commission or any successor agency or
department.
"Futuronics" means Futuronics Corporation, a New York corporation.
"Futuronics Acquisition Co." means Allied Capital F Sub Corporation, a New
York corporation and a wholly owned subsidiary of Parent.
"Futuronics Merger" means the merger of Futuronics Acquisition Co. with and
into Futuronics upon the terms and subject to the conditions set forth in the
Futuronics Merger Agreement.
"Futuronics Merger Agreement" means the Agreement and Plan of Merger, dated
as of even date herewith, by and among Parent, Futuronics Acquisition Co. and
Futuronics.
"GAAP" means generally accepted accounting principles in the United States
of America from time to time in effect.
"Governmental Entities" means (a) any international, foreign, federal,
state, county, local or municipal government or administrative agency or
political subdivision thereof, (b) any governmental agency, authority, board,
bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental agency, tribunal or entity
that is vested by a governmental agency with applicable jurisdiction, or (e) any
arbitration tribunal or other non-governmental authority with applicable
jurisdiction.
"Hazardous Materials" means (i) any substance or material regulated or
identified as hazardous, toxic, pollutant or contaminant under Environmental
Laws, including gasoline, diesel fuel or other petroleum hydrocarbons, PCBs or
asbestos; or (ii) any pollutant, toxic substance, or contaminant.
"H-S-R Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Insurance Policies" has the meaning set forth in Section 4.25.
"Intellectual Property Rights" has the meaning set forth in Section
4.19(a).
"IRS" means the Internal Revenue Service or any successor agency or
department.
"Knowledge of Company" or "of which Company is aware" or words of similar
import shall be deemed to mean the actual knowledge of the following
individuals: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
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"Knowledge of Parent" or "of which Parent is aware" or words of similar
import shall be deemed to mean the actual knowledge of the following
individuals: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇. Roll.
"Justice" means the Antitrust Division of the Department of Justice or any
successor agency or department.
"Leased Real Property" has the meaning set forth in Section 4.18(a).
"Leases" has the meaning set forth in Section 4.18(a).
"Liabilities" has the meaning set forth in Section 4.11.
"lien or other encumbrance" (or "liens or other encumbrances" or "liens or
other encumbrance" or "lien or other encumbrances" as the context may require or
any similar formulation) means any lien, claim, pledge, mortgage, assessment,
security interest, charge, option, right of first refusal, easement, servitude,
adverse claim, transfer restriction under any stockholder or similar agreement
or other encumbrance of any kind.
"Merger" has the meaning set forth in the recitals.
"Named Persons" means each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, R. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and Futuronics.
"1940 Act" shall mean the Investment Company Act of 1940, as amended, and
the regulations and rulings issued thereunder.
"Notice of Superior Proposal" has the meaning set forth in Section 6.9(b).
"Owned Real Property" has the meaning set forth in Section 4.18
"Parent" has the meaning set forth in the preamble.
"Parent Common Stock" means the common stock, par value $0.0001 per share,
of Parent.
"Parent Disclosure Schedule" has the meaning set forth in the preamble to
Article V.
"Parent Documents" has the meaning set forth in Section 5.1.
"Parent Financial Statements" has the meaning set forth in Section 5.4.
"Parent Interim Financial Statements" has the meaning set forth in Section
5.4.
"Parent Material Adverse Effect" has the meaning set forth in Section 5.2.
"Parent SEC Documents" has the meaning set forth in Section 5.4.
"Permits" (or "Permit" as the context may require) mean all licenses,
permits, certificates, certificates of occupancy, orders, approvals,
registrations, authorizations and qualifications with and under all federal,
state, or local or laws.
"person" (or "persons" as the context may require) means any individual,
corporation, limited liability company, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Entity or other entity.
"Plan" or "Plans" has the meaning set forth in Section 4.23(a).
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"Proceeding" has the meaning set forth in Section 4.15.
"property" (or "properties" as the context may require) means real,
personal or mixed property, tangible or intangible.
"Proxy Statement" has the meaning set forth in Section 4.9.
"Receiving Party" has the meaning set forth in Section 14.1.
"Registration Statement" has the meaning set forth in Section 4.9.
"Releasing Party" has the meaning set forth in Section 14.1.
"SBA" has the meaning set forth in Section 4.2.
"SEC" means the Securities and Exchange Commission or any successor agency
or department.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations and rulings issued thereunder.
"Share Consideration" has the meaning set forth in Section 3.2(a).
"Sub" has the meaning set forth in the preamble hereof.
"Sub Common Stock" means the common stock, par value $0.01 per share, of
Sub.
"Subsidiaries" (or "Subsidiary" as the context may require), means each
entity as to which a person, directly or indirectly, owns or has the power to
vote, or to exercise a controlling influence with respect to, 50% or more of the
securities of any class of such entity, the holders of which are ordinarily, in
the absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such entity, provided that, with
respect to Parent, the term "Subsidiary" or "Subsidiaries" shall not include any
person that is not required to be consolidated on consolidated financial
statements of Parent prepared in accordance with GAAP.
