EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
dated as of August 13, 1997
Among
ELCOTEL, INC.,
TECHNOLOGY SERVICE GROUP INC.
and
ELCOTEL HOSPITALITY SERVICE, INC.
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TABLE OF CONTENTS
Page
----
TABLE OF DEFINITIONS..........................................................v
ARTICLE I - THE MERGER........................................................2
Section 1.01 The Merger.............................................2
Section 1.02 Conversion of Shares. .................................2
Section 1.03 Surrender and Payment. ................................3
Section 1.04 Stock Option Plans. ...................................5
Section 1.05 TSG Warrants...........................................6
Section 1.06 Fractional Shares......................................7
ARTICLE II - THE SURVIVING CORPORATION........................................7
Section 2.01 Certificate of Incorporation. .........................7
Section 2.02 Bylaws. ..............................................7
Section 2.03 Directors and Officers. ..............................8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF TSG...........................8
Section 3.01 Organization and Power. ..............................8
Section 3.02 Corporate Authorization. ..............................8
Section 3.03 Governmental Authorization. ..........................9
Section 3.04 Non-Contravention. ...................................9
Section 3.05 Capitalization of TSG. ...............................10
Section 3.06 Capitalization of Subsidiaries. .....................11
Section 3.07 SEC Filings. .........................................11
Section 3.08 Financial Statements. ...............................11
Section 3.09 Information Supplied. ...............................12
Section 3.10 Absence of Certain Changes. .........................12
Section 3.11 No Undisclosed Liabilities. .........................13
Section 3.12 Litigation. .........................................14
Section 3.13 Taxes. ...............................................14
Section 3.14 Employee Benefit Plans; ERISA. .......................16
Section 3.15 Certain Agreements; Compliance with Agreements. .....17
Section 3.16 Compliance with Laws and Orders. ....................19
Section 3.17 Environmental Matters. ...............................20
Section 3.18 Assets. .............................................21
Section 3.19 Intellectual Property Rights. .......................21
Section 3.20 Labor Matters. ......................................22
Section 3.21 Transactions with Affiliates. .......................22
Section 3.22 Insurance. ..........................................22
Section 3.23 Takeover Statutes. ..................................23
Section 3.24 Finders' Fees.........................................23
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF ELCOTEL ......................23
Section 4.01 Organization and Power. .............................23
Section 4.02 Corporate Authorization. ............................23
Section 4.03 Governmental Authorization. .........................24
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Section 4.04 Non-Contravention. ...................................24
Section 4.05 Capitalization of Elcotel. ...........................25
Section 4.06 Capitalization of Subsidiaries. ......................25
Section 4.07 SEC Filings. .........................................26
Section 4.08 Financial Statements. ................................26
Section 4.09 Information Supplied. ................................27
Section 4.10 Absence of Certain Changes. ..........................27
Section 4.11 No Undisclosed Liabilities.............................28
Section 4.12 Litigation. ..........................................28
Section 4.13 Taxes. ...............................................29
Section 4.14 Employee Benefits; ERISA. ............................30
Section 4.15 Certain Agreements; Compliance with Agreements. ......32
Section 4.16 Compliance with Laws and Orders. .....................34
Section 4.17 Environmental Matters. ...............................34
Section 4.18 Assets. ..............................................34
Section 4.19 Intellectual Property Rights. .........................35
Section 4.20 Labor Matters. ........................................35
Section 4.21 Transactions with Affiliates...........................36
Section 4.22 Insurance. ...........................................36
Section 4.23 Takeover Statutes. ...................................36
Section 4.24 Finders' Fees..........................................37
Section 4.25 Opinion of Financial Advisor. ........................37
ARTICLE V - COVENANTS.........................................................37
Section 5.01 Conduct of TSG. ......................................37
Section 5.02 Conduct of Elcotel. ..................................39
Section 5.03 No Solicitation........................................42
Section 5.04 Approval of Stockholders. ............................43
Section 5.05 Preparation of Form S-4 and Proxy Statement. .........44
Section 5.06 Access to Information. ..............................44
Section 5.07 Notices of Certain Events. ...........................45
Section 5.08 Regulatory and Other Approvals. .......................46
Section 5.09 Public Announcements. ................................46
Section 5.10 Further Assurances. ..................................46
Section 5.11 TSG Affiliates. ......................................47
Section 5.12 Obligations of Merger Subsidiary. ....................47
Section 5.13 Listing of Stock. .....................................47
Section 5.14 Antitakeover Statutes. ...............................47
Section 5.15 Tax Treatment. .......................................47
Section 5.16 Appointment of Directors. .............................47
ARTICLE VI - GENERAL CONDITIONS PRECEDENT TO THE MERGER.......................48
Section 6.01 Stockholder Approval. ................................48
Section 6.02 HSR Act. .............................................48
Section 6.03 Registration Statement; State Securities Laws..........48
Section 6.04 Listing. .............................................48
Section 6.05 Suits or Other Proceedings.............................48
Section 6.06 Employment Agreements..................................48
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ARTICLE VII - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
ELCOTEL AND MERGER SUBSIDIARY........................................49
Section 7.01 Representations and Warranties. .......................49
Section 7.02 Performance of Obligations. ..........................49
Section 7.03 No Material Adverse Change. ..........................49
Section 7.04 Consents. ............................................49
Section 7.05 Opinion of TSG Counsel. ..............................49
Section 7.06 Stockholders Agreement. ..............................49
Section 7.07 Proceedings. .........................................49
ARTICLE VIII - CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF TSG...............................................................50
Section 8.01 Representations and Warranties. ......................50
Section 8.02 Performance of Obligations. ..........................50
Section 8.03 No Material Adverse Change. ..........................50
Section 8.04 Consents. ............................................50
Section 8.05 Opinion of Elcotel Counsel. ..........................50
Section 8.06 Stockholders Agreement. ..............................51
Section 8.07 Proceedings. .........................................51
Section 8.08 Tax Opinion. .........................................51
ARTICLE IX - TERMINATION......................................................51
Section 9.01 Termination. .........................................51
Section 9.02 Effect of Termination..................................52
ARTICLE X - MISCELLANEOUS ....................................................54
Section 10.01 Notices. ............................................54
Section 10.02 Entire Agreement; Non-Survival of Representations
and Warranties; Third Party Beneficiaries. ......55
Section 10.03 Amendment.............................................55
Section 10.04 Waiver. .............................................55
Section 10.05 Expenses. ...........................................56
Section 10.06 Successors and Assigns. .............................56
Section 10.07 Governing Law. ......................................56
Section 10.08 Jurisdiction. .......................................56
Section 10.09 Counterparts; Effectiveness. ........................56
Section 10.10 Interpretation. .....................................56
Section 10.11 Severability. .......................................57
Section 10.12 Specific Performance. ...............................57
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EXHIBITS
Voting Agreement.....................................................A
Affiliate Letter.....................................................B
Opinion of TSG Counsel...............................................C
Stockholders' Agreement..............................................D
Opinion of Elcotel Counsel...........................................E
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TABLE OF DEFINITIONS
Term Section
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1933 Act 3.03
1934 Act 3.03
Acor preamble
Adjusted Option 1.04(a)
Affiliate Letter 5.11
Alternative Proposal 5.03
Antitrust Division 5.08
Closing 1.01(b)
Closing Date 1.01(b)
Code recitals
Confidentiality Agreement 5.06(a)
Delaware Law 1.01(a)
Elcotel preamble
Elcotel 10-K 4.08
Elcotel Agreement 4.04
Elcotel Balance Sheet 4.08
Elcotel Balance Sheet Date 4.08
Elcotel Common Stock 1.02(a)
Elcotel Disclosure Letter 2.03
Elcotel ERISA Affiliate 4.14(a)
Elcotel Financial Statements 4.08
Elcotel Plans 4.05(a)
Elcotel Benefit Plans 4.14(a)
Elcotel Securities 4.05(a)
Elcotel SEC Documents 4.07(a)
Elcotel Stockholders' Approval 5.03(b)
Elcotel Stockholders' Meeting(s) 5.03(b)
Elcotel Subsidiary Securities 4.06
Elcotel Tax Returns 4.13
Effective Time 1.01(c)
Environmental Laws 3.17(b)
Environmental Liabilities 3.17(b)
ERISA 3.14(a)
Exchange Agent 1.03(a)
Form S-4 4.09
FTC 5.08
GAAP 3.08
Governmental Authorities 3.03
Hazardous Substance 3.17(b)
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Term Section
---- -------
HSR Act 3.03
Intellectual Property 3.19(a)
Laws 3.04
Material Adverse Effect 3.01
Merger 1.01(a)
Merger Consideration 1.02(c)
Merger Subsidiary preamble
Notice of Superior Proposal 5.04(a)
Orders 3.04
Person 1.02(d)
Proxy Statement 3.09
Qualified Stock Options 1.04(a)
Takeover Statute 3.23
Taxes 3.13(i)
Taxing Authority 3.13(i)
Tax Return 3.13(i)
TSG preamble
TSG 10-K 3.08
TSG Affiliates 5.11
TSG Agreement 3.04
TSG Balance Sheet 3.08
TSG Balance Sheet Date 3.08
TSG Benefit Plans 3.14(a)
TSG Common Stock 1.02(a)
TSG Disclosure Letter 3.08
TSG ERISA Affiliate 3.14(a)
TSG Financial Statements 3.01
TSG Group 3.13(i)
TSG Option Plans 1.04(a)
TSG Preferred Stock 3.05(a)
TSG Securities 3.05(a)
TSG Subsidiary Securities 3.06
TSG SEC Documents 3.07(a)
TSG Stockholders' Approval 5.03(a)
TSG Stockholders' Meeting 5.04(a)
TSG Stock Option 1.04(a)
TSG Tax Returns 3.13(a)
Service 3.13(h)
Share(s) 1.02(a)
Stockholders recitals
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Term Section
---- -------
Stockholders' Meetings 5.04(b)
Subsidiary 1.02(d)
Subsidiary of TSG 3.17(b)
Superior Proposal 5.03(a)
Surviving Corporation 1.01(a)
Voting Agreement recitals
Wexford recitals
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 13, 1997 among
ELCOTEL, INC., a Delaware corporation ("Elcotel"), TECHNOLOGY SERVICE GROUP,
INC., a Delaware corporation ("TSG"), and ELCOTEL HOSPITALITY SERVICE, INC., a
Delaware corporation and a wholly-owned subsidiary of Elcotel ("Merger
Subsidiary").
WHEREAS, the respective Boards of Directors of Elcotel and TSG
have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate the acquisition of TSG by Elcotel by means
of a merger of Merger Subsidiary into TSG, as a result of which TSG will become
a wholly owned subsidiary of Elcotel, all on the terms and conditions set forth
herein;
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger contemplated by this Agreement qualify as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder (the
"Code"); and
WHEREAS, as a condition and inducement to Elcotel entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, Elcotel is entering into a
Voting Agreement with Wexford Partners Fund, L.P. ("Wexford") and Fundamental
Management Corporation ("Fundamental", together with Wexford, the
"Stockholders"), in the form of Exhibit A hereto (the "Voting Agreement")
pursuant to which, among other things, Wexford has agreed to vote the shares of
TSG Common Stock owned by it in favor of this Agreement and the Merger and other
transactions provided for herein and Fundamental has agreed to vote the shares
of Elcotel Common Stock owned by it in favor of the issuance of shares of
Elcotel Common Stock pursuant to the Merger and the other transactions
contemplated by the Merger.
NOW, THEREFORE, in consideration of the promises and the
respective representations, warranties, covenants, and agreements set forth
herein and in the Voting Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
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ARTICLE I.
THE MERGER
Section A. The Merger.
1. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, Merger Subsidiary shall be merged (the
"Merger") with and into TSG in accordance with the Delaware General Corporation
Law (the "Delaware Law"), whereupon the separate existence of Merger Subsidiary
shall cease, and TSG shall continue as the surviving corporation (the "Surviving
Corporation");
2. Upon the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at 10:00
a.m. on a date to be specified by the parties (the "Closing Date"), which shall
be no later than the fifth business day after satisfaction of the conditions set
forth in Article 6, at the offices of Schnader, Harrison, ▇▇▇▇▇ & ▇▇▇▇▇ LLP,
14th Floor, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another time,
date or place is agreed to in writing by the parties hereto;
3. Upon the Closing, TSG and Merger Subsidiary will file a
certificate of merger with the Secretary of State of the State of Delaware and
make all other filings or recordings required by Delaware Law in connection with
the Merger. The Merger shall become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is agreed by Elcotel and TSG and specified in the certificate
of merger (the "Effective Time");
4. The Merger shall have the effects set forth in Section
259 of the Delaware Law; and
5. Each party hereto will, either prior to or after the
Effective Time, execute such further documents, instruments, deeds, bills of
sale, assignments and assurances and take such further actions as may reasonably
be requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, privileges,
rights, approvals, immunities and franchises of Merger Subsidiary or TSG, or to
effect the other purposes of this Agreement.
Section B. Conversion of Shares.
1. At the Effective Time by virtue of the Merger, and
without any action on the part of the holder of any common stock of TSG or
Merger Subsidiary:
a. each share of Common Stock, par value $0.01 per
share, of TSG (the "TSG Common Stock") held by TSG as treasury stock
or owned by Elcotel or any Subsidiary of Elcotel immediately prior to
the Effective Time shall automatically be canceled and retired without
any conversion thereof, and no Elcotel Common Stock or other
consideration shall be delivered in exchange therefor;
b. each share of common stock, par value $0.01 per
share, of Merger Subsidiary outstanding immediately prior to the
Effective Time shall automatically be
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converted into and become one share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation; and
c. each share (each, a "Share" and collectively, the
"Shares") of TSG Common Stock outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section
1.02(a)(i), automatically be converted into the right to receive 1.05
shares of fully paid and non-assessable Common Stock, par value $0.01
per share of Elcotel (the "Elcotel Common Stock").
2. From and after the Effective Time, all Shares converted
in accordance with Section 1.02(a)(iii) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration. From
and after the Effective Time, all certificates representing the common stock of
Merger Subsidiary shall be deemed for all purposes to represent the number of
shares of Common Stock of the Surviving Corporation into which they were
converted in accordance with Section 1.02(a)(ii);
3. The Elcotel Common Stock to be received as consideration
pursuant to the Merger by each holder of Shares (together with cash in lieu of
fractional shares of Elcotel Common Stock) is referred to herein as the "Merger
Consideration"; and
4. For purposes of this Agreement, the word "Subsidiary"
when used with respect to any Person means any other Person, whether
incorporated or unincorporated, of which at least a majority of the securities
or other interests having by their terms ordinary voting power to elect at least
a majority of the board of directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such Person or by any one or more of its Subsidiaries.
For purposes of this Agreement, "Person" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any other
entity or organization, including a Governmental Authority.
Section C. Surrender and Payment.
1. Prior to the Effective Time, Elcotel shall appoint an
agent reasonably satisfactory to TSG (the "Exchange Agent") for the purpose of
exchanging certificates representing Shares for the Merger Consideration.
