EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CITRIX SYSTEMS, INC.,
SOUNDGARDEN ACQUISITION CORP.
AND
SEQUOIA SOFTWARE CORPORATION
MARCH 20, 2001
TABLE OF CONTENTS
Page
ARTICLE I....................................................................5
SECTION 1.1 The Offer.....................................................5
SECTION 1.2 Offer Documents...............................................6
SECTION 1.3 Company Actions...............................................7
SECTION 1.4 Directors.....................................................8
ARTICLE II The Merger.......................................................9
SECTION 2.1 The Merger....................................................9
SECTION 2.2 Effective Time; Closing.......................................9
SECTION 2.3 Effect of the Merger..........................................9
SECTION 2.4 Certificate of Incorporation; Bylaws..........................9
SECTION 2.5 Directors and Officers.......................................10
SECTION 2.6 Effect on Capital Stock......................................10
SECTION 2.7 Payment for Shares...........................................10
SECTION 2.8 Stock Transfer Books.........................................12
SECTION 2.9 Stock Options................................................12
SECTION 2.10 Dissenting Shares...........................................13
ARTICLE III Representations and Warranties of Company......................14
SECTION 3.1 Organization; Subsidiaries...................................14
SECTION 3.2 Company Capitalization.......................................15
SECTION 3.3 Obligations With Respect to Capital Stock....................16
SECTION 3.4 Authority; Non-Contravention.................................17
SECTION 3.5 SEC Filings; Company Financial Statements....................18
SECTION 3.6 Absence of Certain Changes or Events.........................19
SECTION 3.7 Taxes........................................................20
SECTION 3.8 Properties...................................................23
SECTION 3.9 Intellectual Property........................................23
SECTION 3.10 Compliance with Laws........................................27
SECTION 3.11 Litigation..................................................27
SECTION 3.12 Employee Benefit Plans......................................28
SECTION 3.13 Certain Agreements..........................................32
SECTION 3.14 Brokers' and Finders' Fees..................................33
SECTION 3.15 Insurance...................................................33
SECTION 3.16 Disclosure..................................................33
SECTION 3.17 Fairness Opinion............................................33
SECTION 3.18 Related Party Transactions..................................33
SECTION 3.19 Joint Ventures; Partnerships and Similar Arrangements.......34
ARTICLE IV Representations and Warranties of Parent and Merger Sub.........34
SECTION 4.1 Organization, Standing and Power.............................34
SECTION 4.2 Authority; Non-Contravention.................................34
SECTION 4.3 Information Supplied.........................................35
SECTION 4.4 Board Recommendation.........................................36
SECTION 4.5 Brokers' and Finders' Fees...................................36
SECTION 4.6 Funds Available..............................................36
SECTION 4.7 SEC Filings; Parent Financial Statements.....................36
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SECTION 4.8 Litigation...................................................36
ARTICLE V Conduct Prior to the Effective Time..............................37
SECTION 5.1 Conduct of Business by the Company...........................37
ARTICLE VI Additional Agreements...........................................40
SECTION 6.1 Preparation of the Proxy Statement; Company Stockholders
Meeting; Merger without a Company Stockholders Meeting.....40
SECTION 6.2 Antitrust Filings; Other Filings.............................41
SECTION 6.3 No Solicitation..............................................41
SECTION 6.4 Obligations of Merger Sub....................................43
SECTION 6.5 Voting of Shares.............................................44
SECTION 6.6 Confidentiality; Access to Information.......................44
SECTION 6.7 Public Disclosure............................................44
SECTION 6.8 Reasonable Efforts; Notification.............................44
SECTION 6.9 Indemnification..............................................46
SECTION 6.10 Takeover Statutes...........................................46
SECTION 6.11 Certain Employee Benefits...................................47
SECTION 6.12 Employment, Noncompetition, and Other Agreements............48
SECTION 6.13 Limitation on the Company's Legal and Investment Banking
Fees......................................................48
SECTION 6.14 Transfer Tax................................................48
SECTION 6.15 Change of Control...........................................48
SECTION 6.16 Silicon Valley Bank.........................................48
SECTION 6.17 Appointment of Director.....................................49
ARTICLE VII Conditions to the Merger.......................................49
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger.49
ARTICLE VIII Termination, Amendment and Waiver.............................49
SECTION 8.1 Termination..................................................49
SECTION 8.2 Notice of Termination; Effect of Termination.................51
SECTION 8.3 Fees and Expenses............................................51
SECTION 8.4 Amendment....................................................51
ARTICLE IX General Provisions..............................................51
SECTION 9.1 Non-Survival of Representations and Warranties...............51
SECTION 9.2 Notices......................................................52
SECTION 9.3 Interpretation; Certain Defined Terms........................52
SECTION 9.4 Counterparts.................................................53
SECTION 9.5 Entire Agreement; Third Party Beneficiaries..................53
SECTION 9.6 Severability.................................................54
SECTION 9.7 Other Remedies; Specific Performance.........................54
SECTION 9.8 Governing Law................................................54
SECTION 9.9 Rules of Construction........................................54
SECTION 9.10 Assignment..................................................54
SECTION 9.11 Waiver of Jury Trial........................................55
Annex A
Exhibit A...Stockholders Agreement
Exhibit B...Transaction Option Agreement
3
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of March 20, 2001, among Citrix Systems, Inc., a Delaware corporation
("Parent"), Soundgarden Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and Sequoia Software Corporation, a
Maryland corporation ("Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved the acquisition of the Company by Parent, by means of the
merger of Merger Sub with and into the Company, upon the terms and subject to
the conditions set forth in the Agreement;
WHEREAS, to effectuate the acquisition, Parent and the Company each desire
that Merger Sub commence a cash tender offer to purchase all of the outstanding
shares of common stock, par value $.001 per share, of the Company (the "Shares"
or "Company Common Stock"), upon the terms and subject to the conditions set
forth in this Agreement and the Offer Documents (as defined in Section 1.2), and
the Board of Directors of the Company has approved such tender offer and agreed
to recommend to its stockholders that they accept the tender offer and tender
their Company Common Stock pursuant thereto;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition of and inducement to Parent and Merger Sub entering into this
Agreement (i) the Company (solely with respect to Section 5 of such agreement)
and certain beneficial and record holders of the Company Common Stock are
entering into an agreement, dated as of the date hereof, in the form of Exhibit
A hereto (the "Stockholders Agreement") providing for the tender of the Shares
held by such stockholders pursuant to the Offer (as defined in Section 1.1) and
certain other matters with respect to their Shares and (ii) the Company has
approved the execution and delivery of the Stockholders Agreement by the parties
thereto;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a further condition of and inducement to Parent and Merger Sub entering
into this Agreement (i) Parent and the Company are entering into an agreement,
dated as of the date hereof, in the form of Exhibit B hereto (the "Transaction
Option Agreement"), pursuant to which the Company is granting Parent an option
to purchase shares of Company Common Stock, exercisable in certain circumstances
as provided therein, and (ii) the Company has approved the execution and
delivery of the Transaction Option Agreement by the parties thereto; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger (as defined in Section 2.1) and also to prescribe various
conditions to consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained in this Agreement, the
Stockholders Agreement
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and the Transaction Option Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer.
(a) As promptly as practicable but in no event later than five (5)
business days after the public announcement (on the date hereof or the following
business day) of the execution of this Agreement, Parent shall cause Merger Sub
to commence (within the meaning of Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), an offer to purchase (the "Offer")
all outstanding shares of the Company Common Stock at a price of $5.64 per
share, net to the seller in cash (the "Offer Consideration"). The obligations of
Parent and Merger Sub to commence the Offer, consummate the Offer, accept for
payment and pay for shares of Company Common Stock validly tendered in the Offer
and not withdrawn shall be subject only to those conditions set forth on the
Annex A hereto.
(b) Parent and Merger Sub expressly reserve the right to amend or modify
the terms of the Offer, except that, without the prior written consent of the
Company, Merger Sub shall not (and Parent shall not cause or permit Merger Sub
to) (i) decrease the Offer Consideration or change the form of consideration
therefor or decrease the number of Shares sought pursuant to the Offer, (ii)
change, in any material respect, the conditions to the Offer, (iii) impose
additional conditions to the Offer, (iv) waive the condition that there shall be
validly tendered and not withdrawn prior to the time the Offer expires a number
of shares of Company Common Stock which constitutes a majority of the Shares
outstanding on a fully-diluted basis on the date of expiration of the Offer (for
the purposes of this Agreement, "on a fully-diluted basis" means, as of any
date: the number of shares of Company Common Stock outstanding, together with
Shares which the Company may be required to issue during the period beginning on
that date and ending on June 30, 2001 pursuant to then vested and exercisable
obligations outstanding under employee stock option agreements, plans or similar
benefit plans, warrants or otherwise) (the "Minimum Condition"), (v) extend the
expiration date of the Offer (except as set forth in the following two
sentences), or (vi) amend any term of the Offer in any manner materially adverse
to holders of shares of Company Common Stock; provided, however, that, except as
set forth above, Merger Sub may waive any other condition to the Offer in its
sole discretion. Subject to the terms of the Offer and this Agreement and the
satisfaction (or waiver to the extent permitted by this Agreement) of the
conditions to the Offer, Merger Sub shall accept for payment all Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the applicable expiration date of the Offer and shall pay for all such Shares
promptly after acceptance; provided that (x) Merger Sub may extend the Offer,
(1) in its sole discretion, for successive extension periods not in excess of
three (3) business days (not to exceed six (6) business days in the aggregate)
if, at the scheduled expiration date of the Offer or any extension thereof, the
number of Shares validly tendered and not withdrawn is a number of Shares which,
together with Shares then owned by Parent and Merger Sub, represents more than
60% but less than 71% of the Shares outstanding on a fully-diluted basis, or (2)
with the prior written consent
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of the Company, which consent shall not be unreasonably withheld, for mutually
agreed upon extension periods if any of the conditions to the Offer shall not
have been satisfied, until such times as such conditions are satisfied or
waived, and (y) Merger Sub may extend the Offer if and to the extent required by
the applicable rules and regulations of the SEC. In addition, subject to Merger
Sub's compliance with Rule 14d-11 promulgated under the Exchange Act, Merger Sub
may extend the Offer after the acceptance of Shares thereunder for a further
period of time by means of a subsequent offering period under Rule 14d-11
promulgated under the Exchange Act, of not more than 20 business days to meet
the objective (which is not a condition to the Offer) that there be validly
tendered, in accordance with the terms of the Offer, prior to the expiration
date of the Offer (as so extended) and not withdrawn a number of Shares, which
together with Shares then owned by Parent and Merger Sub, represents at least
90% of the Shares outstanding on a fully-diluted basis. The initial expiration
date of the Offer shall be 20 business days from the commencement of the Offer.
(c) Parent shall provide or cause to be provided to Merger Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Shares that
Merger Sub becomes obligated to accept for payment and pay for, pursuant to the
Offer.
SECTION 1.2 Offer Documents. On the date of commencement of the Offer, Parent
and Merger Sub shall (i) file or cause to be filed with the SEC a Tender Offer
Statement on Schedule TO promulgated under Section 14(d)(1) of the Exchange Act
(the "Schedule TO") with respect to the Offer which shall contain the offer to
purchase and related letter of transmittal and other ancillary Offer documents
and instruments pursuant to which the Offer will be made (collectively with any
supplements or amendments thereto, the "Offer Documents") and shall contain (or
shall be amended in a timely manner to contain) all information which is
required to be included therein in accordance with the Exchange Act and the
rules and regulations thereunder and any other applicable law, shall conform in
all material respects with the requirements of the Exchange Act and any other
applicable law, and shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that no agreement or
representation hereby is made or shall be made by Parent or Merger Sub with
respect to information supplied by the Company expressly for inclusion in, or
with respect to Company information derived from the Company's public filings
with the United States Securities and Exchange Commission ("SEC") that is
included or incorporated by reference in, the Offer Documents, (ii) deliver a
copy of the Schedule TO to the Company at its principal executive office, (iii)
give telephonic notice and mail to the National Association of Securities
Dealers, Inc. (the "NASD") a copy of the Schedule TO in accordance with Rule
14d-3 promulgated under the Exchange Act, and (iv) mail the Offer Documents to
the holders of Company Common Stock. Parent, Merger Sub and the Company each
agree promptly to correct any information provided by them for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and Merger Sub further agrees to take all lawful action
necessary to cause the Offer Documents as so corrected to be filed promptly with
the SEC and to be disseminated to holders of Company Common Stock, in each case
as and to the extent required by applicable law. In conducting the Offer, Parent
and Merger Sub shall comply in all material respects with the provisions of the
Exchange Act and any other applicable law. The Company and its counsel shall be
given a
6
reasonable opportunity to review and comment on the Offer Documents and
any amendments thereto prior to the filing thereof with the SEC or dissemination
to Company's stockholders. Parent and Merger Sub agree to provide the Company
and its counsel any comments Parent, Merger Sub or their counsel may receive
from the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments including a copy of such comments that are made in
writing.
SECTION 1.3 Company Actions. The Company hereby consents to the Offer and
represents that (a) its Board of Directors (at a meeting duly called and held)
has (excluding any member of the Board of Directors who has properly recused
himself or herself from such determinations) (i) determined that each of this
Agreement, the Transaction Option Agreement, the Stockholders Agreement, the
Offer and the Merger are fair to and in the best interests of the stockholders
of the Company, (ii) approved the execution, delivery and performance of this
Agreement, the Transaction Option Agreement, and the Stockholders Agreement and
the consummation of the transactions contemplated hereby and thereby, including
the Offer and the Merger, and such approval constitutes approval of the
foregoing for purposes of Section 3-603 of the Maryland General Corporation Law
(as amended, the "MGCL"), and (iii) after considering its fiduciary duties under
applicable law following consultation with counsel, resolved to recommend
acceptance of the Offer, approval and adoption of this Agreement and the
Stockholders Agreement and approval of the Merger by the holders of Company
Common Stock (the recommendations referred to in this clause (iii) are
collectively referred to in this Agreement as the "Recommendations"), and (b)
Xxxxxx Brothers has delivered to the Board of Directors of the Company its
written opinion that, as of the date thereof, the Offer Consideration to be
received by the holders of Company Common Stock in the Offer is fair, from a
financial point of view, to such holders. The Board of Directors of the Company
shall not withdraw, modify or amend its approval or recommendation of the Offer,
this Agreement, the Transaction Option Agreement, the Stockholders Agreement or
the Merger unless the Board of Directors of the Company shall conclude in good
faith following consultation with counsel that such action is necessary under
applicable law in order to satisfy such Board's fiduciary duties. The Company
hereby consents to the inclusion in the Offer Documents of the Recommendations.