"Superior Proposal" has the meaning set forth in Section 6.9.
"Surviving Corporation" has the meaning set forth in Section 1.1.
"Surviving Corporation Plan" has the meaning set forth in Section 6.18.
"Taxes" (or "Tax" as the context may require) means all federal, state,
county, local, foreign and other taxes (including, without limitation, income,
intangibles, premium, excise, sales, use, gross receipts, franchise, ad valorem,
severance, capital levy, transfer, employment and payroll-related, and property
taxes, import duties and other governmental charges and assessments), and
includes interest, additions to tax and penalties with respect thereto.
"Tax Returns" means any return or report relating to Taxes.
"Termination Fee" has the meaning set forth in Section 12.2.
"Voting Agreement" has the meaning set forth in the preamble.
"Unvested Options" has the meaning set forth in Section 6.18.
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ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 PUBLICITY. So long as this Agreement is in effect, prior to
making a press release or other public statement with respect to the
transactions contemplated by this Agreement, any party (a "Releasing Party")
will consult with the other party (the "Receiving Party") and provide such other
party with a draft of such press release, except as may otherwise be required by
law or stock exchange regulations.
SECTION 14.2 PARENT GUARANTY. Parent hereby unconditionally and
irrevocably guarantees the full and timely payment and performance by Sub of its
obligations hereunder.
SECTION 14.3 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered, express mail or
nationally recognized courier service, postage prepaid. Any such notice shall
deemed given when so delivered personally or successfully sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails, as follows:
(i) if to Parent or Sub to:
Allied Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a concurrent copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Company to:
BLC Financial Services, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Simeon Gold
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may by notice given in accordance with this Section 14.3 to the
other parties designate another address or person for receipt of notices
hereunder.
SECTION 14.4 ENTIRE AGREEMENT. This Agreement (including the exhibits and
schedules hereto) and the agreements contemplated hereby, including but not
limited to the Confidenti-
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ality Agreement, contain the entire agreement among the parties with respect to
the subject matter hereof, and supersede all prior agreements, written or oral,
with respect thereto.
SECTION 14.5 WAIVERS AND AMENDMENTS; NON CONTRACTUAL REMEDIES; PRESERVATION
OF REMEDIES; LIABILITY. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by each of the parties or, in the case of waiver, by the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and, except as provided
in Section 12.2, are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any inaccuracy in or breach of
any representation, warranty, covenant or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or agreement contained in this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach. The
limitations on claims set forth in this Section 14.5 and elsewhere in this
Agreement shall not apply in the case of fraud on the part of the Company.
SECTION 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 14.7 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns and heirs and legal representatives. Neither this
Agreement, nor any right hereunder, may be assigned by any party without the
prior written consent of the other party hereto; provided, however, that Parent
may assign its rights (but not its obligations) hereto to its Subsidiaries.
SECTION 14.8 THIRD PARTY BENEFICIARIES. Except for Section 6.1(b) and 6.5,
nothing in this Agreement is intended or shall be construed to give any person,
other than the parties hereto, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
Without limiting the foregoing, no direct or indirect holder of any equity
interests or securities of any party hereto (whether such holder is a limited or
general partner, member, stockholder or otherwise), nor any affiliate of any
party hereto, nor any director, officer, employee, representative, agent or
other controlling person of each of the parties hereto and their respective
affiliates, shall have any liability or obligation arising under this Agreement
or the transaction contemplated hereby, except as may be provided in a separate
written agreement signed by such Person.
SECTION 14.9 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
SECTION 14.10 EXHIBITS AND SCHEDULES. The exhibits and schedules hereto
are a part of this Agreement as if fully set forth herein. All references herein
to Articles, Sections,
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subsections, clauses, exhibits and schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
SECTION 14.11 HEADINGS. The headings in this Agreement are for reference
only, and shall not affect the interpretation of this Agreement.
SECTION 14.12 SUBMISSION TO JURISDICTION; VENUE. Any action or proceeding
against any party hereto with respect to this Agreement shall be brought in the
courts of the State of New York or of the United States located in the State of
New York, and, by execution and delivery of this Agreement, each party hereto
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. Each party hereto
irrevocably consents to the service of process at any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address set
forth in Section 14.3, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of any party hereto to serve
process on any other party hereto in any other manner permitted by law. Each
party hereto irrevocably waives any objection which it may now have or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in the courts
referred to above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
SECTION 14.13 SPECIFIC PERFORMANCE. 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, this being in addition to any other
remedy to which they are entitled at law or in equity.
SECTION 14.14 SEVERABILITY. If any court of competent jurisdiction
determines that any provision of this Agreement is not enforceable in accordance
with its terms, then such provision shall be deemed to be modified so as to
apply such provision, as modified, to the protection of the legitimate interests
of the parties hereto to the fullest extent legally permissible and shall not
affect the validity or enforceability of the remaining provisions of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
ALLIED CAPITAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: Managing Director and Chief Operating
Officer
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
ALLIED CAPITAL B SUB CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Title: Managing Director
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
BLC FINANCIAL SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
---------------------------------------------
Title: President and Chief Executive Officer
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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