Promptly after the Effective Time (but in any event within five business days
thereafter), Elcotel will send, or will cause the Exchange Agent to send, to
each holder of Shares at the Effective Time (i) a letter of transmittal for use
in such exchange (which shall specify that delivery of the Merger Consideration
shall be effected, and risk of loss and title to the certificates representing
TSG Common Stock shall pass, only upon proper delivery of the certificates
representing Shares to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the certificates representing Shares in exchange for
the certificates representing Elcotel Common Stock and cash in lieu of
fractional shares of Elcotel Common Stock. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
certificates theretofore representing Shares for any amount which may be
required to be paid to a public official pursuant to any applicable abandoned
property, escheat or similar law;
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2. Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender to the Exchange Agent
of a certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, will be entitled
to receive the Merger Consideration payable in respect of such Shares and any
dividends payable pursuant to Section 1.03(f). Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes only the
right to receive the Merger Consideration and any dividends payable pursuant to
Section 1.03(f) and the holder thereof shall not be entitled to vote the Elcotel
Common Stock until such certificate is surrendered;
3. If any certificate representing Merger Consideration is
to be delivered to a Person other than the registered holder of the Shares
represented by the certificate or certificates surrendered in exchange therefor,
it shall be a condition to the issuance of such certificate evidencing Elcotel
Common Stock that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of shares of Elcotel Common Stock
to a Person other than the registered holder of such Shares represented by the
certificate or certificates so surrendered or establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable;
4. After the Effective Time, there shall be no further
registration of transfers of Shares on the stock transfer book of TSG. If, after
the Effective Time, certificates representing Shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article I;
5. Any portion of the Merger Consideration that remains
unclaimed by the holders of Shares six months after the Effective Time shall be
returned to Elcotel, upon demand, and any such holder who has not exchanged his
Shares for the Merger Consideration in accordance with this Section 1.03 prior
to that time shall thereafter look only to Elcotel for payment of the Merger
Consideration. Notwithstanding the foregoing, Elcotel shall not be liable to any
holder of Shares for any amount paid to a public official pursuant to applicable
abandoned property laws. Any amounts remaining unclaimed by holders of Shares
seven years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
Governmental Authority) shall, to the extent permitted by applicable law, become
the property of Elcotel free and clear of any claims or interest of any Person
previously entitled thereto;
6. No dividends or other distributions with respect to
Elcotel Common Stock issued in the Merger shall be paid to the holder of any
unsurrendered certificates representing Shares until such certificates are
surrendered as provided in this Section 1.03. Subject to the effect of
applicable laws, following the surrender of such certificates, there shall be
paid, without interest, to the record holder of the Elcotel Common Stock issued
in exchange therefor at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time payable prior to
or on the date of such surrender with respect to such whole shares of Elcotel
Common Stock and not previously paid, less the amount of any withholding taxes
which may be required thereon;
7. In the event any certificate representing Shares shall
have been lost, stolen or destroyed, upon the making of an affidavit of the fact
by the person claiming such certificate to be lost, stolen or destroyed, Elcotel
will, after the Effective Time, issue in exchange for such lost, stolen or
destroyed certificate the certificate evidencing shares of Elcotel Common Stock
deliverable
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in respect thereof, as determined in accordance with this Article I. When
authorizing such issue of the certificate of shares of Elcotel Common Stock in
exchange therefor, Elcotel may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
certificate to give Elcotel a bond in such sum as it may direct as indemnity
against any claim that may be made against Elcotel with respect to the
certificate alleged to have been lost, stolen or destroyed; and
8. Approval and adoption of this Agreement by the
stockholders of TSG shall constitute, as an integral part of the Merger,
ratification of the appointment of, and the reappointment of, said Exchange
Agent.
Section D. Stock Option Plans.
1. At or before the Effective Time, Elcotel and TSG shall
take such action as may be required to effect the following: the terms of each
outstanding option granted by TSG to purchase shares of TSG Common Stock (a "TSG
Stock Option") under the TSG 1994 Omnibus Stock Plan (the "Omnibus Plan"), the
TSG 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan") and the TSG
1995 Non-Employee Director Stock Option Plan (the "Director Plan," together with
the Omnibus Plan and the Stock Purchase Plan, collectively, the "TSG Option
Plans"), whether vested or unvested, shall be adjusted as necessary to provide
that at the Effective Time, each TSG Stock Option outstanding immediately prior
to the Effective Time shall be deemed to constitute and shall become an option
to acquire, on the same terms and conditions as were applicable under such TSG
Stock Option, the same number of shares of Elcotel Common Stock as the holder of
such TSG Stock Option would have been entitled to receive pursuant to the Merger
had such holder exercised such TSG Stock Option in full immediately prior to the
Effective Time, at a price per share of Elcotel Common Stock equal to (i) the
aggregate exercise price for the shares of TSG Common Stock otherwise
purchasable pursuant to such TSG Stock Option divided by (ii) the aggregate
number of shares of Elcotel Common Stock deemed purchasable pursuant to such TSG
Stock Option (each, as so adjusted, an "Adjusted Option"); provided that (after
aggregating all the Shares of a holder subject to TSG Stock Options) any
fractional share of Elcotel Common Stock resulting from such calculation for
such holder shall be rounded up to the nearest whole share and provided,
further, that in the case of any option to which Section 421 of the Code applies
by reason of its qualification under any of Sections 422 through 424 of the Code
("qualified stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 424 of the Code;
2. As soon as practicable after the Effective Time, Elcotel
shall deliver to the holders of TSG Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective TSG Option Plans and the
agreements evidencing the grants of such TSG Stock Options and that such TSG
Stock Options and agreements shall be assumed by Elcotel and shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 1.04 after giving effect to the Merger); and
3. Elcotel shall take such actions as are reasonably
necessary for the assumption of the TSG Option Plans pursuant to this Section
1.04, including the reservation, issuance and listing of Elcotel Common Stock as
is necessary to effectuate the transactions contemplated by this Section 1.04.
Elcotel shall prepare and file with the SEC a registration statement on Form S-8
or other appropriate form with respect to shares of Elcotel Common Stock subject
to TSG Stock Options issued under such TSG Option Plans and shall use its
reasonable efforts to have such registration statement
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declared effective as soon as practicable following the Effective Time and to
maintain the effectiveness of such registration statement or registration
statements covering such TSG Stock Options (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such TSG Stock
Options remain outstanding.
Section E. TSG Warrants.
1. At or before the Effective Time, Elcotel and TSG shall
take such action in connection with warrants to purchase 575,000 shares of TSG
Common Stock issued by TSG pursuant to that certain warrant agreement between
TSG and Liberty Bank and Trust Company of Oklahoma City, N.A. dated as of May
10, 1996 as may be required to effect the following: the terms of each
outstanding warrant to purchase shares of TSG Common Stock (a "TSG Public
Warrant") issued pursuant to such warrant agreement shall be adjusted as
necessary to provide that at the Effective Time, each TSG Public Warrant
outstanding immediately prior to the Effective Time shall be deemed to
constitute and shall become a warrant to acquire, on substantially the same
terms and conditions as were applicable under such TSG Public Warrant, the same
number of shares of Elcotel Common Stock as the holder of such TSG Public
Warrant would have been entitled to receive pursuant to the Merger had such
holder exercised such TSG Public Warrant in full immediately prior to the
Effective Time.
2. At or before the Effective Time, Elcotel and TSG shall
take such action in connection with the warrants to purchase 100,000 shares of
TSG Common Stock issued by TSG pursuant to that certain underwriter's warrant
agreement between TSG and Brookehill Equities, Inc. dated as of May 10, 1996 as
may be required to effect the following: the terms of each outstanding warrant
to purchase shares of TSG Common Stock (a "TSG Underwriter Warrant") issued
pursuant to such underwriter's warrant agreement shall be adjusted as necessary
to provide that at the Effective Time, each TSG Underwriter Warrant outstanding
immediately prior to the Effective Time shall be deemed to constitute and shall
become a warrant to acquire, on substantially the same terms and conditions as
were applicable under such TSG Underwriter Warrant, the same number of shares of
Elcotel Common Stock as the holder of such TSG Underwriter Warrant would have
been entitled to receive pursuant to the Merger had such holder exercised such
TSG Underwriter Warrant in full immediately prior to the Effective Time.
Section F. Fractional Shares. Neither certificates nor scrip
for fractional shares of Elcotel Common Stock will be issued in the Merger, but
in lieu thereof each holder of TSG Common Stock otherwise entitled to a fraction
of a share of Elcotel Common Stock (after aggregating all fractional shares of
TSG Common Stock that would otherwise be received by such holder) will be
entitled hereunder to receive a cash payment. The amount of such cash payment
shall equal, in the case of each fractional share, an amount (rounded to the
nearest whole cent), without interest, calculated as the product of (i) such
fraction, multiplied by (ii) the arithmetic mean of the closing sales prices for
the Elcotel Common Stock reported on the NASDAQ National Market System for each
of the five (5) consecutive trading days on which Elcotel Common Stock was
traded immediately preceding the Effective Time as quoted in the Wall Street
Journal or other reliable financial newspaper or publication. For the purposes
of the preceding sentence, a "trading day" means a day on which trading
generally takes place on the NASDAQ National Market System. No such fractional
share interest shall entitle the owner thereof to vote or to any rights of a
stockholder of Elcotel.
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ARTICLE II.
THE SURVIVING CORPORATION
Section A. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary shall be the certificate of incorporation of
the Surviving Corporation, except that, at the Effective Time, the name of the
Surviving Corporation shall be changed to "TSG" or such other name as Elcotel
may designate on or before the Effective Time, until thereafter amended in
accordance with applicable law and such certificate of incorporation.
Section B. Bylaws. The bylaws of Merger Subsidiary in effect
at the Effective Time shall be the bylaws of the Surviving Corporation, until
thereafter amended in accordance with applicable law, the certificate of
incorporation of the Surviving Corporation and such bylaws.
Section C. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with the Delaware Law and the certificate of incorporation and bylaws
of the Surviving Corporation, the directors and the officers of the Surviving
Corporation shall be those persons set forth on Schedule 2.03 to the disclosure
letter delivered by Elcotel and Merger Subsidiary to TSG concurrently with the
execution and delivery of this Agreement (the "Elcotel Disclosure Letter").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF TSG
TSG represents and warrants to Elcotel that:
Section A. Organization and Power. Each of TSG and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has the requisite corporate or other power
and authority and governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted. Each of TSG and
its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect on TSG. For purposes of this Agreement, a "Material
Adverse Effect" with respect to any Person means a material adverse effect (i)
on the condition (financial or otherwise), business, liabilities, properties,
assets, results of operations or prospects of such Person and its Subsidiaries,
taken as a whole, or (ii) on the ability of such Person to perform its
obligations under or to consummate the transactions contemplated by this
Agreement. Schedule 3.01 to the disclosure letter delivered by TSG to Elcotel
and Merger Subsidiary concurrently with the execution and delivery of this
Agreement (the "TSG Disclosure Letter") sets forth (i) the name and jurisdiction
of incorporation of each Subsidiary of TSG, (ii) its authorized capital stock,
(iii) the number of issued and outstanding shares of capital stock, and (iv) the
record and beneficial owners of such shares. Except as set forth on Schedule
3.01 to the TSG Disclosure Letter, TSG does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any Person. TSG has
heretofore delivered to Elcotel true and complete copies of the certificate or
articles of incorporation and bylaws as currently in effect of TSG and its
Subsidiaries.
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Section B. Corporate Authorization. The execution, delivery
and performance by TSG of this Agreement and the consummation by TSG of the
transactions contemplated hereby are within TSG's corporate powers and, except
as set forth in the second succeeding sentence of this Section 3.02, have been
duly authorized by all necessary corporate action, including without limitation
its Board of Directors. The Board of Directors of TSG has recommended approval
and adoption of this Agreement by the stockholders of TSG and directed that this
Agreement be submitted to the stockholders of TSG for their approval. The
affirmative vote of a majority of the outstanding Shares is the only vote of any
class or series of TSG's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated by this Agreement. This Agreement
has been duly executed and delivered by TSG and, subject to the receipt of the
approval described in the immediately preceding sentence, constitutes a legal,
valid and binding agreement of TSG, enforceable against TSG in accordance with
its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, regardless of whether in a proceeding in equity or at law).
Section C. Governmental Authorization. The execution, delivery
and performance by TSG of this Agreement, and the consummation by TSG of the
transactions contemplated hereby, require no action by or in respect of, or
filing with or notice to, any United States federal, state or local government,
any foreign country, any foreign state or local government or any court,
administrative agency or commission or other governmental or regulatory agency
or authority of any of the foregoing (collectively "Governmental Authorities"
and individually a "Governmental Authority"), other than (a) the filing of a
certificate of merger with respect to the Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which TSG is qualified to do business; (b) compliance with any applicable
requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); (c) compliance with any applicable requirements of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "1933 Act"); (d) compliance with any applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "1934 Act"); (e) compliance with any other
applicable securities laws; and (f) those set forth on Schedule 3.03 to the TSG
Disclosure Letter.
Section D. Non-Contravention. Except as set forth on Schedule
3.04 to the TSG Disclosure Letter, the execution, delivery and performance by
TSG of this Agreement do not, and the consummation by TSG of the transactions
contemplated hereby will not require the consent of any other Person, or
conflict with, result in a violation or breach of, constitute (with or without
notice or lapse of time or both) a default under, result in or give to any
Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien on any of the assets or properties of TSG or any of its Subsidiaries under,
any of the terms, conditions or provisions of (a) the certificate or articles of
incorporation, bylaws or similar organizational documents of TSG or any of its
Subsidiaries, (b) assuming receipt of the approval of stockholders referred to
in Section 3.02, and compliance with the matters referred to in Section 3.03,
any United States or foreign statute, law, regulation, rule or ordinance
(together "Laws") or any judgment, injunction, order, writ, license, permit or
decree of any Governmental Authority (together "Orders") binding upon or
applicable to TSG, any Subsidiary of TSG or any of their respective assets or
properties, or (c) any note, bond, mortgage, security agreement, indenture,
lease, contract, instrument or other agreement of any kind to which TSG or any
Subsidiary of TSG is a party or by which TSG or any Subsidiary of TSG or any of
their respective assets or properties is bound (a "TSG Agreement") or any
license, franchise, permit or other similar authorization held by TSG or any
Subsidiary of TSG. For purposes of this Agreement, "Lien" means, with respect to
any asset, any
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mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset, and, in addition with respect to real property, any
easement, right of way or other restriction, limitation or burden of any kind in
respect of such real property.
Section E. Capitalization of TSG.
1. The authorized capital stock of TSG consists solely of
10,000,000 shares of TSG Common Stock and 100,000 shares of preferred stock, par
value $100.00 per share (the "TSG Preferred Stock"). As of the close of business
on July 31, 1997, (i) 4,708,476 shares of TSG Common Stock are issued and
outstanding, no shares of TSG Common Stock are issued and held in the treasury
of TSG, and 1,491,524 shares of TSG Common Stock are reserved for issuance under
the TSG Option Plans and the TSG Warrants; (ii) options to purchase 579,250
shares of TSG Common Stock were outstanding under the TSG Option Plans
(excluding approximately 9,306 shares subject to a pending offering under the
Stock Purchase Plan) and warrants to purchase 675,000 shares of TSG Common Stock
were outstanding under the TSG Warrants, and (iii) no shares of TSG Preferred
Stock are issued, outstanding or held in the treasury of TSG. All the
outstanding shares of TSG Common Stock are, and all shares reserved for issuance
will be, when issued in accordance with the terms specified in the instruments
or agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid and non-assessable. Except (i) as set forth in this Section
3.05 and (ii) for Shares that may be issued as provided in Section 5.01(f),
there are outstanding (x) no shares of capital stock or other voting securities
of TSG, (y) no securities of TSG convertible into or exchangeable for shares of
capital stock or voting securities of TSG, and (z) no options, warrants or other
rights to acquire from TSG, and no preemptive or similar rights, subscriptions
or other rights, convertible securities, agreements, arrangements or commitments
of any character, obligating TSG to issue, transfer or sell, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of TSG or obligating TSG to grant, extend or enter
into any such option, warrant, subscription or other right, convertible
security, agreement, arrangement or commitment (the items in clauses (x), (y)
and (z) being referred to collectively as the "TSG Securities").
2. Except as set forth on Schedule 3.05 to the TSG
Disclosure Letter, there are no voting trusts or other agreements or
understandings to which TSG or any Subsidiary of TSG is a party with respect to
the voting of the capital stock of TSG or any Subsidiary of TSG. None of TSG or
its Subsidiaries has any contractual obligation to redeem, repurchase or
otherwise acquire any TSG Securities or any capital stock of any Subsidiary of
TSG, including as a result of the transactions contemplated by this Agreement or
to provide funds to, or make any investment in, any Subsidiary of TSG or any
other Person. Except as permitted by this Agreement, following the Merger,
neither TSG nor any of its Subsidiaries will have any obligation to issue,
transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
Section F. Capitalization of Subsidiaries. Except as set forth
on Schedule 3.06 to the TSG Disclosure Letter, all of the outstanding shares of
capital stock of, or other ownership interests in, each Subsidiary of TSG, are
duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by TSG, directly or indirectly, free and clear of
any consensual Lien (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests). There are
no (i) outstanding securities of TSG or any Subsidiary of TSG convertible into
or exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of TSG, or (ii) options, warrants or other
rights to acquire from TSG or any Subsidiary of TSG, and no other obligation of
TSG or any Subsidiary of TSG to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into
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or exchangeable for, any capital stock, voting securities or ownership interests
in, any Subsidiary of TSG (the items in clauses (i) and (ii) being referred to
collectively as the "TSG Subsidiary Securities").
Section G. SEC Filings.