The Company hereby agrees to file with the SEC simultaneously with the filing by
Parent and Merger Sub of the Schedule TO, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing such Recommendations of the Board of
Directors of the Company in favor of the Offer and the Merger and otherwise
complying with Rule 14d-9 under the Exchange Act. The Schedule 14D-9 shall
comply in all material respects with the Exchange Act and any other applicable
law and shall contain (or shall be amended in a timely manner to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and any other applicable
law. The Company, Parent and Merger Sub each agree promptly to correct any
information provided by them for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect and the
Company further agrees to take all lawful action necessary to cause the Schedule
14D-9 as so corrected to be filed promptly with the SEC and disseminated to the
holders of Company Common Stock, in each case as and to the extent required by
applicable law. Parent, Merger Sub and their counsel shall be given an
opportunity to review and comment on the Schedule 14D-9 and any amendments
thereto prior to the filing thereof with the SEC. In connection with the
7
Offer, the Company shall promptly furnish, or cause its transfer agent to
furnish, Parent with mailing labels, security position listings and all
available listings or computer files containing the names and addresses of the
record holders of the Company Common Stock as of the latest practicable date and
shall furnish, or cause its transfer agent to furnish, Parent with such
information and assistance (including updated lists of stockholders, mailing
labels and lists of security positions) as Parent or its agents may reasonably
request in communicating the Offer to the record and beneficial holders of
Company Common Stock. Subject to the requirements of applicable law, and except
for such actions as are necessary to disseminate the Offer Documents and any
other documents necessary to consummate the Offer and the Merger, Parent and
Merger Sub and each of their affiliates, associates, partners, employees, agents
and advisors shall hold in confidence the information contained in such labels
and lists, shall use such information only in connection with the Offer and the
Merger, and, if this Agreement is terminated, in accordance with its terms,
shall deliver promptly to the Company all copies of such information then in
their possession or under their control.
SECTION 1.4 Directors.
(a) Promptly following the acceptance for payment of, and full payment by,
Parent or any of its subsidiaries of such number of shares of Company Common
Stock which represents at least a majority of the outstanding shares of Company
Common Stock (on a fully diluted basis), and from time to time thereafter (the
"Appointment Time"), Parent shall be entitled to designate such number of
directors, rounded up to the next whole number as will give Parent, subject to
compliance with Section 14(f) of the Exchange Act, representation on the Board
of Directors of the Company equal to the product of (x) the number of directors
on the Board of Directors of the Company (giving effect to any increase in the
number of directors pursuant to this Section 1.4) and (y) the percentage that
such number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"), and the Company shall,
upon request by Parent, promptly satisfy the Board Percentage by (i) increasing
the size of the Board of Directors of the Company or (ii) using its reasonable
efforts to secure the resignations of such number of directors as is necessary
to enable Parent's designees to be elected to the Board of Directors of the
Company and shall cause Parent's designees promptly to be so elected. At the
request of Parent, the Company shall take, at the Company's expense, all lawful
action necessary to effect any such election, including, without limitation,
mailing to its stockholders the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, unless such information has
previously been provided to the Company's stockholders in the Schedule 14D-9.
(b) Following the election or appointment of Parent's designees pursuant
to this Section 1.4 and prior to the Effective Time (as defined in Section 2.2)
of the Merger, any (i) amendment or termination of this Agreement, (ii)
extension for the performance or waiver of the obligations or other acts of
Parent or Merger Sub, or (iii) waiver of the Company's rights hereunder shall
require the concurrence of a majority of directors of the Company then in office
who are "Continuing Directors". The term "Continuing Director" shall mean (i)
each member of the Board of Directors of the Company on the date hereof and (ii)
any successor to any Continuing Director that was recommended to succeed such
Continuing Director by a majority
8
of the Continuing Directors then on the Board of Directors other than any
director designated by Parent or its subsidiaries for appointment pursuant to
this Section 1.4.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of the MGCL and the Delaware General
Corporation Law (as amended, the "DGCL"), at the Effective Time, Merger Sub
shall be merged (the "Merger") with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation of the Merger (Merger Sub and the Company are sometimes
hereinafter referred to as "Constituent Corporations" and, as the context
requires, the Company is sometimes hereinafter referred to as the "Surviving
Corporation").
SECTION 2.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the Company and Merger Sub will file a certificate of merger, in such
appropriate form as determined by the parties, (a) with the Secretary of State
of the State of Delaware in accordance with the relevant provisions of the DGCL
(the "Certificate of Merger"), and (b) with the State Department of Assessments
and Taxation of the State of Maryland in accordance with the relevant provisions
of the MGCL (the date and time of such later filing (or such later time as may
be agreed in writing by Company and Parent and specified in the Certificate of
Merger) being the "Effective Time") as soon as practicable on or after the
Closing Date. The closing of the Merger (the "Closing") shall take place at the
offices of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, at a time and date to be specified by the parties, which shall be
as soon as practicable after the satisfaction or waiver of the conditions set
forth in Article VII, or at such other time, date and location as the parties
hereto agree in writing (the "Closing Date").
SECTION 2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL and the MGCL. Without limiting the generality of the foregoing, at the
Effective Time, the Surviving Corporation shall possess all the property,
rights, privileges, powers and franchises of Company and Merger Sub, and shall
be subject to all debts, liabilities and duties of Company and Merger Sub.
SECTION 2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law; provided, however, that at the Effective Time
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read: "The name of the corporation is "Sequoia Software
Corporation".
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law.
9
SECTION 2.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub, until their respective
successors are duly elected or appointed and qualified. The initial officers of
the Surviving Corporation shall be the officers of the Company immediately prior
to the Effective Time, until their respective successors are duly appointed.
SECTION 2.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, the Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time, other than
any shares of Company Common Stock to be canceled pursuant to Section 2.6(b) and
Dissenting Shares (as defined in Section 2.10), will be canceled and
extinguished and automatically converted into the right to receive the Offer
Consideration, payable to the holder thereof, without any interest thereon, less
any required withholding, transfer and other conveyance taxes, upon surrender of
the certificate representing such share of Company Common Stock in the manner
provided in Section 2.7 (the "Merger Consideration").
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share of
Company Common Stock held by Company or owned by Parent or Merger Sub
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Options; Warrants. At the Effective Time, all options and warrants
to purchase Company Common Stock then outstanding, whether (i) under the
Company's 2000 Stock Incentive Plan (the "Company Stock Option Plan") or option
agreements, (ii) pursuant to outstanding warrants or (iii) otherwise, shall be
treated in accordance with Section 2.9 of this Agreement.
(d) Capital Stock of Merger Sub. Each share of common stock, par value
$0.001 per share, of Merger Sub (the "Merger Sub Common Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, $0.001 par
value per share, of the Surviving Corporation. Following the Effective Time,
each certificate evidencing ownership of shares of Merger Sub common stock shall
evidence ownership of such shares of capital stock of the Surviving Corporation.
SECTION 2.7 Payment for Shares.
(a) Paying Agent. Prior to the Effective Time, Merger Sub shall appoint
a United States bank or trust company reasonably acceptable to the Company) to
act as paying agent (the "Paying Agent") for the payment of the Merger
Consideration, and Merger Sub shall deposit or shall cause to be deposited with
the Paying Agent in a separate fund established for the benefit of the holders
of shares of Company Common Stock, for payment in accordance with this Article
II, through the Paying Agent (the "Payment Fund"), immediately available funds
in amounts necessary to make the payments pursuant to Section 2.6(a) and this
Section 2.7 to holders (other than the Company or any subsidiary of the Company
or Parent, Merger Sub or any other
10
subsidiary of Parent, or holders of Dissenting Shares). The Paying Agent shall,
pursuant to irrevocable instructions, pay the Merger Consideration out of the
Payment Fund. The Paying Agent shall invest portions of the Payment Fund as
Parent directs in obligations of or guaranteed by the United States of America,
in commercial paper obligations receiving the highest investment grade rating
from both Xxxxx'x Investors Services, Inc. and Standard & Poor's Corporation, or
in certificates of deposit, bank repurchase agreements or banker's acceptances
of commercial banks with capital exceeding $1,000,000,000 (collectively,
"Permitted Investments"); provided, however, that the maturities of Permitted
Investments shall be such as to permit the Paying Agent to make prompt payment
to former holders of the Company Common Stock entitled thereto as contemplated
by this Section. Parent and the Surviving Corporation shall cause the Payment
Fund to be promptly replenished to the extent of any losses incurred as a result
of Permitted Investments. All earnings on Permitted Investments shall be paid to
the Surviving Corporation. If for any reason (including losses) the Payment Fund
is inadequate to pay the amounts to which holders of shares of Company Common
Stock shall be entitled under this Section 2.7, Parent and the Surviving
Corporation shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose except as expressly provided in this
Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall instruct the Paying Agent to
mail to each holder of record (other than the Company or any subsidiary of the
Company or Parent, Merger Sub or any other subsidiary of Parent) of a
Certificate or Certificates which, immediately prior to the Effective Time,
evidenced outstanding shares of Company Common Stock (the "Certificates"), (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as the Surviving Corporation reasonably may
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment therefor. Upon surrender of a Certificate
for cancellation to the Paying Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be paid in cash in an
amount equal to the product of (x) the number of shares of Company Common Stock
represented by such Certificate and (y) the Merger Consideration, and the
Certificate so surrendered shall forthwith be canceled. Absolutely no interest
shall be paid or accrued on the Merger Consideration payable upon the surrender
of any Certificate. If payment is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a condition
of payment that the Certificate so surrendered shall be promptly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the surrendered Certificate or
established to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.7(b), each Certificate (other than Certificates
representing Shares owned by Parent or any subsidiary of Parent or held in the
treasury of the Company) shall represent for all purposes only the right to
receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the Payment
Fund which remains undistributed to the holders of Company Common Stock for 180
days after the Effective
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Time shall be delivered to the Surviving Corporation, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
Article II and the instructions set forth in the letter of transmittal mailed to
such holder after the Effective Time shall thereafter look only to the Surviving
Corporation for payment of the Merger Consideration to which they are entitled.
All interest accrued in respect of the Payment Fund shall inure to the benefit
of and be paid to the Surviving Corporation.
(d) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of shares of Company Common Stock for any cash from the
Payment Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent.
(f) Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Paying Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger
Consideration into which the shares of Company Common Stock represented by such
Certificates were converted; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance of such Merger
Consideration, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Paying Agent with respect to the Certificates alleged to have been lost, stolen
or destroyed.
SECTION 2.8 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of shares of Company Common Stock thereafter on the records of the
Company. On or after the Effective Time, any certificates presented to the
Paying Agent or Parent for any reason shall be converted into the Merger
Consideration.
SECTION 2.9 Stock Options.
(a) At the Effective Time, each holder of a then outstanding Company
Option (as defined in Section 3.2), to the extent then exercisable, shall, in
settlement thereof, receive for each Share subject to such Company Option an
amount (subject to any applicable withholding tax) in cash equal to the
difference between the Offer Consideration and the per Share exercise price of
such Company Option to the extent such difference is a positive number (such
amount being hereinafter referred to as, the "Option Consideration"). Upon
receipt of the Option Consideration, the Company Option shall be canceled. The
Boards of Directors of each of
12
Parent, Merger Sub and the Company shall take all reasonable and necessary
actions in order that, with respect to any person subject to Section 16(a) of
the Exchange Act, any such amounts can be paid without liability to such person
under Section 16(b) of the Exchange Act and Rule 16b-3(e) promulgated
thereunder. The surrender of an exercisable Company Option to the Company in
exchange for the Option Consideration shall be deemed a release of any and all
rights the holder had or may have had in respect of such Company Option. Prior
to the Effective Time, Parent shall grant to the Company's employees options to
purchase Parent common stock, par value $.001 per share ("Parent Common Stock"),
in such amounts, at such exercise prices, and on such terms as will be
determined by Parent with the advice of the Company, such grants to be effective
as of the Effective Time. Parent shall be entitled to require as a condition of
making any such grant of options to any such Company employee that such employee
execute an agreement terminating such employee's rights to all Company Options
that are outstanding but not exercisable at the Effective Time. Any such
outstanding Company Option not exercisable at the Effective Time that is not
terminated pursuant to such an agreement shall be assumed by Parent at the
Effective Time, and shall be exercisable (in accordance with the terms of such
Company Option) for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Common Stock that were issuable
upon exercise of such Company Option immediately prior to the Effective Time
multiplied by the Option Exchange Ratio. The exercise price per share applicable
to each Company Option will be determined by dividing the exercise price per
share of the Company Option by the Option Exchange Ratio, and rounding up to the
nearest whole cent. The "Option Exchange Ratio" means (i) $5.64 divided by (ii)
the average of the closing prices of Parent Common Stock on the Nasdaq National
Market during the 20 trading days immediately prior to the Effective Time.
(b) At the Effective Time, each holder of a then outstanding Company
Warrant (as defined in Section 3.2), shall have the right to purchase, in lieu
of Warrant Securities (as defined in the Company Warrant) on the same terms and
conditions (including exercise price) as contained in such Company Warrant, an
amount in cash equal to the Offer Consideration multiplied by the number of
Warrant Securities such Company Warrant would have been exercisable for prior to
the Effective Time. Prior to the Effective Time, the Company shall provide all
necessary notices to and obtain all necessary consents or releases from holders
of each Company Warrant in accordance with the terms thereof and take all such
other lawful action as may be necessary to give effect to the transactions
contemplated by this Section 2.9. The Company shall take all action necessary to
ensure that following the Effective Time no holder of a Company Warrant shall
have any right thereunder to acquire securities of the Company, the Surviving
Corporation or any subsidiary thereof.