1. TSG has filed all reports, schedules, forms, statements
and other documents with the Securities and Exchange Commission (the "SEC")
required to be filed by TSG since April 1, 1995 (the "TSG SEC Documents");
2. As of its filing date, each TSG SEC Document filed
pursuant to the 1934 Act complied as to form in all material respects with the
requirements of the 1934 Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and
3. Each TSG SEC Document that is a registration statement,
as amended or supplemented, if applicable, filed pursuant to the 1933 Act as of
the date such registration statement or amendment became effective complied as
to form in all material respects with the requirements of the 1933 Act and did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section H. Financial Statements. The audited consolidated
financial statements included in TSG's Annual Report on Form 10-K for the fiscal
year ended March 28, 1997 (the "TSG 10-K") and the unaudited consolidated
interim financial statements of TSG included in the TSG SEC Documents filed
after such date (collectively the "TSG Financial Statements") complied, or will
comply, as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of TSG and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended (subject to footnote
disclosures and normal year-end adjustments in the case of any unaudited interim
financial statements). The TSG Financial Statements have been prepared from and
are consistent with the books and records of TSG, which reflect all material
transactions of TSG and its Subsidiaries. For purposes of this Agreement, "TSG
Balance Sheet" means the consolidated balance sheet of TSG as of March 28, 1997
set forth in the TSG 10-K and "TSG Balance Sheet Date" means March 28, 1997.
Each Subsidiary of TSG is treated as a consolidated subsidiary of TSG in the TSG
Financial Statements for all periods covered thereby.
Section I. Information Supplied. None of the information
supplied or to be supplied by TSG for inclusion or incorporation by reference in
and none of the statements based on such information contained in (i) the joint
proxy statement to be filed with the SEC relating to the stockholders' meetings
of TSG and Elcotel to be held in connection with the Merger, as amended or
supplemented from time to time (as so amended or supplemented, the "Proxy
Statement"), will, at the date the Proxy Statement is first mailed to
stockholders and at the time of the meetings of such stockholders in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or (ii)
the registration statement on Form S-4 of Elcotel
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to be filed under the 1933 Act relating to the issuance of Elcotel Common Stock
in the Merger, as amended or supplemented from time to time (as so amended or
supplemented, the "Form S-4"), will, at the time the Form S-4 becomes effective
under the 1933 Act and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section J. Absence of Certain Changes. Except as disclosed
in the TSG SEC Documents filed prior to the date of this Agreement or as
disclosed on Schedule 3.10 to the TSG Disclosure Letter, since ▇▇▇▇▇ ▇▇, ▇▇▇▇,
▇▇▇ and its Subsidiaries have conducted their respective businesses in the
ordinary course consistent with past practice and there has not been:
1. any event, occurrence or development which, individually
or in the aggregate, has had or would be reasonably likely to have a Material
Adverse Effect on TSG;
2. any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of TSG, any
issuance of TSG Common Stock other than upon exercise of TSG Warrants or TSG
Options outstanding on March 28, 1997, or any repurchase, redemption or other
acquisition by TSG or any Subsidiary of TSG of any amount of outstanding shares
of capital stock or other equity securities of, or other ownership interests in,
TSG or any Subsidiary of TSG;
3. any amendment of any term of any TSG Securities or TSG
Subsidiary Securities;
4. (i) any incurrence or assumption by TSG or any Subsidiary
of TSG of any indebtedness for borrowed money other than under existing credit
facilities in the ordinary course of business consistent with past practices or
(ii) any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by TSG or any Subsidiary of TSG
for the obligations of any other Person (other than any wholly owned Subsidiary
of TSG);
5. any creation or assumption by TSG or any Subsidiary of
TSG of any consensual Lien on any material asset of TSG or any Subsidiary of
TSG;
6. any making of any loan, advance or capital contribution
to or investment in any Person by TSG or any Subsidiary of TSG other than (i)
loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries of TSG or (ii) loans or advances to employees of TSG or any
Subsidiary of TSG made in the ordinary course of business consistent with past
practice;
7. (i) any contract or agreement entered into by TSG or any
Subsidiary of TSG on or prior to the date hereof relating to any material
acquisition or disposition of any assets or business or (ii) any modification,
amendment, assignment, termination or relinquishment by TSG or any Subsidiary of
TSG of any contract, license, or other right (including any insurance policy
naming it as a beneficiary or a loss payable payee) that would be reasonably
likely to have a Material Adverse Effect on TSG, other than those contemplated
by this Agreement;
8. any change in any method of accounting or accounting
principles or practices by TSG or any Subsidiary of TSG, except for any such
change required by reason of a change in GAAP; or
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9. any (w) grant of any severance or termination pay to any
director, officer or employee of TSG or any of its Subsidiaries, (x) entering
into of any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of TSG or any of its Subsidiaries, (y) increase in benefits payable under any
existing severance or termination pay policies or employment agreements or (z)
increase in compensation or bonus in excess of fifteen percent or increase in
other benefits payable to officers or employees of TSG or any of its
Subsidiaries or increase in compensation, bonus or other benefits payable to
directors of TSG or any of its Subsidiaries.
Section K. No Undisclosed Liabilities. Neither TSG nor any
Subsidiary of TSG has any material liabilities or obligations (whether pursuant
to contracts or otherwise) of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, except:
1. those liabilities and obligations set forth on the TSG
Balance Sheet and not heretofore paid or discharged;
2. those liabilities and obligations incurred since March
28, 1997 in the ordinary course of business consistent with past practice; and
3. those liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby.
Section L. Litigation. Except as disclosed on Schedule 3.12
to the TSG Disclosure Letter, (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of TSG, threatened against, relating to
or affecting, nor are there are any Governmental Authority investigations or
audits pending or, to the knowledge of TSG, threatened against, relating to or
affecting, TSG or any of its Subsidiaries or any of their respective assets or
properties nor, to the knowledge of TSG, is there any valid basis for any such
action, suit, arbitration, proceeding, investigation or audit which, if
adversely determined, would have a Material Adverse Effect on TSG, and (ii)
neither TSG nor any of its Subsidiaries is subject to any order of any
Governmental Authority which adversely affects the ability of TSG to consummate
the transactions contemplated by this Agreement.
Section M. Taxes.
1. All Tax Returns required to be filed by TSG, any of its
Subsidiaries, or any corporation that was included in the filing of a return
with TSG or its Subsidiaries on a consolidated, combined or unitary basis have
been filed (the "TSG Tax Returns") and all Taxes required to be shown on the TSG
Tax Returns, or a subsequent assessment with respect thereto, or otherwise due
or payable (to the extent in excess of $50,000 in the aggregate) have been paid
and any penalties and interest relating to such Taxes (to the extent in excess
of $50,000 in the aggregate) have been paid. No other Taxes are payable by the
TSG Group with respect to items or periods covered by such Tax Returns or with
respect to Tax periods prior to the date of this Agreement. None of the TSG Tax
Returns contain, or are required to contain, a disclosure statement under
Section 6662 of the Code, or any similar provision of state, local or foreign
law, with respect to any items that relate to TSG or its Subsidiaries in order
to avoid a penalty for any taxable year. All TSG Tax Returns are true, correct
and complete in all material respects. TSG has made available to Elcotel correct
and complete copies of all TSG Tax Returns for all periods which are not closed
by the statute of limitations.
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2. No adjustment relating to any TSG Tax Returns has been
proposed formally or, to TSG's knowledge, informally by any Governmental
Authority (to the extent in excess of $50,000 in the aggregate), and no basis
exists for any such adjustment that would have a Material Adverse Effect on TSG.
There are no outstanding subpoenas or requests for information with respect to
any TSG Tax Returns or portions thereof. There are no pending or, to TSG's
knowledge, threatened actions or proceedings for the assessment or collection of
Taxes for which TSG or its Subsidiaries may be liable (to the extent in excess
of $50,000 in the aggregate). There are no Tax liens on any assets of TSG or its
Subsidiaries, except with respect to Taxes which are not yet due and payable.
3. No consent under Section 341(f) of the Code has been
filed with respect to TSG or any of its Subsidiaries. Neither TSG nor any of its
Subsidiaries is or has been subject to the dual consolidated loss provisions of
Section 1503 of the Code.
4. TSG and its Subsidiaries are members of an affiliated
group (within the meaning of Section 1504 of the Code) that is eligible to file
a consolidated return. No other entity is or has been eligible to file a
consolidated or combined return with TSG and its Subsidiaries, and neither TSG
nor its Subsidiaries have filed or consented to the filing of any Federal or
state consolidated or combined return with any entity not a member of the TSG
Group. Neither TSG nor any of its Subsidiaries has been at any time a member of
any partnership or joint venture or the holder of a beneficial interest in any
trust for any Person for which the statute of limitations for any Tax
potentially applicable as a result of such membership or holding has not
expired.
5. TSG and its Subsidiaries have properly accrued all
current or contested Taxes on their books and records, and their books and
records reflect reserves that are adequate for the payment of all Taxes not yet
due and payable that are properly accruable thereon through the date of this
Agreement (including Taxes being contested). Neither TSG nor any of its
Subsidiaries have any material liability for any Taxes in excess of amounts
accrued or the reserves established. All Taxes required to be withheld,
collected or deposited in connection with the operations and activities of TSG
or its Subsidiaries have been timely withheld, collected or deposited and, to
the extent required, have been paid to the relevant taxing authority.
6. TSG owns one share of Elcotel Common Stock, and has not
owned more than one share of Elcotel Common Stock at any time during the past
five years. At the Effective Time, the fair market value of the assets of TSG
will exceed the sum of its liabilities, plus the amount of other liabilities, if
any, to which the assets are subject.
7. There are no requests for rulings, determinations or
information currently outstanding that could affect the Taxes of TSG or any of
its Subsidiaries.
8. The TSG Tax Returns have been audited by the Internal
Revenue Service ("Service") or other governmental agency (or closed by
applicable statutes of limitations) and all Tax liabilities in respect thereof
have been finally determined for all taxable years ending on or before March 31,
1993. There are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which TSG or any of its
Subsidiaries may be liable.
9. "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including income, gross receipts, excise, real or
personal property, sales, withholding,
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social security, retirement, unemployment, occupation, use, goods and services,
service use, license, value added, capital, net worth, payroll, profits,
withholding, franchise, transfer and recording taxes, fees and charges, and any
other taxes, assessment or similar charges imposed by the Service or any taxing
authority (whether domestic or foreign including any state, county, local or
foreign government or any subdivision or taxing agency thereof (including a
United States possession)) (a "Taxing Authority"), whether computed on a
separate, consolidated, unitary, combined or any other basis and such term shall
include any interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such taxes,
charges, fees, levies or other assessments. "Tax Return" shall mean any report,
return, document, declaration or other information or filing required to be
supplied to any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes, including information returns, any documents with respect to
or accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information. The term "TSG Group" shall mean,
individually and collectively, (i) TSG, (ii) its Subsidiaries, and (iii) any
trust, corporation, partnership or any other entity as to which TSG or its
Subsidiaries is liable for Taxes incurred by such entity either as a transferee,
or pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other
provision of federal, state, local or foreign law or regulations.
10. TSG has made available to Elcotel a true and complete
copy of any: (i) elections, letter rulings and determination letters relating to
Taxes with respect to TSG or its Subsidiaries; and (ii) examination reports,
closing agreements and statements of deficiencies for Taxes assessed against or
agreed to by TSG or any of its Subsidiaries.
Section N. Employee Benefit Plans; ERISA.
1. Except as set forth on Schedule 3.14(a) to the TSG
Disclosure Letter, there are no employee benefit plans (including any plans for
the benefit of directors or former directors), contracts or agreements
(including employment agreements and severance agreements, incentive
compensation, bonus, stock option, stock appreciation rights and stock purchase
plans) of any type (including plans described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained by
TSG, any of its Subsidiaries or any trade or business, whether or not
incorporated (a "TSG ERISA Affiliate"), that together with TSG would be deemed a
"controlled group" within the meaning of Section 4001(a)(14) of ERISA, or with
respect to which TSG, any of its Subsidiaries, or any TSG ERISA Affiliate, has
or may have a liability (the "TSG Benefit Plans"). Except as disclosed on
Schedule 3.14(a) to the TSG Disclosure Letter (or as otherwise permitted by this
Agreement): (i) neither TSG nor any ERISA Affiliate has any plan or commitment,
whether legally binding or not, to create any additional TSG Benefit Plan or
modify or change any existing TSG Benefit Plan that would affect any employee or
terminated employee of TSG or any ERISA Affiliate; and (ii) since March 28,
1997, there has been no change, amendment, modification to, or adoption of, any
TSG Benefit Plan;
2. With respect to each TSG Benefit Plan: (i) if intended to
qualify under Section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) no failures to administer such plan in accordance with its terms and
applicable law have occurred that have had or would reasonably be expected to
have a Material Adverse Effect on TSG; (iii) no breaches of fiduciary duty have
occurred; (iv) no prohibited transaction within the meaning of Section 406 of
ERISA has occurred; (v) as of the date of this Agreement, no lien imposed under
the Code or ERISA exists; and (vi) all contributions and premiums due (including
any extensions for such contributions and premiums) have been made in full;
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3. None of the TSG Benefit Plans has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of the
Code, whether or not waived;
4. Neither TSG nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA (including Sections 4063-4064 and 4069 of
ERISA) since the effective date of ERISA that has not been satisfied in full;
5. With respect to each TSG Benefit Plan that is a "welfare
plan" (as defined in Section 3(1) of ERISA), no such plan provides medical or
death benefits with respect to current or former employees of TSG or any of its
Subsidiaries beyond their termination of employment, other than as required by
law or on an employee-pay-all basis;
6. Except as set forth on Schedule 3.04 to the TSG
Disclosure Letter, the consummation of the Merger pursuant to this Agreement
will not (i) entitle any individual to severance pay or any tax "gross-up"
payments with respect to the imposition of any tax pursuant to Section 4999 of
the Code or accelerate the time of payment or vesting, or increase the amount,
of compensation or benefits due to any individual with respect to any TSG
Benefit Plan, or (ii) constitute or result in a prohibited transaction under
Section 4975 of the Code or Section 406 or 407 of ERISA with respect to any TSG
Benefit Plan; and
7. There is no TSG Benefit Plan that is a "multiemployer
plan", as such term is defined in Section 3(37) of ERISA, or which is covered by
Section 4063 or 4064 of ERISA.
Section O. Certain Agreements; Compliance with Agreements.
1. Except as disclosed on Schedule 3.15 to the TSG
Disclosure Letter or as provided for in this Agreement, neither TSG nor any of
its Subsidiaries is a party to or bound by any oral or written:
a. consulting agreement not terminable on thirty (30)
days' or less notice;
b. agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of the transactions contemplated by this
Agreement;
c. agreement with respect to any officer providing any
term of employment or compensation guarantee;
d. agreement or plan, including any stock option plan,
stock appreciation rights plan, employee stock ownership plan,
restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will
be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
e. agreement containing covenants that limit the
ability of TSG or any of its Subsidiaries to compete in any line of
business or with any Person, or that involve
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any restriction on the geographic area in which, or method by which,
TSG or any of its Subsidiaries may carry on its business (other than as
may be required by law or any regulatory agency);
f. agreement, contract or understanding, other than
this Agreement and the certificate of incorporation and by-laws of
TSG, regarding the capital stock of TSG or committing to dispose of
some or all of the capital stock or all or substantially all of the
assets of TSG;
g. partnership, joint venture or profit sharing
agreement of TSG or any of its Subsidiaries with any Person;
h. agreement, contract, commitment, indenture or other
instrument of TSG or any of its Subsidiaries relating to the borrowing
of money, or the direct or indirect guarantee of any obligation for,
or an agreement to service the repayment of, borrowed money, or any
other contingent obligation in respect to indebtedness of any other
Person, including without limitation any agreement or arrangement
relating to the maintenance of compensating balances, any agreement or
arrangement with respect to lines of credit, any agreement or
arrangement to purchase or repurchase obligations of any other Person,
any agreement or arrangement to advance or supply funds to or to
invest in any other Person, any agreement or arrangement to pay for
property, products or services of any other Person even if such
property, products or services are not conveyed, delivered or
rendered, or any guarantee with respect to any lease or other similar
periodic payment to be made by any other Person;
i. lease of TSG or any of its Subsidiaries with annual
rental payments aggregating $50,000 or more;
j. agreement, contract or commitment of TSG or any of
its Subsidiaries relating to the disposition or acquisition of any
investment in any Person if such investment has a book value of, or
the disposition or acquisition price of such investment or interest
is, $50,000 or more;
k. agreement, contract or commitment which involves
payment or potential payment, pursuant to the terms of such agreement,
contract or commitment, by or to TSG or any of its Subsidiaries of
$50,000 or more within any twelve month period commencing after the
date hereof; or
l. agreement, contract, commitment or arrangement
between TSG or any of its Subsidiaries and any Affiliate of TSG or any
of its Subsidiaries that is not described in or filed as an exhibit to
a TSG SEC Report.
2. Neither TSG nor any of its Subsidiaries nor, to the
knowledge of TSG, any other party thereto is in breach or violation of or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, is reasonably
expected to result in a default under, (i) the certificates or articles of
incorporation, bylaws or similar organizational documents of TSG or any of its
Subsidiaries or (ii) any contract, agreement, plan or instrument listed on
Schedule 3.15 to the TSG Disclosure Letter, except in the case of clause (ii)
for breaches, violations or defaults which, individually or in the aggregate,
are not having and are not reasonably expected to have a Material Adverse Effect
on TSG. Except as set forth on Schedule
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3.04 to the TSG Disclosure Letter, no party to any such contract, agreement,
plan or instrument will have the right to terminate any or all of the provisions
of any such contract, agreement, plan or instrument as a result of the
transactions contemplated by this Agreement.
Section P. Compliance with Laws and Orders. TSG and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Authorities necessary for the lawful conduct of
their respective businesses (the "TSG Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and are not reasonably expected
to have a Material Adverse Effect on TSG. TSG and its Subsidiaries are in
compliance with the terms of the TSG Permits, except failures so to comply
which, individually or in the aggregate, are not having and are not reasonably
expected to have a Material Adverse Effect on TSG. TSG and its Subsidiaries are
not in violation of or default under any Laws or Orders, except for such
violations or defaults which, individually or in the aggregate, are not having
and are not reasonably expected to have a Material Adverse Effect on TSG.
Section Q. Environmental Matters.
1. Except as set forth on Schedule 3.17 to the TSG
Disclosure Letter:
a. no notice, notification, demand, request for
information, citation, summons or order has been received by, no
complaint has been filed against, no penalty has been assessed
against, and no investigation, action, claim, suit, proceeding or
review is pending or, to the knowledge of TSG or any Subsidiary of
TSG, is threatened by any Person against, TSG or any Subsidiary of TSG
with respect to any matters relating to or arising out of any
Environmental Law;
b. no Hazardous Substance has been discharged, disposed
of, dumped, injected, pumped, deposited, spilled, leaked, emitted or
released, in violation of any Environmental Law, at, on, under or
adjacent to any property now or, to the knowledge of TSG, previously
owned, leased or operated by TSG or any Subsidiary of TSG; and
c. there are no Environmental Liabilities.
2. For purposes of this Section, the following terms shall
have the meanings set forth below:
a. "TSG" and "Subsidiary of TSG" shall include any
entity which is, in whole or in part, a predecessor of TSG or any of
its Subsidiaries;
b. "Environmental Laws" means any and all federal,
state, local and foreign law (including common law), treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction,
permit, or governmental restrictions or any agreement with any
governmental authority or other third party, relating to human health
and safety, the physical condition of any real property now or
formerly owned, leased or operated by TSG of any of its Subsidiaries
or of any improvements thereon, the environment or to pollutants,
contaminants, wastes or chemicals or toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or
materials, including without limitation Hazardous Substances as
defined herein;
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c. "Environmental Liabilities" means any and all
liabilities of or relating to TSG or any Subsidiary of TSG of any kind
whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, which (A) arise under or relate to matters
covered by Environmental Laws and (B) arise from actions occurring or
conditions existing on or prior to the Effective Time; and
d. "Hazardous Substances" means any pollutant,
contaminant, waste or chemical or any toxic, radioactive, corrosive,
reactive or otherwise hazardous substance, waste or material, or any
substance having any constituent elements displaying any of the
foregoing characteristics, including, without limitation, petroleum,
its derivatives, by-products and other hydrocarbons, or any substance,
waste or material regulated under any Environmental Laws.
Section R. Assets. The assets, properties, rights and
contracts, including (as applicable) title or leaseholds thereto, of TSG and its
Subsidiaries, taken as a whole, are sufficient to permit TSG and its
Subsidiaries to conduct their respective businesses as currently being
conducted. Neither TSG nor its Subsidiaries owns any real property.
Section S. Intellectual Property Rights.
1. TSG and its Subsidiaries own or have the right to use,
all Intellectual Property individually or in the aggregate material to the
conduct of the businesses of TSG and its Subsidiaries. To the knowledge of TSG,
(i) neither TSG nor any Subsidiary of TSG is in default (or with the giving of
notice or lapse of time or both would be in default) under any license to use
such Intellectual Property, (ii) such Intellectual Property (other than patents)
is not being infringed by any third party, and (iii) neither TSG nor any
Subsidiary of TSG is infringing any intellectual property of any third party.
For purposes of this Agreement, "Intellectual Property" means patents and patent
rights, trademarks and trademark rights, trade names and trade name rights,
copyrights and copyright rights and other proprietary intellectual property
rights and all pending applications for and registrations of any of the
foregoing that TSG or its Subsidiaries own, license or otherwise have the right
to use. An accurate schedule of all Intellectual Property of TSG or its
Subsidiaries consisting of patents, registered trademarks, registered trade
names and registered copyrights and all pending applications therefor is set
forth on Schedule 3.19 to the TSG Disclosure Letter;
2. Either TSG or one of its Subsidiaries currently is, or,
with respect to a former Subsidiary of TSG that was merged into TSG, will be as
of the Closing Date, listed in the records of the appropriate United States,
state or foreign agency as the sole owner of record for each application and
registration included in the Intellectual Property, other than Intellectual
Property of which TSG or its Subsidiaries is a licensee;
3. TSG and its Subsidiaries, with respect to all
Intellectual Property owned thereby, have taken or caused to be taken all
reasonable steps in the exercise of reasonable business judgment to obtain and
retain valid and enforceable Intellectual Property rights therein, including the
submission of all necessary filings in accordance with the legal and
administrative requirements of the appropriate jurisdictions. No application or
registration listed on Schedule 3.19 to the TSG Disclosure Letter is the subject
of any pending, existing or, to TSG's knowledge, threatened, opposition,
interference, cancellation proceeding or other legal or governmental proceeding
before any registration authority in any jurisdiction; and
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4. The consummation of the transactions contemplated hereby
will not result in the loss or impairment of TSG's or any of its Subsidiaries'
right to own or use any of the Intellectual Property nor will it require the
consent of any Governmental Authority or third party.
Section T. Labor Matters. TSG has previously furnished to
Elcotel true and complete copies of all labor and collective bargaining
agreements to which TSG or any of its Subsidiaries is a party and that are
currently in effect, together with all amendments thereto (if any). Since
January 1, 1996, there have been no strikes, slow downs or other work stoppages
or lockouts involving any employees of TSG or any of its Subsidiaries and there
are no disputes by any labor organization in progress or pending or, to the
knowledge of TSG, threatened against TSG or any of its Subsidiaries that would
have a Material Adverse Effect on TSG. TSG and its Subsidiaries are in
compliance in all material respects with all applicable laws and regulations in
respect of employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety, health or welfare conditions
relating to premises occupied, and civil rights. There are no charges of unfair
labor practices pending before any Governmental Authority involving or affecting
TSG or any of its Subsidiaries. As of the date of this Agreement, there is no
representation claim or petition pending before the National Labor Relations
Board and, to the knowledge of TSG, no question concerning representation exists
with respect to the employees of TSG or any of its Subsidiaries. TSG has not
received notice that any customer or supplier of TSG or any or its Subsidiaries
is involved in or threatened with or affected by any strike or other labor
disturbance or dispute, litigation or administrative proceeding or judgment,
order, injunction, decree or award, the consequences of which would have a
Material Adverse Effect on TSG.
Section U. Transactions with Affiliates. Except to the
extent disclosed in the TSG SEC Documents filed prior to the date of this
Agreement, none of the officers or directors of TSG or any of its Subsidiaries
nor any of its Affiliates, and, to its knowledge, none of its key employees or
the key employees of any of its Subsidiaries, is a party to any transaction with
TSG or any of its Subsidiaries (other than for services as an employee, officer
or director and other than transactions between TSG and one or more of its
direct or indirect wholly owned Subsidiaries or between such Subsidiaries),
including, without limitation, any contract, agreement or other arrangement (i)
providing for the furnishing of services to or by, (ii) providing for rental of
real or personal property to or from, or (iii) otherwise requiring payments to
or from, any such officer, director, Affiliate or key employee, any member of
the family of any such officer, director or key employee or any corporation,
partnership, trust or other entity in which any such officer, director or key
employee has substantial interest (excluding the ownership of not more than two
percent (2%) of the capital stock of a publicly traded corporation) or which is
an Affiliate of such officer, director or key employee.
Section V. Insurance. Schedule 3.22 to the TSG Disclosure
Letter sets forth a complete and accurate list of all primary, excess and
umbrella policies, bonds and other forms of insurance currently owned or held by
or on behalf of or providing insurance coverage to TSG or any of its
Subsidiaries and their respective businesses, properties and assets (or its
directors, officers, agents or employees). All such policies are in full force
and effect. Neither TSG nor any of its Subsidiaries has received notice of
default under any such policy, or has received written notice of any pending or
threatened termination or cancellation, coverage limitation or reduction, or
material premium increase with respect to any such policy the failure of which
to maintain, has a Material Adverse Effect on TSG. Schedule 3.22 to the TSG
Disclosure Letter sets forth a complete and accurate summary of all of the
self-insurance coverage provided by TSG or any of its Subsidiaries and no
letters of credit have been posted in respect thereof.
-▇▇-
▇▇▇▇▇▇▇ ▇. Takeover Statutes. The Board of Directors of TSG
has duly and validly approved the Merger, this Agreement and the transactions
contemplated by this Agreement and such approval is sufficient to render
inapplicable to the Merger, this Agreement, and the transactions contemplated by
this Agreement and the Voting Agreement the provisions of Section 203 of the
Delaware Law. No other "fair price", "moratorium", "control share acquisition"
or other similar antitakeover statute or regulation enacted under state or
federal laws in the United States (each, a "Takeover Statute") applicable to TSG
or any of its Subsidiaries is applicable to the Merger or the other transactions
contemplated hereby.
Section X. Finders' Fees. Except for a fee to Wexford
Management LLC, a copy of whose engagement letter has been provided to Elcotel,
no investment banker, broker, finder, other intermediary or other Person is
entitled to any fee or commission from TSG or any Subsidiary of TSG upon
consummation of the transactions contemplated by this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF ELCOTEL
Elcotel represents and warrants to TSG that:
Section A. Organization and Power. Each of Elcotel and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation or organization, and has the requisite corporate or other
power and authority and governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted. Each of Elcotel
and its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect on Elcotel. Schedule 4.01 to the Elcotel Disclosure
Letter sets forth a complete list of Elcotel's Subsidiaries, all of which are
wholly owned, directly or indirectly, by Elcotel. Elcotel has heretofore
delivered to TSG true and complete copies of Elcotel's and Merger Subsidiary's
certificate of incorporation and bylaws as currently in effect.
Section B. Corporate Authorization. The execution, delivery
and performance by Elcotel and Merger Subsidiary of this Agreement and the
consummation by Elcotel and Merger Subsidiary of the transactions contemplated
hereby are within the corporate power of Elcotel and Merger Subsidiary and,
except for any required approval by the stockholders of Elcotel of the issuance
of shares of Elcotel Common Stock in connection with the Merger, have been duly
authorized by all necessary corporate action, including the Board of Directors
of Merger Subsidiary and the Board of Directors of Elcotel, in its capacity as
the sole stockholder of Merger Subsidiary. This Agreement has been duly executed
and delivered by each of Elcotel and Merger Subsidiary and, subject to the
approval of the holders of Elcotel Common Stock with respect to the issuance of
shares of Elcotel Common Stock in connection with the Merger (including any
shares contemplated by Sections 1.04 and 1.05), constitutes a legal, valid and
binding agreement of each of Elcotel and Merger Subsidiary, enforceable against
Elcotel or Merger Subsidiary, as applicable, in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity,
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regardless of whether in a proceeding in equity or at law). The shares of
Elcotel Common Stock issued in connection with the Merger, when issued in
accordance with the terms hereof, will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
Section C. Governmental Authorization. The execution,
delivery and performance by Elcotel and Merger Subsidiary of this Agreement, and
the consummation by Elcotel and Merger Subsidiary of the transactions
contemplated hereby, require no action by or in respect of, or filing with or
notice to, any Governmental Authority, other than (a) the filing of a
certificate of merger with respect to the Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which Merger Subsidiary is qualified to do business; (b) compliance with any
applicable requirements of the HSR Act; (c) compliance with any applicable
requirements of the 1933 Act; (d) compliance with any applicable requirements of
the 1934 Act; (e) compliance with any other applicable securities laws; and (f)
those set forth on Schedule 4.03 to the Elcotel Disclosure Letter.
Section D. Non-Contravention. Except as set forth on
Schedule 4.04 to the Elcotel Disclosure Letter, the execution, delivery and
performance by Elcotel and Merger Subsidiary of this Agreement do not, and the
consummation by Elcotel and Merger Subsidiary of the transactions contemplated
hereby will not require the consent of any other Person, or conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, result in or give to any Person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien on any of
the assets or properties of Elcotel or any of its Subsidiaries under, any of the
terms, conditions or provisions of (a) the certificate or articles of
incorporation, bylaws or similar organizational documents of Elcotel or any of
its Subsidiaries, (b) assuming receipt of the approval of stockholders referred
to in Section 4.02, and compliance with the matters referred to in Section 4.03,
any Laws or Orders binding upon or applicable to Elcotel or any Subsidiary of
Elcotel or any of their respective assets or properties, or (c) any note, bond,
mortgage, security agreement, indenture, lease, contract, instrument or other
agreement of any kind to which Elcotel or any Subsidiary of Elcotel is a party
or by which Elcotel or any Subsidiary of Elcotel or any of their respective
assets or properties is bound (an "Elcotel Agreement") or any license,
franchise, permit or other similar authorization held by Elcotel or any
Subsidiary of Elcotel.
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Section E. Capitalization of Elcotel.
1. The authorized capital stock of Elcotel consists of
20,000,000 shares of Elcotel Common Stock, par value $0.01 per share. As of the
close of business on July 31, 1997, (i) 8,182,217 shares of Elcotel Common Stock
are issued and outstanding, 52,000 shares of Elcotel Common Stock are issued and
held in the treasury of Elcotel, and 1,775,000 shares of Elcotel Common Stock
are reserved for issuance under Elcotel's 1991 Stock Option Plan and Elcotel's
Directors' Stock Option Plan (collectively the "Elcotel Plans") and (ii) options
to purchase 661,848 shares of Elcotel Common Stock under the Elcotel Plans
("Elcotel Options") were outstanding. All the outstanding shares of Elcotel
Common Stock are, and all shares reserved for issuance will be, when issued in
accordance with the terms specified in the instruments or agreements pursuant to
which they are issuable, duly authorized, validly issued, fully paid and
non-assessable. Except (i) as set forth in this Section 4.05, (ii) for Elcotel
Common Stock that may be issued as provided in Section 5.02(e); and (iii) for
the transactions contemplated by this Agreement (including those permitted in
Article II), there are outstanding (x) no shares of capital stock or other
voting securities of Elcotel, (y) no securities of Elcotel convertible into or
exchangeable for shares of capital stock or voting securities of Elcotel, and
(z) no options, warrants or other rights to acquire from Elcotel, and no
preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, obligating
Elcotel to issue, transfer or sell, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Elcotel or obligating Elcotel to grant, extend or enter into any
such option, warrant, subscription or other right, convertible security,
agreement, arrangement or commitment (the items in clauses (x), (y) and (z)
being referred to collectively as the "Elcotel Securities").
2. There are no voting trusts or other agreements or
understandings to which Elcotel or any Subsidiary of Elcotel is a party with
respect to the voting of the capital stock of Elcotel or any Subsidiary of
Elcotel. None of Elcotel or its Subsidiaries has any contractual obligation to
redeem, repurchase or otherwise acquire any Elcotel Securities, including as a
result of the transactions contemplated by this Agreement. Except as permitted
by this Agreement, following the Merger, Elcotel will not have any obligation to
issue, transfer or sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise.