SECTION 2.10 Dissenting Shares. Notwithstanding any other provisions of this
Agreement to the contrary, to the extent that Section 3-202 of the MGCL applies
to the Merger, shares of Company Common Stock that are outstanding immediately
prior to the Effective Time and which are held by stockholders who shall have
not voted in favor of the Merger or consented thereto in writing and who shall
have demanded properly in writing appraisal for such shares in accordance with
Section 3-202 of the MGCL (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders instead shall be entitled to receive payment of the appraised value
of such shares of Company Common Stock held by them in accordance with the
provisions of such Section 3-202, except
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that all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal of
such shares of Company Common Stock under such Section 3-202 shall thereupon be
deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without any interest thereon, the
Merger Consideration upon surrender in the manner provided in Section 2.7, of
the Certificate or Certificates that, immediately prior to the Effective Time,
evidenced such shares of Company Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date of this Agreement, the Company represents and warrants to
Parent and Merger Sub, subject to the exceptions disclosed in writing in the
disclosure letter delivered by the Company to Parent dated as of the date hereof
and certified by a duly authorized officer of the Company in such person's
capacity as an officer and not as an individual (the "Company Disclosure
Schedule"), as follows:
SECTION 3.1 Organization; Subsidiaries.
(a) The Company and each of its subsidiaries identified in Section
3.1(a) of the Company Disclosure Schedule is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate power and authority to carry on its business as
now being conducted. The Company and each of its subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction
(domestic or foreign) in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect (as defined in Section 9.3) on the Company. Section
3.1(a) of the Company Disclosure Schedule indicates the jurisdiction of
organization of each subsidiary of the Company and the Company's direct or
indirect equity interest therein. Attached to Section 3.1(a) of the Company
Disclosure Schedule are complete and correct copies of the Certificate of
Incorporation and By-laws of the Company, and the Company has made available to
Parent similar governing instruments of each of its subsidiaries (collectively,
the "Company Charter Documents"), and each such instrument is in full force and
effect.
(b) Except as set forth on Section 3.1(b) of the Company Disclosure
Schedule, neither Company nor any of its subsidiaries identified in Section
3.1(a) of the Company Disclosure Schedule owns any capital stock of, or any
equity interest of any nature in, any corporation, partnership, joint venture
arrangement or other business entity, except for passive investments in equity
interests of public companies as part of the cash management program of the
Company. Neither the Company nor any of its subsidiaries has agreed or is
obligated to make, or is bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
14
date hereof or as may hereinafter be in effect under which it may become
obligated to make any future material investment in or material capital
contribution to any other entity. Neither the Company, nor any of its
subsidiaries, is a general partner of any general partnership, limited
partnership or other similar entity.
SECTION 3.2 Company Capitalization.
(a) The authorized capital stock of the Company consists solely of
150,000,000 shares of capital stock, all of which is currently classified as
Company Common Stock, of which there were 30,950,135 shares issued and
outstanding as of March 19, 2001. As of the date of this Agreement, there are no
shares of Company Common Stock held in treasury by the Company.
(b) As of the close of business on March 19, 2001, 4,896,582 shares of
Company Common Stock are subject to issuance pursuant to outstanding options to
purchase Company Common Stock under the Company Stock Option Plan, option
agreements, or otherwise (collectively, the "Company Options"). Section 3.2(b)
of the Company Disclosure Schedule sets forth the following information with
respect to each Company Option outstanding as of the date of this Agreement: (i)
the name of the optionee; (ii) the number of shares of Company Common Stock
subject to such Company Option; (iii) the exercise price of such Company Option;
(iv) the date on which such Company Option was granted or assumed; and (v) the
date on which such Company Option expires. As of the close of business on March
19, 2001, 423,259 shares of Company Common Stock are subject to issuance
pursuant to outstanding warrants to purchase Company Common Stock (the "Company
Warrants"). Section 3.2(b) of the Company Disclosure Schedule sets forth the
following information with respect to each Company Warrant outstanding as of the
date of this Agreement: (v) the name of the warrant holder; (w) the number of
shares of Company Common Stock subject to such Company Warrant; (x) the purchase
price of such shares of Company Common Stock subject to such Company Warrant;
(y) the date on which such Company Warrant was granted or assumed; and (z) the
date on which such Company Warrant expires. The Company has made available to
Parent an accurate and complete copy of the Company Stock Option Plan, the
standard forms of stock option agreements evidencing Company Options and each of
the Company Warrants. There are no options or warrants outstanding to purchase
shares of Company Common Stock other than pursuant to the Transaction Option
Agreement and the Company Stock Option Plan and no warrants to purchase shares
of the Company Stock other than the Company Warrants.
(c) All outstanding shares of Company Common Stock, all shares of Company
Common Stock which may be issued pursuant to the exercise of the Company Options
and all shares of Company Common Stock which may be purchased pursuant to the
Company Warrants will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement or document to which the Company is a party or by which it is bound.
All outstanding shares of Company Common Stock, all outstanding Company Options,
all outstanding Company Warrants, and all outstanding shares of capital stock of
each subsidiary of the Company have been issued and granted in compliance in all
material respects with (i) all applicable securities laws and other
applicable Legal Requirements and (ii) all requirements set
15
forth in applicable agreements or instruments. For the purposes of this
Agreement, "Legal Requirements" means any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity (as defined in
Section 3.4). There are no outstanding bonds, debentures, notes or other
indebtedness or debt securities of the Company which require consent for any
actions contemplated by this Agreement or the Transaction Option Agreement or
which have the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote.
SECTION 3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2 hereof, there are no equity securities, partnership interests or
similar ownership interests of any class of Company equity security, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. The Company owns all of the securities of
its subsidiaries identified in Section 3.1 of the Company Disclosure Schedule,
free and clear of all claims and Encumbrances (as defined below), and there are
no other equity securities, partnership interests or similar ownership interests
of any class of equity security of any subsidiary of the Company, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. For purposes of this Agreement,
"Encumbrances" means any lien, pledge, hypothecation, charge, mortgage, security
interest, encumbrance, claim, infringement, interference, option, right of first
refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset), but excluding: liens for taxes,
assessments, and governmental charges or levies not yet due or payable; and
encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens. Except pursuant to the Transaction Option
Agreement, Stockholders Agreement, Company Options and Company Warrants, there
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Company or any
of its subsidiaries is a party or by which it is bound obligating the Company or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement. There are no
registration rights with respect to any equity security of any class of the
Company or with respect to any equity security, partnership interest or similar
ownership interest of any class of any of its subsidiaries.
16
SECTION 3.4 Authority; Non-Contravention.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and the Transaction Option Agreement and, subject to the
Company Stockholder Approvals (as defined below), to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Transaction Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Company's
stockholders (the "Company Stockholder Approvals") pursuant to the MGCL and the
filing of the Certificate of Merger pursuant to DGCL. The affirmative vote of
the holders of a majority of the total number of shares of Company Common Stock
outstanding and entitled to vote thereon is sufficient for the Company's
stockholders to approve and adopt this Agreement and approve the Merger, and no
other approval of any holder of any securities of the Company is required in
connection with the consummation of the transactions contemplated hereby. This
Agreement and the Transaction Option Agreement have been duly executed and
delivered by the Company and, assuming the due execution and delivery by Parent
and Merger Sub, constitute the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity. There is no vote
of the holders of any class or series of the Company's securities necessary to
approve the Transaction Option Agreement.
(b) The execution and delivery of this Agreement and the Transaction
Option Agreement by the Company do not, and the performance of this Agreement
and the Transaction Option Agreement by the Company will not, (i) conflict with
or violate any Company Charter Documents, (ii) subject to obtaining the Company
Stockholder Approvals and compliance with the requirements set forth in Section
3.4(c), conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which the
Company or any of its subsidiaries or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair the Company's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an Encumbrance on
any of the properties or assets of the Company or any of its subsidiaries
pursuant to, any note, bond, mortgage, indenture, agreement, lease, license,
permit, franchise, concession or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective assets are bound or affected,
except, in the case of clauses (ii) and (iii), for such conflicts, violations,
breaches, defaults, impairments, or rights which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(c) No action by or in respect of, or filing with any court,
administrative agency or commission or other governmental authority or
instrumentality, foreign, domestic or supranational ("Governmental Entity") or
other person, is required to be obtained or made by the Company in connection
17
with the execution and delivery of this Agreement or the Transaction Option
Agreement or the consummation by the Company of the transactions contemplated
hereby and thereby, except for the filing of the Certificate of Merger with (i)
the Secretary of State of the State of Delaware and the State Department of
Assessments and Taxation of the State of Maryland and appropriate documents with
the relevant authorities of other states in which Company is qualified to do
business, (ii) compliance with any applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), the Exchange Act, and any other
applicable securities law, whether state or foreign, (iii) such filings as may
be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (iv) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company or the Surviving Corporation or have a Material Adverse Effect on
the ability of the Company to consummate the transactions contemplated by this
Agreement and the Transaction Option Agreement.
SECTION 3.5 SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and documents required to
be filed by Company with the SEC since the effective date of the registration
statement for the Company's initial public offering and has made available to
Parent such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that the Company may
file subsequent to the date hereof) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Company
SEC Report. None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements of the Company
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "Company Financials"), including each Company SEC Report filed
after the date hereof until the Closing, (i) comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) are prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
under Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii)
fairly present the consolidated financial position of Company and its
subsidiaries as at the respective dates thereof and the consolidated results of
Company's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments.
18
The balance sheet of the Company contained in the Company SEC Reports as
of September 30, 2000 is hereinafter referred to as the "Company Balance Sheet."
Except as disclosed in the Company Financials or in the Company SEC Documents
filed, in each case, prior to the date hereof, neither Company nor any of its
subsidiaries has any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are material to the business, results of
operations or financial condition of the Company and its subsidiaries, taken as
a whole, except (i) for liabilities incurred since the date of the Company
Balance Sheet in the ordinary course of business consistent with past practice
and (ii) liabilities incurred in connection with the transactions contemplated
by this Agreement or the Transaction Option Agreement.
(c) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
SECTION 3.6 Absence of Certain Changes or Events.
(a) Since the date of the Company Balance Sheet, the business of the
Company and its subsidiaries has been conducted in the ordinary course
consistent with past practices (other than the transactions contemplated by this
Agreement and the Transaction Option Agreement) and there is not and has not
been (i) any event, occurrence, development or state of circumstances or facts
that has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or give rise to a Material
Adverse Change (as defined in Section 9.3(c)) on the Company, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company's or any
of its subsidiaries' capital stock, or any purchase, redemption or other
acquisition by the Company of any of the Company's capital stock or any other
securities of the Company or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
which are not, individually or in the aggregate, material in amount from
employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any material change by
the Company in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP, (iv) any revaluation by the Company of
any of its material assets, other than in the ordinary course of business, or
(v) any condition, event or occurrence which, individually or in the aggregate,
could reasonably be expected to prevent or materially delay the ability of the
Company to consummate the transactions contemplated by this Agreement and the
Transaction Option Agreement or perform its obligations hereunder or thereunder.
(b) Since the date of the Company Balance Sheet and through the date of
this Agreement, there has not been (i) any amendment of any material term of any
outstanding security of the Company or any of its subsidiaries, (ii) any
incurrence, assumption or guarantee by the Company or any of its subsidiaries of
any indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices, (iii) any
split, combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock, (iv) any granting by the Company or any of its
subsidiaries of any increase in compensation or fringe benefits to any of their
directors, officers or employees, or any payment
19
by Company or any of its subsidiaries of any bonus to any of their directors,
officers or employees, or any granting by the Company or any of its subsidiaries
of any increase in severance or termination pay, other than in the ordinary
course, consistent with past practice, or any entry by Company or any of its
subsidiaries into, or material modification or amendment of, any currently
effective employment, severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Company of the
nature contemplated hereby, (v) any creation or other incurrence by the Company
or any of its subsidiaries of any lien on any material asset other than in the
ordinary course of business consistent with past practices, (vi) any making of
any material loan, advance or capital contributions to or investment in any
Person other than loans, advances or capital contributions to or investments in
its wholly-owned subsidiaries (or advances to employees) in the ordinary course
of business consistent with past practices, (vii) any damage, destruction or
other casualty loss (whether or not covered by insurance) affecting the business
or assets of the Company or any of its subsidiaries that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, (viii) any change in terms from the standard
forms of licensing agreement for Company Intellectual Property Rights that are
attached to Section 3.6(b)(viii) of the Company Disclosure Schedule in
connection with any agreement for the licensing of any Company Intellectual
Property Rights, including through discounts or similar practices, lengthening
the term of licenses, changing the basis of pricing or terms of such licenses,
or modifying the indemnification provisions or (ix) any agreement, commitment,
arrangement or undertaking by the Company or any of its subsidiaries to perform
any action described in (i) through (viii) above.
SECTION 3.7 Taxes.
(a) The Company and each of its subsidiaries have timely filed or caused
to be filed all federal, state, local, foreign and other returns, estimates,
information statements and reports ("Returns") relating to Taxes (as defined in
Section 3.7(u)) required to be filed by or on behalf of the Company and each of
its subsidiaries with any Tax authority. Such Returns are true, correct and
complete in all material respects, and the Company and each of its subsidiaries
have paid all Taxes due, whether or not such Taxes have been shown to be due on
such Returns. Neither the Company nor any of its subsidiaries has requested an
extension of time within which to file any Return.
(b) Except as is not material to the Company, the Company and each of
its subsidiaries have withheld with respect to its employees and other persons
all federal and state income Taxes, Taxes pursuant to the Federal Insurance
Contribution Act ("FICA"), Taxes pursuant to the Federal Unemployment Tax Act
("FUTA") and other Taxes required to be withheld.
(c) Neither the Company nor any of its subsidiaries has been delinquent
in the payment of any material Tax, nor is there any material Tax deficiency
outstanding, proposed or assessed against the Company or any of its
subsidiaries. The Company and its subsidiaries have not executed any unexpired
waiver of any statute of limitations on or extended the period for the
20
assessment or collection of any Tax, and no power of attorney with respect to
Tax matters has been executed or filed with any Tax authority.
(d) No audit or other examination of any Return of the Company or any of
its subsidiaries by any Tax authority is presently in progress, nor has the
Company or any of its subsidiaries been notified of any request for such an
audit or other examination that is reasonably likely to result in any
adjustment.
(e) No adjustment relating to any Returns filed by the Company or any of
its subsidiaries has been proposed formally or informally by any Tax authority
to the Company or any of its subsidiaries or any representative thereof.
(f) Neither the Company nor any of its subsidiaries has any liability
for unpaid Taxes which has not been accrued for or reserved on the Company
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, other than any liability for unpaid Taxes that may have
accrued since the date of the Company Balance Sheet in connection with the
operation of the business of the Company and its subsidiaries in the ordinary
course.