Section F. Capitalization of Subsidiaries. Except as set
forth on Schedule 4.06 to the Elcotel Disclosure Letter, all of the outstanding
shares of capital stock of, or other ownership interests in, each Subsidiary of
Elcotel, are duly authorized, validly issued, fully paid and nonassessable and
are owned beneficially, and of record, by Elcotel, directly or indirectly, free
and clear of any consensual Lien (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests). There are no (i) outstanding securities of Elcotel or any Subsidiary
of Elcotel convertible into or exchangeable for shares of capital stock or other
voting securities or ownership interests in any Subsidiary of Elcotel, or (ii)
options, warrants or other rights to acquire from Elcotel or any Subsidiary of
Elcotel, and no other obligation of Elcotel or any Subsidiary of Elcotel to
issue, any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable for, any capital stock, voting
securities or ownership interests in, any Subsidiary of Elcotel (the items in
clauses (i) and (ii) being referred to collectively as the "Elcotel Subsidiary
Securities").
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Section G. SEC Filings.
1. Elcotel has filed all reports, schedules, forms,
statements and other documents with the SEC required to be filed by Elcotel
since April 1, 1995 (the "Elcotel SEC Documents");
2. As of its filing date, each Elcotel SEC Document filed
pursuant to the 1934 Act complied as to form in all material respects with the
1934 Act and did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
3. Each Elcotel SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed pursuant to the 1933
Act as of the date such registration statement or amendment became effective
complied as to form in all material respects with the requirements of the 1933
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section H. Financial Statements. The audited consolidated
financial statements included in Elcotel's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997 (the "Elcotel 10-K") and the unaudited
consolidated interim financial statements of Elcotel included in the Elcotel SEC
Documents filed after such date (collectively the "Elcotel Financial
Statements") complied, or will comply, as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Elcotel and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to footnote
disclosures and normal year-end adjustments in the case of any unaudited interim
financial statements). The Elcotel Financial Statements have been prepared from
and are consistent with the books and records of Elcotel, which reflect all
material transactions of Elcotel and its Subsidiaries. For purposes of this
Agreement, "Elcotel Balance Sheet" means the consolidated balance sheet of
Elcotel as of March 31, 1997 set forth in the Elcotel 10-K and "Elcotel Balance
Sheet Date" means March 31, 1997.
Section I. Information Supplied. None of the information
supplied or to be supplied by Elcotel for inclusion or incorporation by
reference in and none of the statements based on such information contained in
(i) the Proxy Statement will, at the date the Proxy Statement is first mailed to
stockholders and at the time of the meetings of such stockholders in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or (ii)
the Form S-4 will, at the time the Form S-4 becomes effective under the 1933 Act
or at the Effective Time, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
Section J. Absence of Certain Changes. Except as disclosed in
the Elcotel SEC Documents filed prior to the date of this Agreement or as
disclosed on Schedule 4.10 to the Elcotel Disclosure Letter, since March 31,
1997, Elcotel and its Subsidiaries have conducted their respective businesses as
in the ordinary course consistent with past practice and there has not been:
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1. any event, occurrence or development which, individually
or in the aggregate, has had or would be reasonably likely to have a Material
Adverse Effect on Elcotel;
2. any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of Elcotel,
any issuance of Elcotel Common Stock other than upon exercise of Elcotel Options
outstanding on March 28, 1997, or any repurchase, redemption or other
acquisition by Elcotel or any Subsidiary of Elcotel of any amount of outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Elcotel or any Subsidiary of Elcotel;
3. any amendment of any term of any Elcotel Securities or
any Elcotel Subsidiary Securities;
4. (i) any incurrence or assumption by Elcotel or any
Subsidiary of Elcotel of any indebtedness for borrowed money other than under
existing credit facilities in the ordinary course of business consistent with
past practices or (ii) any guarantee, endorsement or other incurrence or
assumption of liability (whether directly, contingently or otherwise) by Elcotel
or any Subsidiary of Elcotel for the obligations of any other Person (other than
any wholly owned Subsidiary of Elcotel);
5. any creation or assumption by Elcotel or any Subsidiary
of Elcotel of any consensual Lien on any material asset of Elcotel or any
Subsidiary of Elcotel;
6. any making of any loan, advance or capital contribution
to or investment in any Person by Elcotel or any Subsidiary of Elcotel other
than (i) loans, advances or capital contributions to or investments in
wholly-owned Subsidiaries of Elcotel or (ii) loans or advances to employees of
Elcotel or any Subsidiary of Elcotel made in the ordinary course of business
consistent with past practice;
7. (i) any contract or agreement entered into by Elcotel or
any Subsidiary of Elcotel on or prior to the date hereof relating to any
material acquisition or disposition of any assets or business or (ii) any
modification, amendment, assignment, termination or relinquishment by Elcotel or
any Subsidiary of Elcotel of any contract, license or other right (including any
insurance policy naming it as a beneficiary or a loss payable payee) that would
be reasonably likely to have a Material Adverse Effect on Elcotel, other than
those contemplated by this Agreement;
8. any change in any method of accounting or accounting
principles or practices by Elcotel or any Subsidiary of Elcotel, except for any
such change required by reason of a change in GAAP; or
9. any (w) grant of any severance or termination pay to any
director, officer or employee of Elcotel or any of its Subsidiaries, (x)
entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of Elcotel or any of its Subsidiaries, (y) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements or (z) increase in compensation or bonus in excess of
fifteen percent or increase in other benefits payable to officers or employees
of Elcotel or any of its Subsidiaries or increase in compensation, bonus or
other benefits payable to directors of Elcotel or any of its Subsidiaries.
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Section K. No Undisclosed Liabilities. Neither Elcotel nor
any Subsidiary of Elcotel has any material liabilities or obligations (whether
pursuant to contracts or otherwise) of any kind whatsoever whether, accrued,
contingent, absolute, determined, determinable or otherwise, except:
1. those liabilities and obligations set forth on the
Elcotel Balance Sheet and not heretofore paid or discharged;
2. those liabilities and obligations incurred since April 1,
1997 in the ordinary course of business consistent with past practice; and
3. those liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby.
Section L. Litigation. Except as disclosed on Schedule 4.12
to the Elcotel Disclosure Letter, (i) there are no actions, suits, arbitrations,
or proceedings pending or, to the knowledge of Elcotel, threatened against,
relating to or affecting, nor are there any Governmental Authority
investigations or audits pending or, to the knowledge of Elcotel, threatened
against, relating to or affecting, Elcotel or any of its Subsidiaries or any of
their respective assets or properties nor, to the knowledge of Elcotel, is there
any valid basis for any such action, suit, arbitration, proceeding,
investigation or audit, which if adversely determined would have a Material
Adverse Effect on Elcotel, and (ii) neither Elcotel nor any of its Subsidiaries
is subject to any order of any Governmental Authority which adversely affects
the ability of Elcotel to consummate the transactions contemplated by this
Agreement.
Section M. Taxes.
1. All Tax Returns required to be filed by Elcotel, any of
its Subsidiaries, or any corporation that was included in the filing of a return
with Elcotel or its Subsidiaries on a consolidated, combined or unitary basis
have been filed (the "Elcotel Tax Returns") and all Taxes required to be shown
on the Elcotel Tax Returns, or a subsequent assessment with respect thereto, or
otherwise due or payable (to the extent in excess of $50,000 in the aggregate)
have been paid and any penalties and interest relating to such Taxes have been
paid. No other Taxes (to the extent in excess of $50,000 in the aggregate) are
payable by the Elcotel Group with respect to items or periods covered by such
Tax Returns or with respect to Tax periods prior to the date of this Agreement.
None of the Elcotel Tax Returns contain, or are required to contain, a
disclosure statement under Section 6662 of the Code, or any similar provision of
state, local or foreign law, with respect to any items that relate to Elcotel or
its Subsidiaries in order to avoid a penalty for any taxable year. All Elcotel
Tax Returns are true, correct and complete in all material respects. Elcotel has
made available to TSG correct and complete copies of all Elcotel Tax Returns for
all periods which are not closed by the statute of limitations.
2. No adjustment relating to any Elcotel Tax Returns has
been proposed formally or, to Elcotel's knowledge, informally by any
Governmental Authority (to the extent in excess of $50,000 in the aggregate),
and no basis exists for any such adjustment that would have a Material Adverse
Effect on TSG. There are no outstanding subpoenas or requests for information
with respect to any Elcotel Tax Returns or portions thereof. There are no
pending or, to Elcotel's knowledge, threatened actions or proceedings for the
assessment or collection of Taxes for which Elcotel or its Subsidiaries may be
liable (to the extent in excess of $50,000 in the aggregate). There are no Tax
liens
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on any assets of Elcotel or its Subsidiaries, except with respect to Taxes which
are not yet due and payable.
3. No consent under Section 341(f) of the Code has been
filed with respect to Elcotel or any of its Subsidiaries. Neither Elcotel nor
any of its Subsidiaries is or has been subject to the dual consolidated loss
provisions of Section 1503 of the Code.
4. Elcotel and its Subsidiaries are members of an affiliated
group (within the meaning of Section 1504 of the Code) that is eligible to file
a consolidated return. No other entity is or has been eligible to file a
consolidated or combined return with Elcotel and its Subsidiaries, and neither
Elcotel nor its Subsidiaries have filed or consented to the filing of any
Federal or state consolidated or combined return with any entity not a member of
the Elcotel Group. Neither Elcotel nor any of its Subsidiaries has been at any
time a member of any partnership or joint venture or the holder of a beneficial
interest in any trust for any Person for which the statute of limitations for
any Tax potentially applicable as a result of such membership or holding has not
expired.
5. Elcotel and its Subsidiaries have properly accrued all
current or contested Taxes on their books and records, and their books and
records reflect reserves that are adequate for the payment of all Taxes not yet
due and payable that are properly accruable thereon through the date of this
Agreement (including Taxes being contested). Neither Elcotel nor any of its
Subsidiaries have any material liability for any Taxes in excess of amounts
accrued or the reserves established. All Taxes required to be withheld,
collected or deposited in connection with the operations and activities of
Elcotel or its Subsidiaries have been timely withheld, collected or deposited
and, to the extent required, have been paid to the relevant taxing authority.
6. Elcotel does not own, nor has it owned during the past
five years, any of the capital stock of TSG. At the Effective Time, the fair
market value of the assets of Elcotel will exceed the sum of its liabilities,
plus the amount of other liabilities, if any, to which the assets are subject.
7. There are no requests for rulings, determinations or
information currently outstanding that could affect the Taxes of Elcotel or any
of its Subsidiaries.
8. The Elcotel Tax Returns have been audited by the Service
or other governmental agency (or closed by applicable statutes of limitations)
and all Tax liabilities in respect thereof have been finally determined for all
taxable years ending on or before March 31, 1993. There are no outstanding
waivers or agreements extending the statute of limitations for any period with
respect to any Tax to which Elcotel or any of its Subsidiaries may be liable.
9. The term "Elcotel Group" shall mean, individually and
collectively, (i) Elcotel, (ii) its Subsidiaries, and (iii) any trust,
corporation, partnership or any other entity as to which Elcotel or its
Subsidiaries is liable for Taxes incurred by such entity either as a transferee,
or pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other
provision of federal, state, local or foreign law or regulations.
10. Elcotel has made available to TSG a true and complete
copy of any: (i) elections, letter rulings and determination letters relating to
Taxes with respect to Elcotel or its Subsidiaries; and (ii) examination reports,
closing agreements and statements of deficiencies for Taxes assessed against or
agreed to by Elcotel or any of its Subsidiaries.
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Section N. Employee Benefits; ERISA.
1. Except as set forth on Schedule 4.14(a) to the Elcotel
Disclosure Letter, there are no employee benefit plans (including any plans for
the benefit of directors or former directors), contracts or agreements
(including employment agreements and severance agreements, incentive
compensation, bonus, stock option, stock appreciation rights and stock purchase
plans) of any type (including plans described in Section 3(3) of ERISA),
maintained by Elcotel, any of its Subsidiaries or any trade or business, whether
or not incorporated (an "Elcotel ERISA Affiliate"), that together with Elcotel
would be deemed a "controlled group" within the meaning of Section 4001(a)(14)
of ERISA, or with respect to which Elcotel or any of its Subsidiaries has or may
have a liability (the "Elcotel Benefit Plans"). Except as disclosed on Schedule
4.14 to the Elcotel Disclosure Letter, since March 31, 1997, there has been no
change, amendment, modification to, or adoption of, any Elcotel Benefit Plan;
2. With respect to each Elcotel Benefit Plan: (i) if
intended to qualify under Section 401(a), 401(k) or 403(a) of the Code, each
such plan so qualifies, and its trust is exempt from taxation under Section
501(a) of the Code; (ii) no failure to administer such plan in accordance with
its terms and applicable law have occurred that have had or would reasonably be
expected to have a Material Adverse Effect on Elcotel; (iii) no breaches of
fiduciary duty have occurred; (iv) no prohibited transaction within the meaning
of Section 406 of ERISA has occurred; (v) as of the date of this Agreement, no
lien imposed under the Code or ERISA exists; and (vi) all contributions and
premiums due (including any extensions for such contributions and premiums) have
been made in full;
3. None of the Elcotel Benefit Plans has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of the
Code, whether or not waived;
4. Neither Elcotel nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA (including Sections 4063-4064 and 4069 of
ERISA) since the effective date of ERISA that has not been satisfied in full;
5. With respect to each Elcotel Benefit Plan that is a
"welfare plan" (as defined in Section 3(1) of ERISA), no such plan provides
medical or death benefits with respect to current or former employees of Elcotel
or any of its Subsidiaries beyond their termination of employment, other than as
required by law or on an employee-pay-all basis;
6. The consummation of the Merger pursuant to this Agreement
will not (i) entitle any individual to severance pay or any tax "gross-up"
payments with respect to the imposition of any tax pursuant to Section 4999 of
the Code or accelerate the time of payment or vesting, or increase the amount,
of compensation or benefits due to any individual with respect to any Elcotel
Benefit Plan, or (ii) constitute or result in a prohibited transaction under
Section 4975 of the Code or Section 406 or 407 of ERISA with respect to any
Elcotel Benefit Plan; and
7. There is no Elcotel Benefit Plan that is a "multiemployer
plan", as such term is defined in Section 3(37) of ERISA, or which is covered by
Section 4063 or 4064 of ERISA.
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Section O. Certain Agreements; Compliance with Agreements.
1. Except as disclosed on Schedule 4.15 to the Elcotel
Disclosure Letter or as provided for in this Agreement, neither Elcotel nor any
of its Subsidiaries is a party to or bound by any oral or written:
a. consulting agreement not terminable on thirty (30)
days' or less notice;
b. agreement with any officer or other key employee the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of the transactions contemplated by this
Agreement;
c. agreement with respect to any officer providing any
term of employment or compensation guarantee;
d. agreement or plan, including any stock option plan,
stock appreciation rights plan, employee stock ownership plan,
restricted stock plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will
be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
e. agreement containing covenants that limit the
ability of Elcotel or any of its Subsidiaries to compete in any line
of business or with any Person, or that involve any restriction on the
geographic area in which, or method by which, Elcotel or any of its
Subsidiaries may carry on its business (other than as may be required
by law or any regulatory agency);
f. agreement, contract or understanding, other than
this Agreement and the certificate of incorporation and by-laws of
Elcotel, regarding the capital stock of Elcotel or committing to
dispose of some or all of the capital stock or all or substantially
all of the assets of Elcotel;
g. partnership, joint venture or profit sharing
agreement of Elcotel or any of its Subsidiaries with any Person;
h. agreement, contract, commitment, indenture or other
instrument of Elcotel or any of its Subsidiaries relating to the
borrowing of money, or the direct or indirect guarantee of any
obligation for, or an agreement to service the repayment of, borrowed
money, or any other contingent obligation in respect to indebtedness
of any other Person, including without limitation any agreement or
arrangement relating to the maintenance of compensating balances, any
agreement or arrangement with respect to lines of credit, any
agreement or arrangement to purchase or repurchase obligations of any
other Person, any agreement or arrangement to advance or supply funds
to or to invest in any other Person, any agreement or arrangement to
pay for property, products or services of any other Person even if
such property, products or services are not conveyed, delivered or
rendered, or any guarantee with respect to any lease or other similar
periodic payment to be made by any other Person;
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i. lease of Elcotel or any of its Subsidiaries with
annual rental payments aggregating $50,000 or more;
j. except as set forth on Schedule 5.02 to the Elcotel
Disclosure Letter, agreement, contract or commitment of Elcotel or any
of its Subsidiaries relating to the disposition or acquisition of any
investment in any Person if such investment has a book value of, or
the disposition or acquisition price of such investment or interest
is, $50,000 or more;
k. agreement, contract or commitment which involves
payment or potential payment, pursuant to the terms of such agreement,
contract or commitment, by or to Elcotel or any of its Subsidiaries of
$50,000 or more within any twelve month period commencing after the
date hereof; or
l. agreement, contract, commitment or arrangement
between Elcotel or any of its Subsidiaries and any Affiliate of
Elcotel or any of its Subsidiaries that is not described in or filed
as an exhibit to an Elcotel SEC Report.
2. Neither Elcotel nor any of its Subsidiaries nor, to the
knowledge of Elcotel, any other party thereto is in breach or violation of or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, is reasonably
expected to result in a default under, (i) the certificates or articles of
incorporation, bylaws or similar organizational documents of Elcotel or any of
its Subsidiaries or (ii) any contract, agreement, plan or instrument listed on
Schedule 4.15 to the Elcotel Disclosure Letter, except in the case of clause
(ii) for breaches, violations or defaults which, individually or in the
aggregate, are not having and are not reasonably expected to have a Material
Adverse Effect on Elcotel. No party to any such contract, agreement, plan or
instrument will have the right to terminate any or all of the provisions of any
such contract, plan or instrument as a result of the transactions contemplated
by this Agreement.
Section P. Compliance with Laws and Orders. Elcotel and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Authorities necessary for the lawful conduct of
their respective businesses (the "Elcotel Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and are not reasonably expected
to have a Material Adverse Effect on Elcotel. Elcotel and its Subsidiaries are
in compliance with the terms of the Elcotel Permits, except failures so to
comply which, individually or in the aggregate, are not having and are not
reasonably expected to have a Material Adverse Effect on Elcotel. TSG and its
Subsidiaries are not in violation of or default under any Laws or Orders, except
for such violations or defaults which, individually or in the aggregate, are not
having and are not reasonably expected to have a Material Adverse Effect on
Elcotel.
Section Q. Environmental Matters.
1. Except as set forth on Schedule 4.17 to the Elcotel
Disclosure Letter:
a. no notice, notification, demand, request for
information, citation, summons or order has been received by, no
complaint has been filed against, no penalty has been assessed against,
and no investigation, action, claim, suit, proceeding or
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review is pending or, to the knowledge of Elcotel or any Subsidiary of
Elcotel, is threatened by any Person, against Elcotel or any Subsidiary
of Elcotel with respect to any matters relating to or arising out of
any Environmental Law;
b. no Hazardous Substance has been discharged, disposed
of, dumped, injected, pumped, deposited, spilled, leaked, emitted or
released, in violation of any Environmental Law, at, on, under or
adjacent to any property now or, to the knowledge of Elcotel,
previously owned, leased or operated by Elcotel or any Subsidiary of
Elcotel; and
c. there are no Environmental Liabilities.
2. For purposes of this Section 4.17, capitalized terms used
shall have the meanings assigned to them in Section 3.17(b), except that in all
cases the word "Elcotel" shall be substituted for the word "TSG".
Section R. Assets. The assets, properties, rights and
contracts, including (as applicable) title or leaseholds thereto, of Elcotel and
its Subsidiaries, taken as a whole, are sufficient to permit Elcotel and its
Subsidiaries to conduct their respective businesses as currently being
conducted. All real property owned by Elcotel or its Subsidiaries is owned free
and clear of all Liens, except (a) those reflected or reserved against in the
Elcotel Balance Sheet (or notes thereto), (b) taxes and general and special
assessments not in default and payable without penalty or interest, and (c)
Liens that do not materially adversely interfere with any present use of such
property.
Section S. Intellectual Property Rights.
1. Elcotel and its Subsidiaries own or have the right to
use, all Intellectual Property individually or in the aggregate material to the
conduct of the businesses of Elcotel and its Subsidiaries. To the knowledge of
Elcotel, (i) neither Elcotel nor any Subsidiary of Elcotel is in default (or
with the giving of notice or lapse of time or both would be in default) under
any license to use such Intellectual Property, (ii) such Intellectual Property
(other than patents) is not being infringed by any third party, and (iii)
neither Elcotel nor any Subsidiary of Elcotel is infringing any intellectual
property of any third party. An accurate schedule of all Intellectual Property
of Elcotel or its Subsidiaries consisting of patents, registered trademarks,
registered trade names and registered copyrights and all pending applications
therefor is set forth on Section 4.19 to the Elcotel Disclosure Letter;
2. Either Elcotel or one of its Subsidiaries currently is
listed in the records of the appropriate United States, state or foreign agency
as the sole owner of record for each application and registration included in
the Intellectual Property, other than Intellectual Property of which Elcotel or
its Subsidiaries is a licensee;
3. Elcotel and its Subsidiaries, with respect to all
Intellectual Property owned thereby, have taken or caused to be taken all
reasonable steps in the exercise of reasonable business judgment to obtain and
retain valid and enforceable Intellectual Property rights therein, including the
submission of all necessary filings in accordance with the legal and
administrative requirements of the appropriate jurisdictions. No application or
registration listed on Schedule 4.19 to the Elcotel Disclosure Letter is the
subject of any pending, existing or, to Elcotel's knowledge, threatened,
opposition, interference, cancellation proceeding or other legal or governmental
proceeding before any registration authority in any jurisdiction; and
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4. The consummation of the transactions contemplated hereby
will not result in the loss or impairment of Elcotel's or any of its
Subsidiaries' right to own or use any of the Intellectual Property nor will it
require the consent of any Governmental Authority or third party.
Section T. Labor Matters. Elcotel has previously furnished
to TSG true and complete copies of all labor and collective bargaining
agreements to which Elcotel or any of its Subsidiaries is a party and that are
currently in effect, together with all amendments thereto (if any). Since
January 1, 1996, there have been no strikes, slow downs or other work stoppages
or lockouts involving any employees of Elcotel or any of its Subsidiaries and
there are no disputes by any labor organization in progress or pending or, to
the knowledge of Elcotel, threatened against Elcotel or any of its Subsidiaries
that would have a Material Adverse Effect on Elcotel. Elcotel and its
Subsidiaries are in compliance in all material respects with all applicable laws
and regulations in respect of employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety, health or
welfare conditions relating to premises occupied, and civil rights. There are no
charges of unfair labor practices pending before any Governmental Authority
involving or affecting Elcotel or any of its Subsidiaries. As of the date of
this Agreement, there is no representation claim or petition pending before the
National Labor Relations Board and, to the knowledge of Elcotel, no question
concerning representation exists with respect to the employees of Elcotel or any
of its Subsidiaries. Elcotel has not received notice that any customer or
supplier of Elcotel or any or its Subsidiaries is involved in or threatened with
or affected by any strike or other labor disturbance or dispute, litigation or
administrative proceeding or judgment, order, injunction, decree or award, the
consequences of which would have a Material Adverse Effect on Elcotel.
Section U. Transactions with Affiliates. Except to the
extent disclosed in the Elcotel SEC Documents filed prior to the date of this
Agreement, none of the officers or directors of Elcotel or any of its
Subsidiaries nor any of its Affiliates, and, to its knowledge, none of its key
employees or the key employees of any of its Subsidiaries, is a party to any
transaction with Elcotel or any of its Subsidiaries (other than for services as
an employee, officer or director and other than transactions between Elcotel and
one or more of its direct or indirect wholly owned Subsidiaries or between such
Subsidiaries), including, without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of services to or by, (ii)
providing for rental of real or personal property to or from, or (iii) otherwise
requiring payments to or from, any such officer, director, Affiliate or key
employee, any member of the family of any such officer, director or key employee
or any corporation, partnership, trust or other entity in which any such
officer, director or key employee has substantial interest (excluding the
ownership of not more than two percent (2%) of the capital stock of a publicly
traded corporation) or which is an Affiliate of such officer, director or key
employee.
Section V. Insurance. Schedule 4.22 to the Elcotel
Disclosure Letter sets forth a complete and accurate list of all primary, excess
and umbrella policies, bonds and other forms of insurance currently owned or
held by or on behalf of or providing insurance coverage to Elcotel or any of its
Subsidiaries and their respective businesses, properties and assets (or its
directors, officers, agents or employees). All such policies are in full force
and effect. Neither Elcotel nor any of its Subsidiaries has received notice of
default under any such policy, or has received written notice of any pending or
threatened termination or cancellation, coverage limitation or reduction, or
material premium increase with respect to any such policy the failure of which
to maintain, has a Material Adverse Effect on Elcotel. Schedule 4.22 to the
Elcotel Disclosure Letter sets forth a complete and
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accurate summary of all of the self-insurance coverage provided by Elcotel or
any of its Subsidiaries and no letters of credit have been posted in respect
thereof.
Section W. Takeover Statutes. The Boards of Directors of
Elcotel and Merger Subsidiary have duly and validly approved the Merger, this
Agreement and the transactions contemplated by this Agreement and such approval
is sufficient to render inapplicable to the Merger, this Agreement, and the
transactions contemplated by this Agreement and the Voting Agreement, the
provisions of Section 203 of the Delaware Law. No other Takeover Statute
applicable to Elcotel or any of its Subsidiaries is applicable to the Merger or
the other transactions contemplated hereby.
Section X. Finders' Fees. Except for a fee payable to
Cameron Associates, a copy of whose engagement agreement has been provided to
TSG, no investment banker, broker, finder, other intermediary or other Person is
entitled to any fee or commission from Elcotel or any Subsidiary of Elcotel upon
consummation of the transactions contemplated by this Agreement.
Section Y. Opinion of Financial Advisor. Elcotel has
received the written opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. to the effect that, as of
the date hereof, the Merger Consideration to be received by the holders of
Shares in the Merger is fair to Elcotel from a financial point of view. Elcotel
has delivered to TSG a copy of such opinion.
ARTICLE V.
COVENANTS
Section A. Conduct of TSG. From the date hereof until the
Effective Time, except as otherwise expressly required by this Agreement or with
the prior written consent of Elcotel, TSG shall conduct, and shall cause its
Subsidiaries to conduct, their respective businesses in the ordinary course
consistent with past practice and shall use their best efforts to preserve
intact their business organizations and relationships with customers, suppliers,
creditors and business partners and shall use their reasonable efforts to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Effective Time,
without the prior written approval of Elcotel (which approval will not be
unreasonably withheld or delayed with respect to (c), (d), (h), (i), (j), (n) or
(o) or (k) as it applies to filing any amended Tax Return):
1. TSG will not adopt or propose any change in its
certificate of incorporation or any change in its bylaws;
2. TSG will not, and will not permit any Subsidiary of TSG
to, adopt a plan or agreement of complete or partial liquidation, or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of TSG or
any of its Subsidiaries (other than a liquidation or dissolution of any
Subsidiary or a merger or consolidation between wholly owned Subsidiaries);
3. TSG will not, and will not permit any Subsidiary of TSG
to, make any investment in or any acquisition of the business of any Person or
any material amount of assets (other than inventory);
4. TSG will not, and will not permit any Subsidiary of TSG
to, sell or otherwise dispose of any assets (other than inventory) in an amount
that would be material to TSG and
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its Subsidiaries, taken as a whole, except in the ordinary course of business
consistent with past practice;
5. TSG will not, and will not permit any Subsidiary of TSG
to, declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock other than dividends
paid by any Subsidiary of TSG to TSG or any other Subsidiary of TSG, or split,
combine, reclassify or take similar action with respect to any of its capital
stock or TSG Securities or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or TSG Securities;
6. TSG will not, and will not permit any Subsidiary of TSG
to, issue, deliver, sell, transfer, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class or series of TSG or its Subsidiaries, other than the issuance of
(i) options with an exercise price at least equal to the fair market value of
the TSG Common Stock on the date of grant for up to 20,000 shares of TSG Common
Stock under the Omnibus Plan as in effect on the date hereof, (ii) rights to
purchase shares of TSG Common Stock granted pursuant to the Stock Purchase Plan
as in effect on the date hereof during the offering period that commenced on
July 14, 1997 and that will end on January 9, 1998, estimated at 9,306.14 shares
of TSG Common Stock based on a stock price of $5.00 per share on July 14, 1997
and eligible employees with $39,551.11 of estimated aggregate compensation
deductions (based on current compensation levels), (iii) options granted
automatically under the Director Plan as in effect on the date hereof, and (iv)
issuances of TSG Common Stock pursuant to the exercise of options granted
pursuant to the TSG Option Plans and the exercise of TSG Warrants described in
Section 3.05(a) which are outstanding on the date hereof, and TSG will not amend
the terms of any option, warrant, right or other security outstanding under any
of the TSG Plans or commence any new offering under the Stock Purchase Plan;
7. TSG will not, and will not permit any Subsidiary of TSG
to, redeem, purchase or otherwise acquire directly or indirectly any of TSG's
capital stock or any TSG Securities;
8. TSG will not, and will not permit any Subsidiary of TSG
to, enter into or amend in any material respect any employment contract with any
of its officers, directors or employees earning annual compensation of more than
$50,000, adopt or amend any TSG Benefit Plan in any material respect or make any
payments, awards or distributions under any TSG Benefit Plan or otherwise not
consistent with past practice or custom except (i) as required by a contract in
existence on the date hereof and listed on Schedule 3.15 to the TSG Disclosure
Letter; or (ii) as necessary to make any TSG Benefit Plan listed on Schedule
3.14 to the TSG Disclosure Letter meet the requirements of ERISA to the extent
such amendment is described in such Schedule or is approved by Elcotel;
9. TSG will not, and will not permit any Subsidiary of TSG
to, (i) enter into (or commit to enter into) any new lease or renew any existing
lease (except pursuant to commitments for such lease or lease renewal entered
into as of the date hereof) or (ii) purchase or acquire or enter into any
agreement to purchase or acquire any real estate;
10. TSG will not, and will not permit any Subsidiary of TSG
to, make or commit to make any capital expenditures in excess of $150,000 in the
aggregate exclusive of existing commitments with Avex Electronics for capital
expenditures not exceeding $200,000 in the aggregate.
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11. TSG will not, and will not permit any Subsidiary of TSG
to, change any tax election, change any annual tax accounting period, change any
method of tax accounting, file any amended Tax Return, enter into any closing
agreement relating to any Tax, settle any Tax claim or assessment, surrender any
right to claim a Tax refund or consent to any extension or waiver (other than a
reasonable extension or waiver) of the limitations period applicable to any Tax
claim or assessment, if any such action would have the effect of increasing the
aggregate Tax liability or reducing the aggregate tax assets of TSG and its
Subsidiaries, taken as a whole, or, to the knowledge of TSG, Elcotel and its
Subsidiaries, taken as a whole;
12. TSG will not, and will not permit any Subsidiary of TSG
to, (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness other than in the ordinary course of its business consistent with
past practice, or (ii) voluntarily purchase, cancel, prepay or otherwise provide
for a complete or partial discharge in advance of a scheduled repayment date
with respect to, or waive any right under, any indebtedness for borrowed money;
13. TSG will not, and will not permit any Subsidiary of TSG
to, enter into any contract or amend or modify any existing contract, or engage
in any new transaction outside the ordinary course of business consistent with
past practice or not on an arm's length basis, with any Affiliate of such party
or any of its Subsidiaries;
14. TSG will not, and will not permit any Subsidiary of TSG
to, agree or commit to do any of the foregoing; and
15. TSG will not, and will not permit any Subsidiary of TSG
to, take or agree or commit to take any action that would make any
representation or warranty of TSG in this Agreement inaccurate at, or as of any
time prior to, the Effective Time.