(g) There is no agreement, plan or arrangement to which the Company or
any of its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code, or which would impose a withholding Tax obligation on Parent, the
Company or the Surviving Corporation for amounts described in Section 4999 of
the Code.
(h) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(i) Neither the Company nor any of its subsidiaries is party to or has
any obligation under any Tax-sharing, Tax indemnity or Tax allocation agreement
or arrangement.
(j) Neither the Company nor any of its subsidiaries will be required
(either as a result of the transactions contemplated by this Agreement or
otherwise), after the Effective Time, to include in taxable income income
attributable to, or that accrued in, a pre-Effective Time taxable period but was
not recognized in a pre-Effective Time taxable period as a result of the
installment method of accounting, the completed contract method of accounting,
the cash method of accounting or under Section 481 of the Code or any comparable
provision of any other Tax law or for any other reason.
(k) Neither the Company nor any of its subsidiaries has been distributed
in a transaction qualifying under Section 355 of the Code within the last two
(2) years, nor has the Company or any of its subsidiaries distributed any
corporation in a transaction qualifying under Section 355 of the Code within the
last two years.
21
(l) Neither the Company nor any of its subsidiaries has any net
operating losses or other tax attributes presently subject to limitation under
Sections 382, 383 or 384 of the Code or the federal consolidated return
regulations (other than limitations imposed as a result of the transactions
contemplated by this Agreement).
(m) There are no outstanding rulings of, or requests for rulings with,
any Tax authority addressed to the Company or any of its subsidiaries that are,
or if issued would be, binding on the Company or any of its subsidiaries.
(n) Neither the Company nor any of its subsidiaries has ever (i) made an
election under Section 1362 at the Code to be treated as an S corporation for
federal income tax purposes or (ii) made a similar election under any comparable
provision of any state, local or foreign Tax law.
(o) Neither the Company nor any of its subsidiaries has ever been a
member of a group filing a consolidated federal income tax return (other than a
group the common parent of which was the Company), and neither the Company nor
any of its subsidiaries has any liability for the taxes of any person under
Treasury Regulations Section 1.1502-6 (or any corresponding provision of state,
local or foreign tax law), as a transferee or successor, by contract, or
otherwise.
(p) Neither the Company nor any of its subsidiaries has, or has had, a
permanent establishment in (or would otherwise be treated as having engaged in
business in), any foreign country.
(q) No portion of the amounts deliverable pursuant to this Agreement to
holders of Company Common Stock is subject to Tax withholding, including but not
limited to the Tax withholding provisions of Section 3406 of the Code, or of
subchapter A of Chapter 3 of the Code, or of any other provision of law.
(r) None of the shares of Company Common Stock outstanding are subject
to a "substantial risk of forfeiture" within the meaning of Section 83 of the
Code.
(s) There are no encumbrances for Taxes (except for encumbrances for
Taxes not yet due and payable) on any of the assets of the Company or any of its
subsidiaries.
(t) Neither the Company nor any of its subsidiaries is a party to any
joint venture, partnerships, limited liability company or other arrangement
which could be treated as a partnership for tax purposes.
(u) For the purposes of this Agreement, "Tax" or "Taxes" refers to (i)
any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities relating to taxes,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts,
(ii) any liability for
22
payment of any amounts of the type described in clause (i) as a result of being
a member of an affiliated consolidated, combined or unitary group, and (iii) any
liability for amounts of the type described in clauses (i) and (ii) as a result
of any express or implied obligation to indemnify another person or as a result
of any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.
SECTION 3.8 Properties.
(a) The Company or one of its subsidiaries (i) has good and marketable
title to all the properties and assets (A) reflected in the Company Balance
Sheet as being owned by the Company or one of its subsidiaries (other than any
such properties or assets sold or disposed of since such date in the ordinary
course of business consistent with past practice) or (B) acquired after the date
of the Company Balance Sheet, in each case, which are material to the Company's
business on a consolidated basis, free and clear of all Encumbrances, except
statutory Encumbrances securing payments not yet due and such Encumbrances as do
not materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties and (ii) is the lessee of all leasehold estates (x) reflected in the
Company Balance Sheet or (y) acquired after the date of the Company Balance
Sheet, in each case, which are material to its business on a consolidated basis
(except for leases that have expired by their terms since the date thereof) and
is in possession of the properties purported to be leased thereunder, and each
such lease is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the respective
parties thereto, and there is no material default thereunder by the lessee or,
to the Company's knowledge, as of the date hereof, the lessor. The Company has
not received notice and does not otherwise have knowledge of any pending,
threatened or contemplated condemnation proceeding affecting any premises owned
or leased by the Company or any of its subsidiaries or any part thereof or of
any sale or other disposition of any such owned or leased premises or any part
thereof in lieu of condemnation. Section 3.8 to the Company Disclosure Schedule
sets forth a list of all leases of real property to which the Company or its
subsidiaries is a party.
SECTION 3.9 Intellectual Property.
(a) The Company and its subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, trade secrets, and any applications therefor,
maskworks, formulae, net lists, designs, schematics, technology, know-how,
computer software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material that are
used or currently proposed to be used in the business of the Company as
currently conducted or as currently proposed to be conducted by the Company
(excluding any of the foregoing validly licensed or purchased from third parties
as set forth on Section 3.9(b) to the Company Disclosure Schedule) (the "Company
Intellectual Property Rights"). Section 3.9(a) to the Company Disclosure
Schedule sets forth a list of all trademarks, service marks, trade names,
registered copyrights (and any applications for the registration thereof),
patents, and patent applications owned or licensed and used or held for use by
the Company that relate to or are part of the Company's products or currently
proposed products or are used in the business of the Company,
23
specifying as to each, as applicable: (i) identifying such right as a patent,
trademark, etc.; (ii) the registrant or applicant of such right; and (iii) the
jurisdictions by or in which such right has been issued or registered or in
which an application for such issuance or registration has been filed, including
the respective registration or application numbers. The Company has received
properly executed assignments for each of the Company's patents and patent
applications listed in Section 3.9(a) to the Company Disclosure Schedule, and
has properly recorded the assignments for each of Company's United States
patents and patent applications in the United States Patent and Trademark
Office. Where required, the Company has received properly executed assignments
for all other Company Intellectual Property Rights and has properly recorded
such assignments with the appropriate domestic or foreign filing offices.
(b) Section 3.9(b) to the Company Disclosure Schedule sets forth a
complete list of (i) all licenses, sublicenses and other agreements as to which
the Company is a party and pursuant to which any person is authorized to use any
Company Intellectual Property Right or any trade secret material to the Company,
including the identity of all parties thereto excepting (A) the Company's
non-exclusive end user licenses of its products entered into through "click
wrap" agreements and (B) non-exclusive end user licenses of the Company's
products that do not deviate in any material respect from the Company's standard
end user license agreement in the form made available to Parent; and (ii) all
licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which the Company is authorized to use (1) any third party
patents, trademarks, trade secrets or copyrights (including software) (the
"Company Third Party Intellectual Property Rights") which are incorporated in,
are, or form a part of, or were utilized in the development of, any Company
product or currently proposed product, or (2) any trade secret of a third party
in or as to any Company product or currently proposed product, including in each
instance the identity of all parties thereto excepting (A) non-exclusive license
agreements to commercially available software that are embodied in "click-wrap"
or "shrink-wrap" license agreements and (B) non-exclusive licenses of
commercially available software under non-negotiated agreements that, in the
case of each of (ii)(2)(A) and (B), would not result in the payment of any
royalty, fee or other compensation to any other person or limit, impair or alter
the Company's methods or manner of licensing or distribution. Assuming that the
other party thereto had due power and authority to execute and deliver such
licenses and assignments, the Company Third Party Intellectual Property Rights
have been duly and validly assigned to or licensed by the licensor of such right
to the Company, and each such assignment or license is in full force and effect,
and is enforceable in accordance with its terms. None of the sale, license,
lease, transfer, use, reproduction, distribution, modification or other
exploitation by the Company, any subsidiary of the Company or any of their
respective successors or assigns of any version or release of any computer
program included in the Company Intellectual Property obligates or will obligate
the Company, any subsidiary of the Company or any of their respective successors
or assigns to pay any royalty, fee or other compensation to any other person.
Neither the Company nor any of its subsidiaries is obligated to provide support
of any computer program included in the Company Intellectual Property other than
pursuant to the terms of the Company's standard end-user license in the ordinary
course of the Company's business.
(c) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the Transaction Option Agreement or the
performance of its obligations hereunder or thereunder, in breach or violation
of any license, sublicense or agreement described on Section
24
3.9(b) to the Company Disclosure Schedule. No third party has informed the
Company orally or in writing of any claims with respect to the Company
Intellectual Property Rights or the Company Third Party Intellectual Property
Rights (to the extent arising out of any use, reproduction or distribution of
such Company Third Party Intellectual Rights by or through the Company), and to
the Company's knowledge, no such claims have been asserted or are threatened by
any person. The Company does not know of any facts that would form a basis for
any bona fide claims (i) to the effect that the manufacture, sale, licensing or
use of any product as now used, sold or licensed or currently proposed for use,
sale or license by the Company infringes on any copyright, patent, trademark,
service xxxx or trade secret; (ii) against the use by the Company of any
trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the Company's
business as currently conducted or as currently proposed to be conducted by the
Company; (iii) challenging the ownership, validity, enforceability or
effectiveness of any of the Company Intellectual Property Rights or other trade
secret material to the Company; or (iv) challenging the Company's license or
legally enforceable right to use, or the validity, enforceability or
effectiveness of, the Company Third Party Intellectual Property Rights.
(d) All registered trademarks, service marks, and copyrights held by the
Company are valid and subsisting. The Company has no knowledge of any facts,
other than any facts disclosed to the Patent Office, which the Company
reasonably believes would form a basis for challenging the validity or
enforceability of any patent held by the Company and such patents are
subsisting, and all patent applications held by Company are pending in their
respective patent office, and the Company has no knowledge of any facts, other
than any facts disclosed to the Patent Office, that the Company reasonably
believes would form a basis for a refusal of, or of any defects in the
prosecution of any such application that would irrevocably foreclose, the grant
of patent rights under such application. Notwithstanding the foregoing, no
representation is made as to the events and decisions of the prosecution of any
patents or patent applications after the date of this Agreement, including the
discovery and disclosure of additional prior art, the amendment of claims or the
abandonment of any patent applications. To the knowledge of the Company, there
has been and is no unauthorized use, disclosure, infringement or
misappropriation of any of the Company Intellectual Property Rights or any
Company Third Party Intellectual Property Right to the extent licensed by or
through the Company, by any third party, including any employee or former
employee of the Company. The Company (i) has not been sued or charged in writing
as a defendant in any claim, suit, action or proceeding which involves a claim
of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party;
(ii) has not been threatened or charged in writing, orally or otherwise with
infringement or violation of any patents, trademarks, service marks, copyrights
or trade secrets or other proprietary right of any third party; and (iii) has no
knowledge of any facts that would form a basis for any such threat or claim.
(e) No Company Intellectual Property Right or Company Third Party
Intellectual Property Right is subject to any outstanding order, judgment,
decree, legal or governmental proceeding (other than pending applications for
patent, trademark registration or copyright registration) or stipulation
restricting in any manner the licensing thereof by Company, other than the
effect of applicable laws and regulations that restrict the licensing of
technology
25
generally, such as export control restrictions. The Company has not entered into
any agreement to indemnify any other person against any charge of infringement
of any Company Third Party Intellectual Property Right.
(f) The Company has taken reasonable measures to protect and preserve (i)
the validity and enforceability of trademarks included in the Company
Intellectual Property Rights, (ii) the confidentiality, validity and
enforceability of copyrights and pending patent applications included in the
Company Intellectual Property Rights, (iii) the validity and enforceability of
patents included in the Company Intellectual Property Rights, and (iv) the
confidentiality, validity and enforceability of its trade secrets and other
confidential information. Since the Company and its subsidiaries have owned any
programs constituting a portion of the Company Intellectual Property Rights, the
Company and its subsidiaries have disclosed source code to such programs only
pursuant to confidentiality terms that reasonably protect the Company's rights
in such programs. Except as disclosed in accordance with such confidentiality
agreements or valid source code escrow agreements, which source code escrow
agreements are described in Section 3.9(f) of the Company Disclosure Schedule,
no person (other than the Company and its subsidiaries) is in possession of any
source code for any computer program included in the Company Intellectual
Property Rights. All employees, contractors, agents and consultants of the
Company have executed a nondisclosure and assignment of inventions agreement to
protect the confidentiality and to vest in the Company exclusive ownership of
such intellectual property rights in the form attached to Section 3.9(f) of the
Company Disclosure Schedule, and to the Company's knowledge, no such person has
violated such agreement. To the knowledge of the Company, no material trade
secret or confidential information of the Company has been used, divulged,
appropriated or misappropriated for the benefit of any person other than the
Company or otherwise to the detriment of the Company. To the knowledge of the
Company, no employee, contractor, agent or consultant of the Company has used
any trade secrets or other confidential information of any other person in the
course of their work for the Company. The Company has no written or, to the
Company's knowledge, oral agreements with employees, contractors, agents or
consultants with respect to the ownership of inventions, trade secrets or other
works created by them as a result of which any such employee, contractor, agent
or consultant may have nonexclusive rights to any portion of the Company
Intellectual Property Rights so created by such individual.
(g) To the Company's knowledge, no officer, employee, contractor, agent or
consultant of the Company is, or is now expected to be, in violation of any term
of any employment contract, patent disclosure agreement, proprietary information
agreement, noncompetition agreement, nonsolicitation agreement, confidentiality
agreement, or any other similar contract or agreement or any restrictive
covenant relating to the right of any such officer, employee, contractor, agent
or consultant to be employed or engaged by the Company because of the nature of
the business conducted or to be conducted by the Company or relating to the use
of trade secrets or proprietary information of others, and to the Company's
knowledge the continued employment or retention of its officers, employees,
contractors, agents or consultants does not subject the Company to any liability
with respect to any of the foregoing matters.
26
SECTION 3.10 Compliance with Laws.
(a) Neither the Company nor any of its subsidiaries is in conflict with,
or has violated or is in violation of (i) any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which the Company or any of its subsidiaries or any of their respective
properties is bound or affected, or (ii) any note, bond, mortgage, indenture,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which Company
or any of its subsidiaries or its or any of their respective properties is bound
or affected, except for conflicts, violations and defaults that would not be
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. To the Company's knowledge, no investigation or
review by any Governmental Entity is pending or, has been threatened in a
writing delivered to the Company against the Company or any of its subsidiaries,
nor, to the Company's knowledge, has any Governmental Entity indicated an
intention to conduct an investigation of the Company or any of its subsidiaries.
There is no judgment or injunction or to the Company's knowledge, order or
decree, in each case, binding upon the Company or any of its subsidiaries which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any material business practice of the Company or any of its
subsidiaries, or any acquisition of material property by Company or any of its
subsidiaries.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities
(including, without limitation all such permits required under environmental
laws) that are material to or required for the operation of the business of the
Company as currently conducted (collectively, the "Company Permits"), and are in
compliance with the terms of the Company Permits, except where the failure to
hold or be in compliance with such Company Permits, would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(c) No written notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed, and no investigation, action, claim, suit, proceeding
or review is pending or, to the knowledge of the Company, is threatened by any
governmental entity or other Person relating to or arising out of any
environmental law. There are no material liabilities of or relating to the
Company or any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising under or
relating to any environmental law and there are no facts, conditions, situations
or set of circumstances that could reasonably be expected to result in or be the
basis for any such material liability. For purposes of this Section, the terms
"Company" and "subsidiaries" shall include any entity that is, in whole or in
part, a predecessor of the Company or any of its subsidiaries.
SECTION 3.11 Litigation. There are no claims, suits, actions, arbitrations,
investigations or proceedings (or any basis therefor) pending or, to the
knowledge of the Company, threatened against, relating to or affecting the
Company, any of its subsidiaries, any officer, director or employee of the
Company or any of its subsidiaries or any person for whom the Company or any
subsidiary may be liable or any of their respective properties, before any
Governmental Entity or any arbitrator that seeks to restrain or enjoin the
consummation of the transactions contemplated
27
by this Agreement or the Transaction Option Agreement or which would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company or prevent or delay the ability of the parties hereto to
consummate the transactions contemplated by this Agreement or the Transaction
Option Agreement or for the Company to perform its obligations hereunder or
thereunder. As of the date hereof, no director, officer or employee of the
Company has asserted a claim to seek indemnification from the Company under any
of the Company Charter Documents or any indemnification agreement between the
Company and such person.
SECTION 3.12 Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit
plan," within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by the
Company or any ERISA Affiliate for the benefit of any Employee;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "DOL" shall mean the Department of Labor;
(iv) "Employee" shall mean any current, former, or retired employee,
officer, or director of Company or any subsidiary of the Company;
(v) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between the Company or any
subsidiary of the Company, on the one hand, and any Employee or consultant
of the Company or any subsidiary of the Company, on the other hand;
(vi) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(vii) "ERISA Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations issued thereunder;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
28
(ix) "International Employee Plan" shall mean each Company Employee
Plan that has been adopted or maintained by the Company, whether
informally or formally, for the benefit of Employees outside the United
States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation;
and
(xiii) "Pension Plan" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Section 3.12 of the Company Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan and each Employee
Agreement and, to the knowledge of the Company, any other material benefit plan,
program, or arrangement in which an Employee is eligible to participate (each
plan other than a Company Employee Plan, an "Outsourced Plan"). The Company does
not have any plan or commitment to establish any new Company Employee Plan, to
modify any Company Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable law), or to enter into any
Company Employee Plan, Employee Agreement or Outsourced Plan, nor does it have
any intention or commitment to do any of the foregoing.
(c) Documents. The Company has made available to Parent: (i) correct and
complete copies of all documents embodying each Company Employee Plan and each
Employee Agreement including all amendments thereto and written interpretations
thereof; (ii) the most recent annual actuarial valuations, if any, prepared for
each Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee
Plan or related trust; (iv) if Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (v) the most
recent summary plan description together with the summary of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (vi) the most recent IRS determination or opinion letter, and all
rulings relating to Company Employee Plans; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to Company; and (ix) all registration statements and prospectuses prepared in
connection with each Company Employee Plan. Additionally, the Company has
provided information with respect to the Outsourced Plans to the extent
reasonably practicable, including but not limited to, a copy of each Outsourced
Plan.
29
(d) Employee Plan Compliance. Except in each case, as would not,
individually or in the aggregate, result in a material liability to the Company:
(i) the Company has performed in all material respects all obligations required
to be performed by it under, is not in default or violation of, and has no
knowledge of any default or violation by any other party to, each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code has received an opinion or
determination letter from the Internal Revenue Service that it is so qualified
or has remaining a period of time to obtain such a letter from the IRS, and no
event has occurred since the date of such determination that could reasonably be
expected to result in the revocation of, or materially adversely affect, such
qualification; (iii) no non-exempt "prohibited transaction," within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA, has occurred with
respect to any Company Employee Plan; (iv) there are no actions, suits or claims
pending, or, to the knowledge of the Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan (other than currently outstanding stock options) can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent, the Company or any of
its ERISA Affiliates (other than expenses typically incurred in a termination
event); (vi) there are no audits, inquiries or proceedings pending or, to the
knowledge of the Company, threatened by the IRS or DOL with respect to any
Company Employee Plan; (vii) neither the Company nor any ERISA Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan; and
(viii) all contributions due from Company or any Affiliate (including employee
contributions withheld from pay) with respect to any of Company Employee Plans
have been made as required under ERISA or have been accrued on the Company
Balance Sheet, all tax returns including annual reports (Form 5500) have been
timely filed.
(e) Pension Plans. Neither the Company nor any ERISA Affiliate of the
Company has now, nor has it ever, maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any ERISA
Affiliate of the Company contributed to or been requested to contribute to any
Multiemployer Plan, that would result in material liability to the Company.
(g) No Post-Employment Obligations. No Company Employee Plan provides,
or has any liability to provide, retiree health benefits to any person for any
reason, except as may be required by COBRA or other applicable statute, and the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
or any other person that such Employee(s) or other person would be provided with
retiree health benefits, except to the extent required by statute.
(h) Effect of Merger. The execution of this Agreement and the
Transaction Option Agreement and the consummation of the transactions
contemplated hereby and thereby will not
30
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting (other than full
vesting as a result of partial or full plan termination of a qualified plan),
distribution, increase in benefits or obligation to fund benefits with respect
to any Employee.
(i) Employment Matters. The Company and each of its subsidiaries is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees. There are no pending, or, to the Company's knowledge,
threatened material claims or actions against the Company under any worker's
compensation policy or long-term disability policy. To the Company's knowledge,
no Employee of the Company has materially violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such Employee is
bound due to such Employee being employed by the Company and disclosing to the
Company or using trade secrets or proprietary information of any other person or
entity.
(j) Labor. That (1) neither the Company nor any of its subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization; (2) to the
knowledge of the Company, neither the Company nor any of its subsidiaries is the
subject of any proceeding asserting that it or any subsidiary has committed an
unfair labor practice or seeking to compel it to bargain with any labor
organization as to wages or conditions of employment; (3) there is no strike,
work stoppage or other labor dispute involving it or any of its subsidiaries
pending or, to its knowledge, threatened; (4) no grievance is pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries; (5) to the knowledge of the Company, the Company and each
subsidiary is in compliance with all applicable laws (domestic and foreign),
agreements, contracts and policies relating to employment, employment practices,
wages, hours, and terms and conditions of employment except for failures so to
comply, if any, that would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company; (6) the Company has
paid in full to all employees of the Company and its subsidiaries all wages,
salaries, commissions, bonuses, benefits and other compensation due and payable
to such employees under any policy, practice, agreement, plan, program, statue
or other law; (7) the Company is not liable for any severance pay or other
payments to any employee or former employee arising from the termination of
employment under any benefit or severance policy, practice, agreement, plan, or
program of the Company, nor to the knowledge of the Company will the Company
have any liability which exists or arises, or may be deemed to exist or arise,
under any applicable law or otherwise, as a result of or in connection with the
transactions contemplated hereunder or as a result of the termination by the
Company of any persons employed by the Company or any of its subsidiaries on or
prior to the Effective Time; and (8) the Company is in compliance with its
obligations pursuant to the Worker Adjustment and Retraining Notification Act of
1988 ("WARN"), and all other employee notification and bargaining obligations
arising under any collective bargaining agreement, statute or otherwise.
31
(k) International Employee Plans. Each International Employee Plan has
been established, maintained and administered in material compliance with its
terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International Employee
Plan. No International Employee Plan has material unfunded liabilities that as
of the Effective Time, will not be offset by insurance or that are not fully
accrued on the Company Balance Sheet. Except as required by law, no condition
exists that would prevent the Company or Parent from terminating or amending any
International Employee Plan at any time for any reason in accordance with the
terms of each such International Employee Plan (other than expenses typically
incurred in a termination event).
SECTION 3.13 Certain Agreements. As of the date hereof, neither the Company nor
any of its subsidiaries is a party to or is bound by:
(a) Any employment or consulting agreement or commitment with any
officer, employee or member of the Company's Board of Directors, that,
individually or in the aggregate, is material to the Company, other than those
that are terminable by Company or any of its subsidiaries on no more than 30
days notice without liability or financial obligation, except to the extent
general principles of law may limit the Company's or any of its subsidiaries'
ability to terminate employees at will;
(b) Any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
Transaction Option 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 or the Transaction Option Agreement;
(c) Any material guaranty or any instrument evidencing indebtedness for
borrowed money by way of direct loan or sale of debt securities;
(d) Any material agreement, obligation or commitment containing
covenants purporting to limit or which effectively limit the Company's or any of
its subsidiaries' freedom to compete in any line of business or in any
geographic area or which would so limit the Company or the Surviving Corporation
or any of its subsidiaries after the Effective Time;
(e) Any agreement or commitment currently in force relating to the
disposition or acquisition by the Company or any of its subsidiaries after the
date of this Agreement of a material amount of assets or pursuant to which the
Company has any material ownership or participation interest in any corporation,
partnership, joint venture, strategic alliance or other business enterprise
other than the Company's subsidiaries; or
(f) Any agreement or commitment currently in force providing for capital
expenditures by the Company or its subsidiaries in excess of $100,000.
The agreements required to be disclosed in the Company Disclosure Schedule
pursuant to clauses (a) through (f) above or pursuant to Section 3.9 or that are
required to be filed with any
32
Company SEC Report ("Company Contracts") are valid and in full force and effect,
except to the extent that such invalidity would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect to the
Company. Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge, any other party thereto, is in breach, violation or default under,
and neither the Company nor any of its subsidiaries has received written notice
that it has breached, violated or defaulted, any of the terms or conditions of
any Company Contract in such a manner as would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 3.14 Brokers' and Finders' Fees. Except for fees payable to Xxxxxx
Brothers pursuant to an engagement letter a copy of which has been provided to
Parent, neither the Company nor any subsidiary has incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or the
Transaction Option Agreement or any transaction contemplated hereby or thereby.
SECTION 3.15 Insurance. Section 3.15 of the Company Disclosure Schedule sets
forth a list of the Company's and its subsidiaries policies of insurance and
bonds. There is no material claim pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies
have been paid and the Company and its subsidiaries are otherwise in compliance
in all material respects with the terms of such policies and bonds. To the
knowledge of the Company, there has been no threatened termination of, or
material premium increase with respect to, any of such material policies.
SECTION 3.16 Disclosure. Neither the Schedule 14D-9, nor any of the information
supplied or to be supplied by the Company or its subsidiaries or representatives
for inclusion or incorporation by reference in the Offer Documents will, at the
respective times any such documents or any amendments or supplements thereto are
filed with the SEC, are first published, sent or given to stockholders, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Schedule 14D-9 will comply as to form in all material respects
with the requirements of all applicable laws, including the Exchange Act and the
rules and regulations thereunder. No representations or warranty is made by the
Company with respect to statements made or incorporated by reference in any such
documents based on information supplied by Parent or Merger Sub specifically for
inclusion or incorporation by reference therein.
SECTION 3.17 Fairness Opinion. The Company has received the opinion of Xxxxxx
Brothers to the effect that, as of the date thereof, the Offer Consideration to
be received by the holders of Company Common Stock in the Offer and the Merger
Consideration to be received by the holders of Company Common Stock in the
Merger is fair from a financial point of view to such holders, a signed, true
and complete copy of which opinion has been delivered to Parent.
SECTION 3.18 Related Party Transactions. No director, officer, partner,
employee, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company or any of its subsidiaries (i) has
outstanding any indebtedness or other similar obligations to the
33
Company or any of its subsidiaries; (ii) to the knowledge of the Company, is a
participant in any transaction to which the Company or any of its subsidiaries
is a party or (iii) to the knowledge of the Company, is otherwise a party to any
contract, arrangement or understanding with the Company or any of its
subsidiaries. No officer of the Company owns any direct or indirect interest of
any kind in, or is a director, officer, employee, partner, affiliate or
associate of, or consultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any person or entity
which is (1) a competitor, supplier, customer, distributor, lessor, tenant,
creditor or debtor of the Company or any of its subsidiaries, or (2) is engaged
in a business related to the business of the Company or any of its subsidiaries.
SECTION 3.19 Joint Ventures; Partnerships and Similar Arrangements. The Company
has no ownership or partnership interests in and no other economic rights to any
joint venture, partnership or similar arrangement and is not a party to any
agreement relating to a joint venture, partnership or similar arrangement. There
are no agreements, orally or in writing, obligating the Company to discuss,
consider or form any joint venture, partnership or similar arrangement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
SECTION 4.1 Organization, Standing and Power. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the requisite power and
authority to carry on its business as now being conducted, and is duly qualified
or licensed to business and is in good standing in each jurisdiction (domestic
or foreign) in which the nature of its business or the ownership or leasing of
its properties, makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not be
reasonably expected to have; individually or in the aggregate, a Material
Adverse Effect on Parent. Parent and Merger Sub have heretofore made available
to the Company complete and correct copies of their respective Certificates of
Incorporation and Bylaws, and each such instrument is in full force and effect.
SECTION 4.2 Authority; Non-Contravention.