Section B. Conduct of Elcotel. From the date hereof until
the Effective Time, except as otherwise expressly required by this Agreement or
with the prior written consent of TSG, Elcotel shall conduct, and shall cause
its Subsidiaries to conduct, their respective businesses in the ordinary course
consistent with past practice and shall use their best efforts to preserve
intact their business organizations and relationships with customers, suppliers,
creditors and business partners and shall use their reasonable efforts to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Effective Time,
without the prior written approval of TSG (which approval will not be
unreasonably withheld or delayed with respect to (c), (d), (h), (i), (j), (n) or
(o) or (k) as it applies to filing any amended Tax Return):
1. Elcotel will not adopt or propose any change in its
certificate of incorporation or any change in its bylaws, except as and to the
extent required to consummate the Merger;
2. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, adopt a plan or agreement of complete or partial liquidation, or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Elcotel or any of its Subsidiaries (other than a liquidation or dissolution
of any Subsidiary or a merger or consolidation between wholly owned
Subsidiaries);
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3. Except as set forth on Schedule 5.02 to the Elcotel
Disclosure Letter, Elcotel will not, and will not permit any Subsidiary of
Elcotel to, make any investment in or any acquisition of the business of any
Person or any material amount of assets (other than inventory);
4. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, sell or otherwise dispose of any assets (other than inventory) in an
amount that would be material to Elcotel and its Subsidiaries, taken as a whole,
except in the ordinary course of business consistent with past practice;
5. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, declare, set aside or pay any dividend or other distribution payable
in cash, stock or property with respect to its capital stock, other than
dividends paid by any Subsidiary of Elcotel to Elcotel or any other Subsidiary
of Elcotel, or split, combine, reclassify or take similar action with respect to
any of its capital stock or Elcotel Securities or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock of Elcotel Securities;
6. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, issue, deliver, sell, transfer, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any class or series of Elcotel or its Subsidiaries, other than
(x) issuances by any Subsidiary of Elcotel to Elcotel or any other Subsidiary of
Elcotel, (y) issuances pursuant to the exercise of options granted pursuant to
the Elcotel Plans described in Section 4.05(a) which are outstanding on the date
hereof or granted as contemplated in clause (z) below, and (z) any grant of
options to purchase Elcotel Common Stock to new employees of Elcotel or any of
its Subsidiaries pursuant to the Elcotel Plans that could result in the issuance
of not more than 75,000 shares in the aggregate of Elcotel Common Stock;
7. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, redeem, purchase or otherwise acquire directly or indirectly any of
Elcotel's capital stock or any Elcotel Securities;
8. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, enter into or amend in any material respect any employment contract
with any of its officers, directors or employees earning annual compensation of
more than $50,000 (other than as contemplated by Section 6.06), adopt or amend
any Elcotel Benefit Plan in any material respect or make any payments, awards or
distributions under any Elcotel Benefit Plan or otherwise not consistent with
past practice or custom except (i) as required by a contract in existence on the
date hereof and listed on Schedule 4.15 to the Elcotel Disclosure Letter; or
(ii) as necessary to make any Elcotel Benefit Plan listed on Schedule 4.14 to
the Elcotel Disclosure Letter meet the requirements of ERISA to the extent such
amendment is described in such Schedule or is approved by TSG;
9. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, (i) enter into (or commit to enter into) any new lease or renew any
existing lease (except pursuant to commitments for such lease or lease renewal
entered into as of the date hereof) or (ii) purchase or acquire or enter into
any agreement to purchase or acquire any real estate;
10. Except as set forth on Schedule 5.02 to the Elcotel
Disclosure Letter, Elcotel will not, and will not permit any Subsidiary of
Elcotel to, make or commit to make any capital expenditures in excess of
$150,000 in the aggregate;
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11. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, change any tax election, change any annual tax accounting period,
change any method of tax accounting, file any amended Tax Return, enter into any
closing agreement relating to any Tax, settle any Tax claim or assessment,
surrender any right to claim a Tax refund or consent to any extension or waiver
(other than a reasonable extension or waiver) of the limitations period
applicable to any Tax claim or assessment, if any such action would have the
effect of increasing the aggregate Tax liability or reducing the aggregate tax
assets of TSG and its Subsidiaries, taken as a whole, or, to the knowledge of
Elcotel, TSG and its Subsidiaries, taken as a whole;
12. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness other than in the ordinary course of its business consistent with
past practice or other than in connection with the transactions contemplated by
this Agreement, or (ii) voluntarily purchase, cancel, prepay or otherwise
provide for a complete or partial discharge in advance of a scheduled repayment
date with respect to, or waive any right under, any indebtedness for borrowed
money;
13. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, enter into any contract or amend or modify any existing contract, or
engage in any new transaction outside the ordinary course of business consistent
with past practice or not on an arm's length basis, with any Affiliate of such
party or any of its Subsidiaries;
14. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, agree or commit to do any of the foregoing; and
15. Elcotel will not, and will not permit any Subsidiary of
Elcotel to, take or agree or commit to take any action that would make any
representation or warranty of Elcotel in this Agreement inaccurate at, or as of
any time prior to, the Effective Time.
Section C. No Solicitation. From the date hereof until the
earlier of the Effective Time and the termination of this Agreement, TSG agrees
that (a) it will not, and will cause its Subsidiaries and the officers,
directors, employees, investment bankers, consultants and other agents of TSG
and its Subsidiaries and the Affiliates of TSG not to, directly or indirectly,
initiate, solicit, encourage (including by way of furnishing information) or
facilitate or take any action to initiate, solicit, encourage or facilitate any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) with respect to a
merger, consolidation or other business combination including TSG or any of its
Subsidiaries or any acquisition or similar transaction (including, without
limitation, a tender or exchange offer) involving the purchase of (x) all or any
significant portion of the assets of TSG and its Subsidiaries taken as a whole,
(y) 5% or more of the outstanding shares of TSG Common Stock or (z) 15% of the
outstanding shares of the capital stock of any Subsidiary of TSG (any such
proposal or offer being hereinafter referred to as an "Alternative Proposal"),
or engage in any discussions or negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person or
group relating to an Alternative Proposal (excluding the transactions
contemplated by this Agreement) or otherwise facilitate any effort or attempt to
make or implement an Alternative Proposal; (b) it will immediately cease and
cause to be terminated and will cause its Subsidiaries and the officers,
directors, employees, investment bankers, consultants and other agents of TSG
and its Subsidiaries and the Affiliates of TSG to immediately cease and
terminate, any existing activities, discussions or negotiations with any parties
with respect to any of the foregoing, and it will take the necessary steps to
inform such parties of its
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obligations under this Section; and (c) it will notify Elcotel immediately (and
in no event later than 24 hours after receipt of any Alternative Proposal) if
any such inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it or any of such Persons; provided, however, that
nothing contained in this Section 5.03 shall prohibit the Board of Directors of
TSG from (i) furnishing information to (but only pursuant to a confidentiality
agreement in customary form and having terms and conditions substantially
comparable to the Confidentiality Agreement) or entering into discussions or
negotiations with any person or group that makes an unsolicited bona fide
Alternative Proposal, if, and only to the extent that, (A) the Board of
Directors of TSG, based upon the written opinion of outside counsel (a copy of
which shall be provided promptly to Elcotel), determines in good faith that such
action is required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by Delaware Law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such Person
or group, TSG provides written notice to Elcotel to the effect that it is
furnishing information to, or entering into discussions or negotiations with
such Person or group, and (C) TSG keeps Elcotel informed (which notice shall be
provided orally and in writing) of the status and material information including
the identity of such Person or group with respect to any such discussions or
negotiations and any Alternative Proposal and the material terms thereof and
gives Elcotel at least 24 hours' advance notice of any information to be
supplied to, and at least 48 hours' advance notice of any agreement to be
entered into with, any Person or group making such Alternative Proposal; and
(ii) to the extent required, complying with Rule 14e-2 promulgated under the
1934 Act with regard to an Alternative Proposal.
Section D. Approval of Stockholders.
1. TSG shall, through its Board of Directors, duly call,
give notice of, convene and hold a meeting of its stockholders (the "TSG
Stockholders' Meeting") for the purpose of voting on the approval and adoption
of this Agreement and the Merger (the "TSG Stockholders' Approval") as soon as
reasonably practicable after the date hereof. Except as provided in the next
sentence, the Board of Directors of TSG shall recommend approval and adoption of
this Agreement and the Merger by the holders of TSG Common Stock and shall use
its best efforts to obtain such approval and adoption. The Board of Directors of
TSG shall be permitted to (i) not recommend to the holders of TSG Common Stock
that they give the TSG Stockholders' Approval or (ii) withdraw or modify in a
manner adverse to Elcotel its recommendation to the holders of TSG Common Stock
that they give the TSG Stockholders' Approval, but in each of cases (i) and (ii)
only if and to the extent that TSG has complied with Section 5.03 and a Superior
Proposal is pending at the time the TSG Board of Directors determines to take
any such action or inaction; provided that no such failure to recommend,
withdrawal or modification shall be made unless TSG shall have delivered to
Elcotel a written notice (a "Notice of Superior Proposal") advising Elcotel that
the Board of Directors of TSG has received a Superior Proposal and identifying
the Person or group making such Superior Proposal; provided, further that
nothing contained in this Agreement shall prevent the Board of Directors of TSG
from complying with Rule 14e-2 under the 1934 Act with regard to an Alternative
Proposal. For purposes of this Agreement, "Superior Proposal" means any bona
fide Alternative Proposal for at least a majority of the outstanding Shares on
terms that the Board of Directors of TSG determines in its good faith judgment
(based on the advice of an independent reputable financial advisor, taking into
account all the terms and conditions of the Alternative Proposal, including any
break-up fees, expense reimbursement provisions and conditions to consummation)
are more favorable and provide greater value to all holders of TSG Common Stock
than this Agreement and the Merger taken as a whole;
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2. Elcotel shall, through its Board of Directors, duly call,
give notice of, convene and hold a meeting of its stockholders (the "Elcotel
Stockholders' Meeting" and, together with the TSG Stockholders' Meeting, the
"Stockholders' Meetings") for the purpose of voting on the issuance of Elcotel
Common Stock in the Merger (the "Elcotel Stockholders' Approval") as soon as
reasonably practicable after the date hereof. The Board of Directors of Elcotel
shall recommend that the stockholders of Elcotel approve such issuances of
Elcotel Common Stock, and shall use its best efforts to obtain such approval;
3. Elcotel and TSG shall coordinate and cooperate with
respect to the timing of the Stockholders' Meetings and shall use their best
efforts to cause the Stockholders' Meetings to be held on the same day and as
soon as practicable after the date hereof.
Section E. Preparation of Form S-4 and Proxy Statement. TSG
and Elcotel shall prepare and file with the SEC as soon as reasonably
practicable after the date hereof, the Proxy Statement, and Elcotel shall
prepare and file with the SEC as soon as reasonably practicable after such date,
the Form S-4 in which the Proxy Statement will be included within the
prospectus. Elcotel and TSG shall use their best efforts to have the Form S-4
declared effective by the SEC as promptly as practicable after such filing.
Elcotel shall also take any action (other than qualifying as a foreign
corporation or taking any action which would subject it to service of process in
any jurisdiction where Elcotel is not now so qualified or subject) required to
be taken under applicable state blue sky or securities laws in connection with
the issuance of Elcotel Common Stock in connection with the Merger. If at any
time prior to the Effective Time any event shall occur that should be set forth
in an amendment of or a supplement to the Form S-4, Elcotel shall prepare and
file with the SEC such amendment or supplement as soon thereafter as is
reasonably practicable. Elcotel, Merger Subsidiary and TSG shall cooperate with
each other in the preparation of the Form S-4 and the Proxy Statement and any
amendment or supplement thereto, and each shall notify the other of the receipt
of any comments of the SEC with respect to the Form S-4 and any amendment or
supplement thereto or for additional information, and shall provide to the other
promptly copies of all correspondence between Elcotel or TSG, as the case may
be, with respect to the Form S-4 or the Proxy Statement. Elcotel shall give TSG
and its counsel the opportunity to review and comment on the Form S-4 and all
responses to requests for additional information by and replies to comments of
the SEC before their being filed with, or sent to, the SEC. Each of TSG,
Elcotel, and Merger Subsidiary agrees to use its best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC and to cause (x) the Form S-4 to be declared
effective by the SEC at the earliest practicable time and to be kept effective
as long as is necessary to consummate the Merger, and (y) the Proxy Statement to
be mailed to the holders of Elcotel Common Stock and TSG Common Stock entitled
to vote at the meetings of the stockholders of Elcotel and TSG at the earliest
practicable time.
Section F. Access to Information.
1. To the extent permitted by applicable law, from the date
hereof until the Effective Time, TSG will give Elcotel, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours to the offices, properties, books and records of TSG and
its Subsidiaries, will furnish to Elcotel, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such Persons may reasonably request and will instruct
TSG's employees, auditors, counsel and financial advisors to cooperate with
Elcotel in its investigation of the business of TSG and its Subsidiaries;
provided that no investigation pursuant to this Section shall affect any
representation or warranty given
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by TSG to Elcotel hereunder. The foregoing information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the confidentiality agreement dated February 27, 1997 between Elcotel and TSG
(the "Confidentiality Agreement").
2. To the extent permitted by applicable law, from the date
hereof until the Effective Time, Elcotel will give TSG, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours to the offices, properties, books and records of Elcotel
and its Subsidiaries, will furnish to TSG, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such Persons may reasonably request and will instruct
Elcotel's employees, auditors, counsel and financial advisors to cooperate with
TSG in its investigation of the business of Elcotel and its Subsidiaries,
provided that no investigation pursuant to this Section shall affect any
representation or warranty given by Elcotel to TSG hereunder. Such information
shall be held in confidence to the extent required by, and in accordance with,
the Confidentiality Agreement.
Section G. Notices of Certain Events.
1. TSG and Elcotel shall promptly notify each other of:
a. any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; and
b. any notice or other communication from any
Governmental Authority in connection with the transactions contemplated
by this Agreement.
2. TSG shall promptly notify Elcotel of any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting TSG or any Subsidiary
of TSG which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 3.12 or Section 3.17 or which relate
to the consummation of the transactions contemplated by this Agreement.
3. Elcotel shall promptly notify TSG of any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting Elcotel or any
Subsidiary of Elcotel which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.12 or which
relate to the consummation of the transactions contemplated by this Agreement.
Section H. Regulatory and Other Approvals. Subject to the
terms and conditions of this Agreement, each of TSG and Elcotel will proceed
diligently and in good faith to, as promptly as practicable, (a) obtain all
consents, approvals or actions of, make all filings with and give all notices to
Governmental Authorities or any other public or private third parties required
of Elcotel, TSG or any of their Subsidiaries to consummate the Merger and the
other transactions contemplated hereby, and (b) provide such other information
and communications to such Governmental Authorities or other public or private
third parties as the other party or such Governmental Authorities or other
public or private third parties may reasonably request in connection therewith.
In addition to and not in limitation of the foregoing, each of the parties will
(x) take promptly all actions necessary to make the filings required of Elcotel
and TSG or their Affiliates under the HSR Act no later than fifteen business
days after the date hereof, (y) comply at the earliest practicable date with any
request for additional
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information received by such party or its Affiliates from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division") pursuant to the HSR Act, and (z) cooperate with the
other party in connection with such party's filings under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
Merger or the other transactions contemplated by this Agreement commenced by
either the FTC or the Antitrust Division or state attorneys general. Without
limiting the generality of the foregoing, Elcotel and TSG shall together, or
pursuant to an allocation of responsibility to be agreed between them,
coordinate and cooperate in determining whether any action by or in respect of,
or filing with, any Governmental Authorities is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
contracts, in connection with the consummation of the transactions contemplated
by this Agreement, and in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section I. Public Announcements. So long as this Agreement
is in effect, Elcotel and TSG will consult with each other before issuing any
press release or making any SEC filing or other public statement with respect to
this Agreement or the Voting Agreement or the transactions contemplated hereby
or thereby and, except as may be required by applicable law, court process or
any listing agreement with any national securities exchange or with NASDAQ, will
not issue any such press release or make any such SEC filing or other public
statement prior to such consultation and providing the other party with a
reasonable opportunity to comment thereon and approve the same (such approval
not to be unreasonably withheld or delayed).
Section J. Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be authorized
to execute and deliver, in the name and on behalf of TSG or Merger Subsidiary,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of TSG or Merger Subsidiary, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets of TSG acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
Section K. TSG Affiliates. At least thirty (30) days prior
to the Effective Time, TSG shall deliver a letter to Elcotel identifying all
persons who, at the time of the TSG Stockholders' Meeting, may, in TSG's
reasonable judgment, be deemed to be "affiliates" (as such term is used in Rule
145 under the ▇▇▇▇ ▇▇▇) of TSG ("TSG Affiliates"). TSG shall use its best
efforts to cause each TSG Affiliate to deliver to Elcotel at or prior to the
Effective Time a letter substantially in the form and to the effect of Exhibit B
hereto (an "Affiliate Letter"). Elcotel shall be entitled to issue appropriate
stop transfer instructions to the transfer agent for the Elcotel Common Stock to
be issued to TSG Affiliates pursuant to the Merger, consistent with the terms of
such Affiliate Letters.
Section L. Obligations of Merger Subsidiary. Elcotel will
take all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Merger on the terms and conditions
set forth in this Agreement.
Section M. Listing of Stock. Elcotel shall use its best
efforts to cause the shares of Elcotel Common Stock to be issued in connection
with the Merger to be approved for listing on the NASDAQ National Market System
at or prior to the Effective Time, subject to official notice of issuance.
-▇▇-
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. If any Takeover Statute is
or may become applicable to the Merger, each of Elcotel and TSG shall take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of any Takeover Statute
on the Merger.