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement, the Stockholders Agreement and the
Transaction Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement, the
Stockholders Agreement and the Transaction Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Merger Sub. This
Agreement, the Stockholders Agreement and the Transaction Option Agreement have
been duly executed and delivered by each of Parent and Merger Sub and, assuming
the due execution and delivery by the Company, constitute the valid and binding
obligations of Parent and Merger Sub enforceable in accordance with their terms,
except as enforceability may be limited by
34
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity. There is no vote of the holders of any class
or series of the Company's securities necessary to approve this Agreement, the
Stockholders Agreement or the Transaction Option Agreement.
(b) The execution and delivery of this Agreement, the Stockholders
Agreement and the Transaction Option Agreement by each of Parent and Merger Sub
do not, and the performance of this Agreement, the Stockholders Agreement and
the Transaction Option Agreement by each of Parent and Merger Sub will not
result in any violation pursuant to any provision of the respective Articles or
Certificates of Incorporation or Bylaws of Parent or Merger Sub or, except as to
which requisite waivers or consents have been obtained prior to the date hereof
and assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in paragraph (c) of this Section 4.2 are duly and
timely obtained or made and, if required, the Company Stockholder Approval has
been obtained, result in any violation of any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation, instrument,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Merger Sub or their
respective properties or assets, which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Parent.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, notice to, or permit from any Governmental Entity,
is required by or with respect to Parent or Merger Sub in connection with the
execution and delivery of this Agreement, the Stockholders Agreement and the
Transaction Option Agreement by each of Parent and Merger Sub or the
consummation by each of Parent or Merger Sub of the transactions contemplated
hereby or thereby, except for: (A) filings under the HSR Act; (B) the filing
with the SEC of (x) the Schedule TO in connection with the commencement and
consummation of the Offer and (y) such reports under and such other compliance
with the Exchange Act and the rules and regulations thereunder, as may be
required in connection with this Agreement, the Stockholders Agreement and the
Transaction Option Agreement and the transactions contemplated hereby and
thereby; (C) the notice to and mailing of the Schedule TO to the NASD pursuant
to Rule 14d-3 under the Exchange Act, (D) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware; and (E) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover laws.
SECTION 4.3 Information Supplied. Neither the Schedule TO, the Offer Documents,
nor any of the information supplied or to be supplied by Parent or Merger Sub
for inclusion or incorporation by reference in the Schedule 14D-9 will, at the
respective times any such documents or any amendments or supplements thereto are
filed with the SEC, are first published, sent or given to stockholders, and at
any time any of them are amended or supplemented, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
35
circumstances under which they are made, not misleading, nor will the Proxy
Statement, at the date it is first mailed to the Company's stockholders or at
the time of the Company Stockholders Meeting (as defined in Section 6.1),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent or Merger Sub, or with respect to information supplied by Parent or
Merger Sub for inclusion in the Schedule TO, the Offer Documents, the Schedule
14D-9 or the Proxy Statement, shall occur which is required to be described in
an amendment of, or a supplement to, such documents, Parent shall promptly
notify the Company and, in the case of any of the Schedule TO, the Offer
Documents or the Proxy Statement, promptly take any such required action. The
Schedule TO, the Offer Documents and the Proxy Statement will comply as to form
in all material respects with the requirements of all applicable laws, including
the Exchange Act and the rules and regulations thereunder. No representations or
warranty is made by Parent or Merger Sub with respect to statements made or
incorporated by reference in any such documents based on information supplied by
the Company specifically for inclusion or incorporation by reference therein.
SECTION 4.4 Board Recommendation. The Boards of Directors of the Parent and
Merger Sub at meetings duly called and held, has by the unanimous vote of their
directors determined that each of the Offer and the Merger is fair to and in the
best interests of Parent and Merger Sub and has approved the same.
SECTION 4.5 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxx
Xxxxx, Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or the Transaction Option Agreement or
any transaction contemplated hereby or thereby.
SECTION 4.6 Funds Available. Parent has, and at all times from the date of this
Agreement through the expiration of the Offer and the Effective Time will have,
and will make available to Merger Sub, all funds necessary for the acquisition
of all Shares pursuant to the Offer and the Merger.
SECTION 4.7 SEC Filings; Parent Financial Statements. Since September 30, 2000,
there has not been with respect to Parent any condition, event or occurrence
which, individually or in the aggregate, would reasonably be expected to prevent
or materially delay the ability of Parent or Merger Sub to consummate the
transactions contemplated by this Agreement, the Stockholders Agreement and the
Transaction Option Agreement or perform their obligations hereunder or
thereunder.
SECTION 4.8 Litigation. There are no claims, suits, actions, arbitrations,
investigations or proceedings (or any basis therefor) pending or, to the
knowledge of Parent, threatened against, relating to or affecting Parent, any of
its subsidiaries, any officer, director or employee of Parent or any of its
subsidiaries or any person for whom Parent or any subsidiary may be liable or
any of their respective properties, before any Governmental Entity or any
arbitrator that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement, the Stockholders Agreement or the Transaction
Option Agreement or prevent or delay the ability of the parties hereto to
consummate the transactions contemplated by this Agreement, the Stockholders
Agreement or the Transaction Option Agreement or for Parent or Merger Sub to
perform its obligations hereunder or thereunder.
36
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
SECTION 5.1 Conduct of Business by the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Appointment Time, the Company and each of
its subsidiaries shall, except to the extent that Parent shall otherwise consent
in writing, carry on its business in the ordinary course consistent with past
practice and in compliance in all material respects with all applicable laws and
regulations, pay its debts and Taxes when due subject to good faith disputes
over such debts or Taxes, pay or perform other material obligations when due,
and use its reasonable best efforts to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees and (iii) preserve its relationships with customers, suppliers,
licensors, licensees and others with which it has business dealings. In
addition, during that period the Company will promptly notify Parent of any
material event involving its business or operations consistent with the
agreements contained herein.
In addition, except as contemplated or permitted by the terms of this
Agreement and the Transaction Option Agreement, and except as contemplated by
this Agreement or the Transaction Option Agreement, and except as set forth in
Section 5.1 of the Company Disclosure Schedule, without the prior written
consent of Parent during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Appointment Time, the Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, reprice options granted
under any employee, consultant, director or other stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any director, officer or
employee except pursuant to written agreements in effect, or policies existing,
on the date hereof (or as required by applicable law), copies of which have been
provided to Parent, or adopt any new severance plan;
(c) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any Company Intellectual Property
Rights, or transfer or license to any person or entity, any Company Intellectual
Property Rights, other than non-exclusive licenses, distribution or other
similar agreements entered into in the ordinary course of business consistent
with past practice; provided that any such license (even if entered into in the
ordinary course consistent with past practice) that has a value of $500,000 or
more shall require the written consent of Parent;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock of the Company or split, combine or reclassify any capital
stock of the Company or issue or authorize
37
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock of the Company;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of outstanding Company Options, and (ii) pursuant to grants of Company
Options to newly hired employees in the ordinary course of business consistent
with past practice, and not to exceed in the aggregate pursuant to this clause
(ii) 75,000 shares of Company Common Stock, during the first 60 days following
the date of this Agreement, and increasing by 25,000 shares for each 30 day
period thereafter, provided that such Company Options provide for standard
vesting over a four-year period (one (1) year cliff vesting, with quarterly
vesting thereafter);
(g) Cause, permit or propose any amendments to the Company Charter
Documents;
(h) Acquire or agree to acquire by merging or consolidating with, or, by
purchasing any equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company or enter into any material joint ventures, strategic
relationships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of the Company,
enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing, other than in the ordinary course of business consistent
with past practice;
(k) Except as required to comply with any Legal Requirement, adopt or
amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract or collective bargaining
agreement, pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants other than with respect to employees and consultants (other than
officers) in the
38
ordinary course of business consistent with past practice, or change any
management policies or procedures;
(1) Make any material capital expenditures, except in accordance with
the current Company annual budget and plan, as previously disclosed to Parent;
(m) Modify, amend or terminate any Company Contract to which the Company
or any subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder other than in the ordinary course of business
consistent with past practice;
(n) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
(o) Change in any term from the standard forms of licensing agreement
attached to Section 3.6(b)(viii) of the Company Disclosure Schedule in
connection with any agreement for the license of Company Intellectual Property
Rights to a third party, including through discounts or similar practices,
lengthening the term of any license, changing the basis of pricing or the
modification of any indemnification provisions or any change in any agreement
for the license of the Company's Intellectual Property Rights if such license
has a value of $500,000 or more;
(p) Pay, discharge or satisfy any claims (including claims of
stockholders), indebtedness, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction of liabilities, indebtedness or obligations in the
ordinary course of business consistent with past practice or in accordance with
their terms as in effect on the date hereof or waive, release, grant, or
transfer any rights of material value or modify or change in any material
respect any existing license, lease, contract or other document;
(q) Adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(r) Enter into or amend any collective bargaining agreement;
(s) Settle or compromise any litigation (whether or not commenced prior
to the date of this Agreement), other than settlements or compromises of
litigation that do not provide for injunctive or similar relief and where the
amount paid (after giving effect to insurance proceeds actually received) in
settlement or compromise does not exceed $100,000, provided that the aggregate
amount paid in connection with the settlement or compromise of all such
litigation matters shall not exceed $500,000;
(t) Take any action that would materially delay the consummation of the
transactions contemplated hereby;
(u) Other than in the ordinary course of business and consistent with
past practice, make or change any material Tax election, amend any Return or
take any other action (or fail to
39
take any other action) in respect of Taxes, in each case, if such action (or
failure to take action) would reasonably be expected to have the effect of
increasing the Tax liability of Parent or any of its affiliates (including the
Company and its subsidiaries) for periods ending on or after the Closing Date;
or
(v) Enter into any joint venture, partnership or other similar
arrangement;
(w) Agree in writing or otherwise to take any of the actions described
in Section 5.1 (a) through (v) above.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of the Proxy Statement; Company Stockholders Meeting;
Merger without a Company Stockholders Meeting.
(a) As soon as practicable following the acceptance for payment of and
payment for shares of Company Common Stock by Merger Sub in the Offer, the
Company and Parent shall prepare and file with the SEC a proxy statement (if
required by applicable law) in definitive form relating to a meeting of the
holders of Company Common Stock to approve the Merger (such proxy statement as
amended or supplemented from time to time being hereinafter referred to as the
"Proxy Statement"). The Company shall use its reasonable efforts to respond to
all SEC comments with respect to the Proxy Statement and to cause the Proxy
Statement to be mailed to the Company's stockholders at the earliest practicable
date.
(b) The Company will, as soon as practicable following the acceptance
for payment of and payment for shares of Company Common Stock by Merger Sub in
the Offer, duly call, give notice of, convene and hold a meeting of the
stockholders of the Company (the "Company Stockholders Meeting") for the purpose
of approving this Agreement and the transactions contemplated hereby. At the
Company Stockholders Meeting, Parent shall cause all of the shares of Company
Common Stock then owned by Parent and Merger Sub and any of their subsidiaries
or affiliates to be voted in favor of the Merger. Parent and Merger Sub will,
and will direct the directors of the Company designated by Parent and Merger Sub
to, take all actions and do all things necessary or advisable to cause the
Merger to occur as promptly as practicable pursuant to the terms of this
Agreement.
(c) Notwithstanding the foregoing clauses (a) and (b), in the event that
Parent or any other subsidiary of Parent shall acquire at least 90% of the
outstanding shares of Company Common Stock in the Offer, the parties hereto
agree, at the request of Merger Sub, to take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after the
expiration of the Offer, without a meeting of stockholders of the Company, in
accordance with Section 3-106 of the MGCL.
(d) Parent shall (i) cause Merger Sub promptly to submit this Agreement
and the Transaction Option Agreement and the transactions contemplated hereby
and thereby for
40
approval and adoption by Parent by written consent of sole stockholder; (ii)
cause the shares of capital stock of Merger Sub to be voted for adoption and
approval of this Agreement and the Transaction Option Agreement and the Merger
and the other transactions contemplated hereby and thereby; and (iii) cause to
be taken all additional actions necessary for Merger Sub to adopt and approve
this Agreement and the Transaction Option Agreement and the transactions
contemplated hereby and thereby.
SECTION 6.2 Antitrust Filings; Other Filings.
(a) Promptly but in no event more than five business days after the date
of this Agreement, Parent will prepare and file (i) with the United States
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice Notification and Report Forms relating to the transactions
contemplated herein as required by the HSR Act, as well as comparable pre-merger
notification forms required by the merger notification or control laws and
regulations of any applicable jurisdiction, as agreed to by the parties (the
"Antitrust Filings") and (ii) any other filings required to be filed by it under
the Exchange Act, the Securities Act or any other federal, state or foreign laws
relating to the Merger and the transactions contemplated by this Agreement (the
"Other Filings"). The Company shall promptly supply Parent with any information
which may be required in order to effectuate any filings pursuant to this
Section 6.2.
(b) Parent will notify the Company promptly upon the receipt of any
comments from the SEC or its staff or any other government officials in
connection with any filing made pursuant hereto and of any request by the SEC or
its staff or any other government officials for amendments or supplements to the
Offer Documents, Proxy Statement or any Antitrust Filings or Other Filings or
for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Offer Documents, Proxy Statement, the Merger or any
Antitrust Filing or Other Filing. The Parent will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under
Section 6.1 and this Section 6.2 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Company Proxy Statement or any Antitrust Filing
or Other Filing, Parent will promptly inform the Company of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to stockholders of the Company such amendment or supplement.
(c) Parent agrees to file a registration statement on Form S-8 for the
shares of Parent Common Stock issuable with respect to assumed Company Options,
as described in Section 2.9 of this Agreement, within 30 days after the
Effective Time and shall maintain the effectiveness of such registration
statement thereafter for so long as any of such options or other rights remain
outstanding.
SECTION 6.3 No Solicitation.
(a) Subject to Section 6.3(b), from the date hereof until the Effective
Time or termination of this Agreement in accordance with Article VIII hereof,
whichever is earlier,
41
neither the Company nor any of its subsidiaries shall, nor shall the Company or
any of its subsidiaries authorize or permit any of its or their officers,
directors, employees, investment bankers, attorneys, accountants, consultants or
other agents or advisors to, directly or indirectly, (i) solicit, initiate or
knowingly take any action to facilitate or encourage the submission or
announcement of any Acquisition Proposal (as defined below), (ii) enter into or
participate in any discussions or negotiations with, furnish any information
relating to the Company or any of its subsidiaries or afford access to the
business, properties, assets, books or records of the Company or any of its
subsidiaries to, otherwise cooperate in any way with, or knowingly assist,
participate in, facilitate or encourage any effort by any third party to do or
seek to make, or that has made an Acquisition Proposal, (iii) approve, endorse
or recommend any Acquisition Proposal or (iv) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Proposal.
(b) Notwithstanding the foregoing, the Board of Directors of the
Company, directly or indirectly through advisors, agents or other
intermediaries, may (i) engage in negotiations or discussions with any third
party that, subject to the Company's compliance with Section 6.3(a), has made
(and not withdrawn) a bona fide Acquisition Proposal that the Board of Directors
of the Company reasonably determines (after consultation with the Company's
financial advisor) constitutes, or in the case of a bona fide Acquisition
Proposal that provides that the consideration being offered to the Company's
shareholders is in the form of stock, could constitute, a Superior Proposal,
(ii) furnish to such third party nonpublic information relating to the Company
or any of its subsidiaries pursuant to a confidentiality agreement with terms no
less favorable to the Company than those contained in the Confidentiality
Agreement, (iii) take and disclose to its stockholders a position contemplated
by Rules 14d-9 and 14e-2(a) under the Exchange Act or otherwise make disclosure
to them, (iv) following receipt of such an Acquisition Proposal, withdraw,
modify in a manner adverse to Parent, or fail to make its Recommendations,
and/or (v) take any action ordered to be taken by the Company by any court of
competent jurisdiction if, in each case (1) neither the Company nor any
representative of Company and its subsidiaries shall have violated any of the
restrictions set forth in this Section 6.3, (2) the Board of Directors of the
Company determines in good faith (after consultation with its outside legal
counsel) that it is necessary for the Board of Directors to take such action in
order to satisfy its fiduciary obligations to the Company's stockholders under
applicable law, (3) prior to furnishing any such nonpublic information to, or
entering into any such discussions with, such person or group, the Company gives
Parent written notice of the identity of such person or group and all of the
material terms and conditions of such Acquisition Proposal and of the Company's
intention to furnish nonpublic information to, or enter into discussions with,
such person or group, and the Company receives from such person or group an
executed confidentiality agreement containing terms at least as restrictive with
regard to the Company's confidential information as the Confidentiality
Agreement (as defined in Section 6.6), (4) gives Parent prompt advance notice of
its intent to furnish such nonpublic information or enter into such discussions
(which notice shall in no event be given less than one (1) business day prior to
furnishing such information or entering into such discussions), and (5)
contemporaneously with furnishing any such nonpublic information to such person
or group, the Company furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by the
Company to Parent). The Company and its subsidiaries will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect
42
to any Acquisition Proposal, and shall use its reasonable best efforts to cause
any such parties in possession of confidential information about the Company
that was furnished by or on behalf of the Company to return or destroy all such
information in the possession of any such party or in the possession of any
agent or advisor of any such party. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to be a
breach of this Section 6.3 by the Company.
(c) In addition to the obligations of the Company set forth in paragraph
(a) of this Section 6.3, the Company as promptly as reasonably practicable shall
advise Parent orally and in writing of any Acquisition Proposal, or any inquiry
with respect to or which the Company reasonably should believe would lead to any
Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal or inquiry, and the identity of the person or group making any such
Acquisition Proposal or inquiry. The Company will keep Parent informed as
promptly as reasonably practicable of any amendments of any such Acquisition
Proposal or inquiry.
For purpose of this Agreement, "Superior Proposal" means any bona fide,
unsolicited written Acquisition Proposal for at least a majority of the
outstanding shares of Company Common Stock on terms that the Board of Directors
of Company determines in good faith by a majority vote, after consultation with
its financial advisor of nationally recognized reputation and taking into
account all the terms and conditions of the Acquisition Proposal, are more
favorable to the Company's stockholders than as provided hereunder.
For purposes of this Agreement, "Acquisition Proposal" shall mean any
offer or proposal by a third party, other than Parent, Merger Sub or any
affiliate thereof, relating to: (A) any acquisition or purchase from the Company
by any person or "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a 15% interest in the
outstanding voting securities of the Company or any of its subsidiaries or any
tender offer or exchange offer that if consummated would result in any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning 15% or more of the outstanding
voting securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction would hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition, or disposition of more than 15% of
the consolidated assets of the Company; (C) any liquidation or dissolution of
the Company or (D) any other transaction the consummation of which would or
could reasonably be expected to impede, interfere with, prevent or materially
delay the consummation of the transactions contemplated hereby.
SECTION 6.4 Obligations of Merger Sub. Parent will take all reasonable action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Offer and the Merger on the terms and subject to the
conditions set forth in this Agreement.
43
SECTION 6.5 Voting of Shares. Parent and Merger Sub agree to vote all Shares
acquired in the Offer or otherwise beneficially owned by them or any of their
subsidiaries in favor of approval and adoption of this Agreement and the Merger
at the Company Stockholders Meeting or pursuant to Section 3-106 of the MGCL, on
the terms and subject to the conditions set forth in this Agreement.
SECTION 6.6 Confidentiality; Access to Information.
(a) The parties acknowledge that the Company and Parent have previously
executed the Mutual Non-Disclosure Agreement, dated as of March 1, 2001, between
the Company and Parent (the "Confidentiality Agreement") which Confidentiality
Agreement will continue in full force and effect in accordance with its terms.
(b) The Company will afford Parent and its accountants, counsel and
other representatives reasonable access during normal business hours to the
properties, books, records and personnel of the Company during the period prior
to the Effective Time to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of the Company, as Parent may reasonably request,
including without limitation copies of working papers of accountants, contracts,
and other corporate documents, and access to other parties with whom it has
business dealings. Parent will afford the Company and its accountants, counsel
and other representatives reasonable access during normal business hours to the
properties, books, records and personnel of Parent during the period prior to
the Effective Time to obtain all information concerning the business, as Company
may reasonably request No information or knowledge obtained in any investigation
pursuant to this Section will affect or be deemed to modify any representation
or warranty contained herein or the conditions to the obligations of the parties
to consummate the Offer and the Merger.
SECTION 6.7 Public Disclosure. Parent and the Company will consult with each
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Offer, Merger, this
Agreement, the Transaction Option Agreement or an Acquisition Proposal and will
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange; provided, however, that this Section 6.7 shall
terminate in the event the Board of Directors of the Company shall withdraw its
Recommendations. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
SECTION 6.8 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and the Transaction Option Agreement, each of the parties agrees to
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions
44
contemplated by this Agreement and the Transaction Option Agreement, including
using reasonable efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions precedent set forth in the
Annex A and Article VII to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the delivery a notice with respect to the
transactions contemplated by this Agreement to each holder of a Company Warrant
pursuant to the applicable notice provision of such Company Warrant and in
accordance with the terms thereof, (v) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the Transaction Option Agreement or the
consummation of the transactions contemplated hereby and thereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (vi) the execution or delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to carry out fully the purposes of, this Agreement.
Notwithstanding anything in this Agreement to the contrary, except pursuant to
the Transaction Option Agreement, neither Parent nor any of its affiliates shall
be under any obligation to make proposals, execute or carry out agreements or
submit to orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of Parent, any of its affiliates or the Company or its subsidiaries or
the holding separate of the shares of Company Common Stock (or shares of stock
of the Surviving Corporation) or imposing or seeking to impose any limitation on
the ability of Parent or any of its subsidiaries or affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation), in each case, where such action would reasonably be
expected to have a Material Adverse Effect on Parent.
(b) Each of the Company and Parent will give prompt notice to the other
of (i) 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 hereby, (ii) any notice or other communication from any
Governmental Entity in connection with the transactions contemplated hereby,
(iii) any litigation relating to, involving or otherwise affecting Company,
Parent or their respective subsidiaries that relates to the consummation of the
transactions contemplated hereby. The Company shall give prompt notice to Parent
of any representation or warranty made by it contained in this Agreement or the
Transaction Option Agreement becoming untrue or inaccurate, or any failure of
the Company to comply with or satisfy in any material
45
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or the Transaction Option Agreement, in each case, such
that the conditions set forth in the Annex A or Article VII would not be
satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement or the
Transaction Option Agreement. Parent shall give prompt notice to the Company of
any representation or warranty made by it or Merger Sub contained in this
Agreement or the Transaction Option Agreement becoming untrue or inaccurate, or
any failure of Parent or Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or the Transaction Option Agreement, in each case, such
that the conditions set forth in the Annex A or Article VII would not be
satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement or the
Transaction Option Agreement.
SECTION 6.9 Indemnification.
(a) For six (6) years after the Effective Time, Parent and the Surviving
Corporation will indemnify and hold harmless (including advancement of expenses)
the current and former directors and officers of the Company in respect of acts
or omissions occurring on or prior to the Effective Time to the extent provided
in the Company Charter Documents in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law. Parent will cause to be maintained for a period of
not less than six (6) years from the Effective Time a "tail" directors' and
officers' insurance and indemnification policy for the Company's current and
former directors' and officers' to the extent that it provides coverage for
events occurring prior to the Effective Time (the "D&O Insurance") for all
persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium therefor would not be in excess of 150%
of the amount per annum the Company paid in its last full fiscal year, which
amount has been disclosed to Parent, on terms and conditions substantially
similar to the existing D&O Insurance. If the existing D&O Insurance cannot be
maintained, expires or is terminated or canceled during such six-year period,
Parent will use reasonable efforts to cause to be obtained as much D&O Insurance
as can be obtained for the remainder of such period for an annualized premium
not in excess of 150% of the amount per annum the Company paid in its last full
fiscal year, on terms and conditions substantially similar to the existing D&O
Insurance. It is understood that, unless made by a court, any determination as
to whether a person seeking indemnification pursuant to this Section 6.9 has met
any applicable legal standard for indemnification shall be made by a committee
consisting of at least two of Parent's independent directors.
(b) In the event Parent of the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 6.9, proper
provision shall be made so that the successors and assigns of Parent and the
Surviving Corporation assume the obligations set forth in this Section 6.9;
provided that, in the case of any such assignment by Parent or the Surviving
Corporation, Parent and the Surviving Corporation shall remain liable for all of
their respective obligations under this Agreement. This Section 6.9 shall
survive the Effective Time, is intended to benefit the current and former
directors and officers of the Company, and shall be enforceable by any of them.
SECTION 6.10 Takeover Statutes. If any takeover statute is or may become
applicable to the Offer or Merger or the other transactions contemplated by this
Agreement or the Transaction Option Agreement, each of Parent and the Company
and their respective Boards of Directors
46
shall grant such approvals and take such lawful actions as are necessary to
ensure that such transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and the Transaction Option Agreement
and otherwise act to eliminate or minimize the effects of such statute and any
regulations promulgated thereunder on such transactions. The Company agrees that
on and after the date hereof, it will not adopt any "poison pill" rights plan or
any similar antitakeover plan or take any other action that would impede or
prevent completion of the Offer, the Merger, this Agreement or the Transaction
Option Agreement.
SECTION 6.11 Certain Employee Benefits.
(a) As soon as practicable after the execution of this Agreement, the
Company and Parent shall confer and work together in good faith to agree upon
mutually acceptable employee benefit and compensation arrangements. Following
the Effective Time, Parent or its affiliates shall either (i) continue (or cause
the Surviving Corporation to continue) to maintain the Company Employee Plans
(other than the Company's 401(k) Plan) on substantially the same terms in the
aggregate as in effect immediately prior to the Effective Time, or (ii) arrange
for each participant in the Company Employee Plans ("Company Participants") to
participate in any similar plans of the Parent ("Parent Plans") on terms no less
favorable than those offered to similarly situated employees of Parent or its
affiliates, or (iii) arrange for a combination of clauses (i) and (ii); provided
that Parent may terminate or change any such benefits at any time. Each Company
Participant who continues to be employed by the Parent or its affiliates
immediately following the Effective Time shall, to the extent permitted by law
and applicable tax qualification requirements, and subject to any generally
applicable break in service or similar rule, receive credit for purposes of
eligibility to participate and vest under the Parent Plans, including vacation
accruals, for years of service with the Company. To the extent consistent with
law, applicable tax qualification requirements and the applicable insurer's
requirements and providing that Parent or affiliate can arrange such terms with
the applicable insurer without a significant increase in the Parent or
affiliates' cost of providing such benefit coverage, Parent or its affiliates
shall cause any and all pre-existing condition limitations, eligibility waiting
periods and evidence of insurability requirements under any group health plans
to be waived with respect to such Company Participants and their eligible
dependents and shall provide them with credit for any co-payments and
deductibles prior to the Effective Time for purposes of satisfying any
applicable deductible, out-of-pocket, or similar requirements under any Parent
Plans in which they are eligible to participate immediately after the Effective
Time. Notwithstanding any of the foregoing to the contrary, none of the
provisions contained herein shall operate to duplicate any benefit provided to
any employee of the Company or the funding of and such benefit.
(b) The Company's Board of Directors shall pass and not rescind
resolutions satisfactory to Parent's counsel effectively terminating Company's
401(k) Plan effective immediately prior to the Appointment Time.
(c) Parent agrees that with respect to any employee of the Company
immediately prior to the Appointment Time whose employment with the Company, the
Surviving Corporation, Parent or any of its subsidiaries is terminated other
than for "cause" (as defined in the Guidelines (as defined below)) within six
(6) months following the Effective Time, Parent will provide severance benefits
to such employee in accordance with Parent's Guidelines for
47
Terminations That Are Not For Cause Within Six Months Following An Acquisition
(the "Guidelines"), a copy of which is attached to Section 6.11(c) of the
Company Disclosure Schedule; provided, however, that such Guidelines shall not
apply to any person who is an employee of the Company prior to the Appointment
Time who has executed an employment agreement with Parent.
SECTION 6.12 Employment, Noncompetition, and Other Agreements. The Company
agrees to cooperate with Parent in its efforts to negotiate employment,
noncompetition or other agreements with key employees identified by Parent
between the date hereof and the Effective Time.