Section O. Tax Treatment. Each of Elcotel and TSG shall not
take any action and shall not fail to take any action which action or failure to
act would cause, or would be reasonably likely to cause, Elcotel, TSG or their
respective stockholders (except to the extent that any stockholder of TSG may
receive cash in lieu of fractional shares) to recognize gain or loss for federal
income tax purposes as a result of the issuance of Elcotel Common Stock in the
Merger, and TSG shall use its reasonable efforts to obtain the opinion of
counsel referred to in Section 8.08.
Section P. Appointment of Directors. Elcotel shall invite
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ to become
members of the Board of Directors of Elcotel immediately following the Effective
Time and shall increase the size of the Board of Directors of Elcotel to nine
members, including those four persons, C. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ and two independent directors who are currently members of the Board of
Directors of Elcotel, immediately following the Effective Time.
ARTICLE VI.
GENERAL CONDITIONS PRECEDENT TO THE MERGER
The obligations of TSG, Elcotel and Merger Subsidiary to
consummate the Merger pursuant to this Agreement and the other transactions
required to be consummated by such date by this Agreement are subject to the
satisfaction (or waiver by the party for whose benefit the applicable condition
exists) of each of the following conditions:
Section A. Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved and adopted by the
stockholders of TSG in accordance with Delaware Law. The stockholders of Elcotel
shall have approved the issuance of Elcotel Common Stock in the Merger by the
requisite vote under applicable law and under the applicable rules of the NASDAQ
National Market System, as the case may be.
Section B. HSR Act. Any applicable waiting period under the
HSR Act relating to the transactions contemplated by this Agreement shall have
expired or been terminated.
Section C. Registration Statement; State Securities Laws.
The Form S-4 shall have become effective in accordance with the provisions of
the 1933 Act, and no stop order suspending such effectiveness shall have been
issued and remain in effect and no proceeding seeking such an order shall be
pending or threatened. Elcotel shall have received all state securities or blue
sky permits and other authorizations necessary to issue the Elcotel Common Stock
pursuant to this Agreement.
Section D. Listing. The shares of Elcotel Common Stock to be
issued in the Merger shall have been approved for listing on the NASDAQ National
Market System, subject to official notice of issuance.
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Section E. Suits or Other Proceedings. There shall not be
pending any suit, action or proceeding by any Governmental Authority, (i)
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement, or seeking to obtain from
Elcotel or TSG any damages the amount of which would be reasonably likely to
have a Material Adverse Effect on TSG or Elcotel, or (ii) seeking to prohibit or
limit the ownership or operation by Elcotel, TSG or any of their respective
Subsidiaries of, or to compel Elcotel, TSG or any of their respective
Subsidiaries to dispose of or hold separate, any material portion of the
business or assets of Elcotel, TSG or any of their respective Subsidiaries, as a
result of the Merger or any of the other transactions contemplated by this
Agreement.
Section F. Employment Agreements. Elcotel shall have entered
into an employment agreement with each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, C. ▇▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF ELCOTEL AND MERGER SUBSIDIARY
The obligations of Elcotel and Merger Subsidiary to
consummate the Merger pursuant to this Agreement and the other transactions
required to be consummated by such date by this Agreement are further subject to
the satisfaction, at or prior to the Effective Time, of each of the following
conditions (all or any of which may be waived in whole or in part by Elcotel and
Merger Subsidiary in their sole discretion):
Section A. Representations and Warranties. The
representations and warranties made by TSG in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing Date or,
in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, and TSG shall
have delivered to Elcotel a certificate, dated the Closing Date and executed by
its President to such effect.
Section B. Performance of Obligations. TSG shall have
performed and complied with each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by TSG at or prior to the
Closing, and TSG shall have delivered to Elcotel a certificate, dated the
Closing Date and executed by its President to such effect.
Section C. No Material Adverse Change. There shall not have
been any change in the consolidated business, results of operations, financial
condition or prospects of TSG and its Subsidiaries, taken as a whole, between
March 28, 1997 and the Closing Date which would have a Material Adverse Effect
on TSG.
Section D. Consents. Elcotel shall have received consents or
waivers from such Persons as are necessary for Elcotel to consummate the
transactions contemplated by this Agreement.
Section E. Opinion of TSG Counsel. At the Closing, Elcotel
shall have received from ▇▇▇▇▇▇▇▇▇ Traurig ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
counsel to TSG, a written opinion reasonably satisfactory to Elcotel, dated as
of the Closing Date, substantially to the effect as set forth in Exhibit C
hereto.
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Section F. Stockholders Agreement. The Stockholders shall
have each entered into the Stockholders Agreement, in the form set forth in
Exhibit D hereto.
Section G. Proceedings. All proceedings to be taken on the
part of TSG in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form and
substance to Elcotel, and Elcotel shall have received copies of all such
documents and other evidences as Elcotel may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF TSG
The obligations of TSG to consummate the Merger pursuant to
this Agreement and the other transactions required to be consummated by such
date by this Agreement are further subject to the satisfaction, at or prior to
the Effective Time, of each of the following conditions (all or any of which may
be waived in whole or in part by TSG in its sole discretion):
Section A. Representations and Warranties. The
representations and warranties made by Elcotel and Merger Subsidiary in this
Agreement shall be true and correct as of the Closing Date as though made on and
as of the Closing Date or, in the case of representations and warranties made as
of a specified date earlier than the Closing Date, on and as of such earlier
date, and Elcotel and Merger Subsidiary shall each have delivered to TSG a
certificate, dated the Closing Date and executed by Elcotel's Chairman of the
Board or President and by Merger Subsidiary's Chairman of the Board or President
to such effect.
Section B. Performance of Obligations. Elcotel and Merger
Subsidiary shall each have performed and complied with each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
Elcotel or Merger Subsidiary at or prior to Closing, and Elcotel and Merger
Subsidiary shall each have delivered to TSG a certificate, dated the Closing
Date and executed by Elcotel's Chairman of the Board or President and by Merger
Subsidiary's Chairman of the Board or President to such effect.
Section C. No Material Adverse Change. There shall not have
been any change in the consolidated business, results of operations, financial
condition or prospects of Elcotel and its Subsidiaries, taken as a whole,
between March 31, 1997 and the Closing Date which would have a Material Adverse
Effect on Elcotel.
Section D. Consents. TSG shall have received consents or
waivers from such Persons as are necessary for TSG to consummate the
transactions contemplated by this Agreement.
Section E. Opinion of Elcotel Counsel. At the Closing, TSG
shall have received from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to
Elcotel, a written opinion reasonably satisfactory to TSG, dated as of the
Closing Date, substantially to the effect as set forth in Exhibit E hereto.
Section F. Stockholders Agreement. The Stockholders and
Elcotel shall have each entered into the Stockholders Agreement, in the form set
forth in Exhibit D hereto.
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Section G. Proceedings. All proceedings to be taken on the
part of Elcotel in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to TSG, and TSG shall have received copies of all such
documents and other evidences as TSG may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
Section H. Tax Opinion. TSG shall have received an opinion
of counsel, in form and substance reasonably satisfactory to TSG, on the basis
of certain facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time, to
the effect that neither TSG nor any of its stockholders shall recognize gain or
loss for U.S. federal income tax purposes as a result of the Merger (other than
in respect of any cash paid in lieu of fractional shares). In rendering the
opinions described in the preceding sentence, such counsel may require and rely
upon representations contained in this Agreement and in certificates of officers
and principal stockholders of TSG, Elcotel and their respective Subsidiaries.
ARTICLE IX.
TERMINATION
Section A. Termination. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to the
Effective Time whether prior to or after Stockholders' Approval:
1. By mutual written agreement of TSG and Elcotel duly
authorized by action taken by or on behalf of their respective Boards of
Directors;
2. By either TSG or Elcotel upon notification to the
non-terminating party by the terminating party;
a. at any time after November 30, 1997 if the Merger
shall not have been consummated on or prior to such date and such
failure to consummate the Merger is not caused by or substantially
attributable to a breach of this Agreement by the terminating party;
b. if (A) TSG Stockholders' Approval (under Delaware
Law) or (B) Elcotel Stockholders' Approval (under Delaware Law and
under the applicable regulations of NASDAQ National Market System), as
the case may be, shall not be obtained by reason of the failure to
obtain the requisite vote upon a vote held at a meeting of
stockholders, or any adjournment thereof, called therefor;
c. if (A) there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement, which breach is not
curable or, if curable, has not been cured within thirty (30) days
following receipt by the non-terminating party of notice of such breach
from the terminating party, or (B) any condition precedent to the
terminating party's obligations set forth in Article VII, with respect
to Elcotel, or Article VIII, with respect to TSG, of this Agreement has
not been met or waived by such party by November 30, 1997; or
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d. if any court of competent jurisdiction or other
competent Governmental Authority shall have issued an order making
illegal or otherwise restricting, preventing or prohibiting the Merger
and such order shall have become final and nonappealable;
3. By TSG if (i) the Board of Directors of TSG determines in
good faith, based upon the written opinion of outside counsel (a copy of which
shall be provided promptly to Elcotel), that termination of the Agreement is
required for the Board of Directors to comply with its fiduciary duties to
stockholders imposed by law by reason of an unsolicited bona fide Superior
Proposal having been made; provided that TSG shall have complied with the
provisions of clauses (B) and (C) of Section 5.03 and shall notify Elcotel at
least 48 hours in advance of its intention to terminate this Agreement or enter
into a definitive agreement with respect to such Superior Proposal; or (ii) the
Board of Directors of Elcotel shall have withdrawn or modified in a manner
materially adverse to TSG its approval or recommendation of this Agreement or
the Merger; or
4. By Elcotel if the Board of Directors of TSG (x) shall
have withdrawn or modified in a manner materially adverse to Elcotel its
approval or recommendation of this Agreement or the Merger or (y) shall have
recommended a Superior Proposal to the stockholders of TSG or shall have entered
into a definitive agreement providing for a Superior Proposal with a Person
other than Elcotel.
Section B. Effect of Termination.
1. If this Agreement is validly terminated by either TSG or
Elcotel pursuant to Section 9.01, this Agreement will forthwith become null and
void and there will be no liability or obligation on the part of either TSG or
Elcotel (or any of their respective representatives or Affiliates), except (i)
that the provisions of Sections 10.05 and 10.08, this Section 9.02 and the
Confidentiality Agreement will continue to apply following any such termination,
(ii) that nothing contained herein shall relieve any party hereto from liability
for wilful breach of its representations, warranties, covenants or agreements
contained in this Agreement and (iii) as provided in paragraph (b) below. The
effectiveness of any termination under this Agreement shall be subject to the
payments (if any) required to be made pursuant to paragraph (b) below being so
made;
2. (i) If this Agreement is terminated by (x) TSG
pursuant to Section 9.01(c)(i) or (y) by Elcotel pursuant to Section
9.01(d)(y), then TSG shall pay or cause to be paid to Elcotel, by wire
transfer of same day funds on the day of such termination, a
termination fee of $1,300,000;
(ii) In the event that (x) this Agreement is terminated
by either party pursuant to Section 9.01(b)(ii)(A) and prior to such
termination any person or group shall have made an Alternative Proposal
or by Elcotel pursuant to Section 9.01(d)(x), then TSG shall pay or
cause to be paid to Elcotel, by wire transfer of same day funds upon
receipt of appropriate documentation therefor, Elcotel's documented
out-of-pocket expenses relating to this Agreement and the transactions
contemplated hereby; provided, however, that such expenses shall not
exceed $500,000;
(iii) In the event that this Agreement is terminated by
either party pursuant to Section 9.01(b)(ii)(B) or by TSG pursuant to
Section 9.01(c)(ii), then Elcotel shall pay or cause to be paid to TSG,
by wire transfer of same day funds upon receipt of appropriate
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documentation therefor, TSG's documented out-of-pocket expenses
relating to this Agreement and the transactions contemplated hereby;
provided however, that such expenses shall not exceed $500,000;
(iv) In the event that this Agreement is terminated by
either party pursuant to Section 9.01(b)(iii), then the non-terminating
party shall pay or cause to be paid to the terminating party by wire
transfer of same day funds upon receipt of appropriate documentation
therefor, the terminating party's documented out-of-pocket expenses
relating to this Agreement and the transactions contemplated hereby;
provided, however, that such expenses shall not exceed $500,000; and
3. The parties acknowledge that the agreements contained in
this Section 9.02 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties hereto would not
enter into this Agreement; accordingly, if either party fails promptly to pay
the amount due pursuant to this Section 9.02, and in order to obtain such
payment, either party commences a suit which results in a judgment against the
non-paying party for any fee or expense reimbursement set forth in this Section
9.02, the non-paying party shall pay to the other party as the case may be, its
cost and expenses (including reasonable attorney's fees and expenses) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank, N.A. in effect on the date such payment was required
to be made.
ARTICLE X.
MISCELLANEOUS
Section A. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and will be deemed to
have been duly given only if delivered personally or by facsimile transmission
or mailed (first class mail postage prepaid), or by overnight express courier
(charges prepaid or billed to the account of the sender) to the parties at the
following addresses or facsimile numbers:
If to Elcotel or Merger Subsidiary, to:
Elcotel, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP
Suite 3600
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
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If to TSG, to: Technology Service Group, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy to: ▇▇▇▇▇▇▇▇▇ Traurig et al.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if delivered personally, upon
delivery, (b) if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section 10.01 and the appropriate facsimile
confirmation is received, (c) if given by mail in the manner described above, on
the third business day after mailing, or (d) if delivered by overnight express
courier, on the next business day.
Section B. Entire Agreement; Non-Survival of Representations
and Warranties; Third Party Beneficiaries.
1. This Agreement (including any exhibits hereto), the other
agreements referred to in this Agreement and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to such
subject matter. None of this Agreement, the Confidentiality Agreement or any
other agreement contemplated hereby or thereby (or any provision hereof or
thereof) is intended to confer on any Person other than the parties hereto or
thereto any rights or remedies (except that Article I is intended to confer
rights and remedies on the Persons specified therein);
(b) The TSG Disclosure Letter, the Elcotel Disclosure Letter
and any Exhibits attached to this Agreement and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein; and
(c) The representations and warranties contained herein or
in any schedule, instrument or other writing delivered pursuant hereto shall not
survive the Effective Time.
Section C. Amendment. This Agreement may be amended,
supplemented or modified by action taken by or on behalf of the respective
Boards of Directors of the parties hereto at any time prior to the Effective
Time, whether prior to or after the Stockholders' Approvals shall have been
obtained, but after such adoption and approval only to the extent permitted by
applicable law. No such amendment, supplement or modification shall be effective
unless set forth in a written instrument duly executed by or on behalf of each
party hereto.
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Section D. Waiver. At any time prior to the Effective Time,
any party hereto may to the extent permitted by applicable law (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto or (iii) waive compliance with any of the covenants,
agreements or conditions of the other parties hereto contained herein. No such
extension or waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party extending the time of performance or
waiving any such inaccuracy or non-compliance. No waiver by any party of any
term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion.
Section E. Expenses. Except as otherwise specified in
Section 9.02 or agreed in writing by the parties, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement, whether or not the Merger is consummated, shall be paid by the
party incurring such cost or expense.
Section F. Successors and Assigns. The provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns; provided that no
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the written consent of the other
parties hereto except that Merger Subsidiary may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to any direct or
indirect wholly owned Subsidiary of Elcotel, it being understood that no such
assignment shall relieve Merger Subsidiary from any of its obligations
hereunder.
Section G. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of Delaware (without
regard to principles of conflict of laws).
Section H. Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated by this
Agreement may be brought against any of the parties in any federal court located
in the State of Delaware or any Delaware state court, and each of the parties
hereto hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and waives any objection to venue laid therein. Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the State of Delaware. Without limiting the generality of the
foregoing, each party hereto agrees that service of process upon such party at
the address referred to in Section 10.01, together with written notice of such
service to such party, shall be deemed effective service of process upon such
party.
Section I. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Section J. Interpretation. When a reference is made in this
Agreement to a Section or Schedule, such reference shall be to a Section of this
Agreement or a Schedule to the Disclosure Letter unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this
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Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 13, 1997.
Section K. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against public policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. Upon such determination that any term, provision, covenant or
restriction of this Agreement is invalid, void, unenforceable or against public
policy, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
Section L. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and 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 of this Agreement
in any Federal court located in the State of Delaware or any Delaware state
court, in addition to any other remedy to which they are entitled at law or in
equity.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ELCOTEL, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President
TECHNOLOGY SERVICE GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President & CEO
ELCOTEL HOSPITALITY SERVICE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President
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