SECTION 6.13 Limitation on the Company's Legal and Investment Banking Fees. The
Company covenants and agrees that (a) all legal fees (including the fees of
Fenwick & West LLP) incurred or to be incurred by the Company in connection with
the transactions contemplated by this Agreement and the Transaction Option
Agreement (excluding any fees arising as a result of any challenge to this
Agreement or the Transaction Option Agreement) shall be based upon the Legal
Representation Agreement between the Company and Fenwick & West LLP dated July
31, 2000 as provided to Parent, which shall not be amended without Parent's
written consent, not to be unreasonably withheld, and (b) the investment banking
and/or consulting fees (including, without limitation, the fees of Xxxxxx
Brothers) incurred or to be incurred by the Company in connection with the
transactions contemplated by this Agreement and the Transaction Option Agreement
shall be based upon the engagement letter between the Company and Xxxxxx
Brothers dated January 22, 2001 as provided to Parent, which shall not be
amended without Parent's written consent, not to be unreasonably withheld.
SECTION 6.14 Transfer Tax. The Company, Merger Sub and Parent shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement
(together with any related interest, penalties or additions to tax, "Transfer
Taxes"). All Transfer Taxes shall be paid by the holders of the Company Common
Stock.
SECTION 6.15 Change of Control. Except as contemplated by Section 2.9, the
execution and delivery of this Agreement and the Transaction Option Agreement
and the consummation of the transactions contemplated hereby and thereby will
not (i) result in any payment (including severance, unemployment compensation,
tax gross-up, bonus or otherwise) becoming due to any current or former
director, employee or independent contractor of the Company or any of its
subsidiaries, from the Company or any of its subsidiaries under any Stock Plan,
Benefit Plan, agreement or otherwise, (ii) materially increase any benefits
otherwise payable under any Stock Plan, Benefit Plan, agreement or otherwise or
(iii) result in the acceleration of the time of payment, exercise or vesting of
any such benefits.
SECTION 6.16 Silicon Valley Bank. Prior to the Effective Time, all indebtedness
outstanding under any lines of credit, loans, credit facilities or otherwise
payable to Silicon Valley Bank, whether for principal or interest and whether or
not due, shall be paid, discharged and satisfied in
48
full and all agreements with Silicon Valley Bank relating to any such
indebtedness shall be terminated.
SECTION 6.17 Appointment of Director. In the sole discretion of the Board of
Directors of Parent, Parent may appoint Xxxxxx X. Xxxxx as a director of Parent,
provided that any such appointment shall be effective at or prior to the
Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1 Conditions to Obligations of Each Party to Effect the Merger. The
obligations of Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) if required by the MGCL, this Agreement and the Merger shall have been
approved and adopted by the stockholders of Company;
(b) Merger Sub shall have accepted for exchange and exchanged all of the
Shares tendered pursuant to the Offer; and
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the stockholders of Company):
(a) by mutual written agreement of Company and Parent; or
(b) by either the Company or Parent, if:
(i) the Offer shall have expired or been terminated in accordance
with the terms of this Agreement without Parent or Merger Sub having
accepted for exchange any Shares pursuant to the Offer, provided that
Parent and Merger Sub shall not be permitted to terminate this Agreement
pursuant to this Section 8.1(b)(i) if the Offer is terminated or expires
without Shares having been accepted for exchange as a result of a breach
by Parent or Merger Sub of this Agreement; or
(ii) the Offer has not been consummated on or before June 30, 2001
(the "End Date"); provided, however, that the right to terminate this
Agreement under this Section
49
8.1(b)(ii) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the principal cause of or
resulted in the failure of the Offer to have been consummated on or before
such date and such action or failure to act constitutes a material breach
of this Agreement; or
(iii) there shall be any applicable law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental body
having competent jurisdiction enjoining the Company or Parent from
consummating the Merger is entered and such judgment, injunction, judgment
or order shall have become final and nonappealable; or
(iv) any representation or warranty of the other party contained in
this Agreement or the Transaction Option Agreement (without giving effect
to any "Material Adverse Effect", "materiality" or similar qualifications
contained therein) shall be or have become inaccurate such that,
individually or in the aggregate, such inaccuracies would reasonably be
expected to have a Material Adverse Effect on such other party, or (B) the
other party fails to perform in any material respect any covenant
contained in this Agreement or the Transaction Option Agreement (without
giving effect to any "Material Adverse Effect", "materiality" or similar
qualifications contained therein); provided, however, that if such
inaccuracy or failure to perform is capable of being cured by such other
party within 30 days following receipt by the terminating party of notice
of such inaccuracy or failure to perform, the party wishing to terminate
this Agreement shall give such notice and may not terminate this Agreement
during such period, and if such inaccuracy or failure to perform is cured
within such period, no such termination shall be permitted; or
(c) by Parent if a Triggering Event shall have occurred.
For purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if, prior to the Appointment Time: (x) (i) the Board of Directors
of the Company or any committee thereof shall have approved or recommended to
the Company stockholders any Acquisition Proposal, (ii) the Board of Directors
of the Company or any committee thereof shall for any reason have withdrawn or
shall have amended or modified in a manner adverse to Parent its
Recommendations, or failed to reaffirm its Recommendations on or before the
second(2nd) business day following the date on which an Acquisition Proposal
shall have been made; (iii) the Company shall have failed to include the
Recommendations in the Offer Documents or the Schedule 14D-9; or (iv) a tender
or exchange offer relating to 15% or more of the Shares shall have been
commenced by a person unaffiliated with Parent and the Company shall not have
sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Securities Act, within five (5) business days after such tender or exchange
offer is first published, a statement disclosing that the Company recommends
rejection of such tender or exchange offer and (y) at the time of any such
approval, recommendation, withdrawal, modification, failure or tender or
exchange offer, (i) any representation or warranty of the Company or any
Stockholder made in the Stockholders Agreement shall be or have become
inaccurate, or (ii) any Stockholder shall have failed to perform any covenant
contained in the Stockholders Agreement, and such inaccuracy or failure,
individually or in the aggregate, would reasonably be expected to prevent or
materially
50
delay the ability of Parent or Merger Sub to consummate the transactions
contemplated by this Agreement and the Transaction Option Agreement.
The party desiring to terminate this Agreement pursuant to this Section
8.1 (other than pursuant to Section 8.1(a)) shall give notice of such
termination to the other party.
SECTION 8.2 Notice of Termination; Effect of Termination. Subject to 8.1(b)(iv),
any proper termination of this Agreement under Section 8.1 above will be
effective immediately upon the delivery of written notice of the terminating
party to the other parties hereto. In the event of the termination of this
Agreement under Section 8.1, this Agreement shall be of no further force or
effect without liability of any party (or any stockholder, director, officer,
employee, agent, consultant or representative of such party) to the other
parties hereto, except (i) as set forth in this Section 8.2, Section 8.3 and
Article IX, each of which shall survive the termination of this Agreement, and
(ii) that nothing herein shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties contained in the Confidentiality Agreement, all of
which obligations shall survive termination of this Agreement in accordance with
their terms. In the event that the Company gives Parent notice of an inaccuracy
or failure to perform such that this Agreement would be subject to termination
pursuant to Section 8.1(b)(iv), Parent shall cause Merger Sub to not consummate
the Offer until such inaccuracy or failure to perform is cured.
SECTION 8.3 Fees and Expenses. All fees and expenses incurred in connection with
this Agreement and the Transaction Option Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated.
SECTION 8.4 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent and the Company.
SECTION 8.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations and Warranties. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at
51
the Effective Time, and only the covenants that by their terms survive the
Effective Time shall survive the Effective Time.
SECTION 9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Citrix Systems, Inc.
0000 XX 0xx Xxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: 000-000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: 000-000-0000
(b) if to Company, to:
Sequoia Software Corporation
0000 XxXxx Xxxx
Xxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile No.: 000-000-0000
with a copy to:
Fenwick & West LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: 415-281-1350
SECTION 9.3 Interpretation; Certain Defined Terms.
(a) When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference
52
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge", "knows" or
words of similar import mean with respect to a party hereto, with respect to any
matter in question, that any of the executive officers of such party has actual
knowledge of such matter, after reasonable inquiry of such matter. For purposes
of this definition, the "executive officers" of Company shall be those person
listed on Section 9.3(b) of the Company Disclosure Schedule.
(c) For purposes of this Agreement, the terms "Material Adverse Change"
or "Material Adverse Effect" when used in connection with an entity means any
change, event, circumstance, occurrence or effect that either individually or in
the aggregate with all other such changes, effects, events and occurrences is
materially adverse to the business, properties, financial condition, assets,
including tangible assets, capitalization or results of operations of such
entity taken as a whole but shall exclude the effects of (i) any material
adverse change in the Company's results of operations for, or financial
condition in, any fiscal period prior to the Closing Date that is directly
attributable to a disruption in the conduct of the Company's business arising
from the transactions contemplated by this Agreement or the public announcement
thereof, (ii) changes in general economic conditions, or (iii) changes affecting
the industry generally in which the Company operates (provided that such changes
do not affect the Company in a substantially disproportionate manner).
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(e) For purposes of this Agreement, "subsidiary" of a specified entity
will be any corporation, partnership, limited liability company, joint venture
or other legal entity of which the specified entity (either alone or through or
together with any other subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
SECTION 9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
SECTION 9.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Transaction Option
Agreement, the Stockholders Agreement, the
53
Confidentiality Agreement, the Company Disclosure Schedule and Annex A (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the Confidentiality Agreement shall continue in full
force and effect until the Closing Date and shall survive any termination of
this Agreement; and (b) are not intended to confer upon any other person any
rights or remedies hereunder, other than the Continuing Directors, and except as
specifically provided in Section 6.9.
SECTION 9.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
SECTION 9.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, except that the provisions of
this Agreement which are mandatorily governed by Maryland law or Delaware law
shall be governed by, and construed in accordance with Maryland law or Delaware
law, as applicable.
SECTION 9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
SECTION 9.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Any purported assignment in
violation of this Section shall be void.
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SECTION 9.11 Waiver of Jury Trial. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
55
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
and Plan of Merger to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CITRIX SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Chief Financial Officer,
Treasurer, Senior Vice President,
Finance and Administration
and Assistant Secretary
SOUNDGARDEN ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: President and Chief Executive Officer
SEQUOIA SOFTWARE CORPORATION
By: /s/ Xxxxxxx X. Faint, Jr.
--------------------------------------
Name: Xxxxxxx X. Faint, Jr.
Title: Chief Executive Officer
56
ANNEX A
The capitalized terms used in this Annex A shall have the respective
meanings given to such terms in the Agreement and Plan of Merger, dated as of
March 20, 2001, among Parent, Merger Sub and the Company (the "Merger
Agreement") to which this Annex A is attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, subject to the terms of
this Agreement, Merger Sub shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Merger Sub's obligation to pay for
or return tendered Shares promptly after expiration or termination of the
Offer), to pay for any Shares tendered, and may postpone the acceptance for
payment if, by the expiration of the Offer (as it may be extended in accordance
with Section 1.1 of this Agreement) (i) the Minimum Condition shall not have
been satisfied; (ii) any applicable waiting periods under the HSR Act shall not
have expired or been terminated prior to the expiration of the Offer; or (iii)
at any time on or after the date of the Merger Agreement and before acceptance
for payment of, or payment for, such Shares any of the following events shall
have occurred and be continuing:
(A) There shall be instituted or pending any action, proceeding or claim
brought by a Governmental Entity by or before any court or governmental,
regulatory or administrative agency, authority or tribunal, domestic, foreign or
supranational (other than actions, proceedings, applications or counterclaims
filed or initiated by Merger Sub), which (i) seeks to challenge the acquisition
by Merger Sub of the Shares, restrain, prohibit or delay the making or
consummation of the Offer or the Merger, prohibit the performance of any of the
contracts or other agreements entered into by Merger Sub or any of its
affiliates in connection with the acquisition of the Company or the Shares, or
obtain any material damages in connection with any of the foregoing, (ii) seeks
to make the purchase of or payment for, some or all of the Shares pursuant to
the Offer, the Merger or otherwise, illegal, (iii) seeks to impose or is
reasonably likely to result in material limitations on the ability of Merger Sub
or any of its affiliates to exercise full rights of ownership of the Shares
purchased by them, including, without limitation, the right to vote the Shares
purchased by them on all matters properly presented to the stockholders of the
Company, or the right to vote any shares of capital stock of any subsidiary
directly or indirectly owned by the Company, (iv) is reasonably likely to result
in a material diminution in the benefits expected to be derived by Parent and
Merger Sub as a result of the transactions contemplated by the Offer, including
the Merger, or (vi) seeks to impose voting, procedural, price or other
requirements in addition to those under MGCL, DGCL and federal securities laws
(each as in effect on the date of the Offer to Purchase) or any material
condition to the Offer;
(B) There shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger by any domestic, foreign or
supranational government or any governmental, administrative or regulatory
authority or agency or by any court or tribunal, domestic, foreign or
supranational, any statute, rule, regulation, judgment, decree, order or
injunction that, directly or indirectly, would be reasonably likely to result in
any of the consequences referred to in clauses (i) through (vi) of paragraph (A)
above;
57
(C) There shall have occurred any general suspension of trading in, or
limitation on prices for, securities on the Nasdaq National Market;
(D) The representations and warranties of the Company contained in the
Merger Agreement or the Transaction Option Agreement (without giving effect to
any "Material Adverse Effect", "materiality" or similar qualifications contained
therein) shall not be true and correct as of the date of the expiration of the
Offer as though made on and as of such date except (1) for changes specifically
permitted by the Merger Agreement or the Transaction Option Agreement, (2) that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date and (3) for such
failures to be true and correct as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company;
(E) The obligations of the Company contained in the Merger Agreement or
the Transaction Option Agreement (without giving effect to any "Material Adverse
Effect", "materiality" or similar qualifications contained therein) shall not
have been performed or complied with in all material respects by the Company;
(F) The Merger Agreement shall have been terminated in accordance with its
terms; or
(G) The Company shall have entered into, or shall have publicly announced
its intention to enter into, an agreement or agreement in principle with respect
to any Acquisition Proposal (provided that a change in the Recommendations of
the Board of Directors of the Company shall not, in and of itself, constitute
the announcement of, or entry into, such an agreement).
The foregoing conditions are for the sole benefit of Merger Sub and its
affiliates and may be asserted by Merger Sub regardless of the circumstances
(other than any action or inaction by Parent, Merger Sub or any of their
affiliates) giving rise to any such condition or may be waived by Merger Sub, in
whole or in part, from time to time in its sole discretion, except as otherwise
provided in the Agreement. The failure by Merger Sub at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right and may be asserted at any time and
from time to time.
58