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AGREEMENT AND PLAN OF MERGER
AND
REORGANIZATION
AMONG
FIRST CONSULTING GROUP, INC.,
A DELAWARE CORPORATION;
FOXTROT ACQUISITION SUB, INC.,
A DELAWARE CORPORATION;
AND
INTEGRATED SYSTEMS CONSULTING GROUP, INC.,
A PENNSYLVANIA CORPORATION
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DATED AS OF SEPTEMBER 9, 1998
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TABLE OF CONTENTS
PAGE
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SECTION 1. DESCRIPTION OF TRANSACTION.................................... 1
1.1 Merger of Merger Sub into the Company............................. 1
1.2 Effect of the Merger.............................................. 2
1.3 Closing; Effective Time........................................... 2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers... 2
1.5 Conversion of Shares.............................................. 2
1.6 Stock Options and Warrants........................................ 3
1.7 Closing of the Company's Transfer Books........................... 3
1.8 Exchange of Certificates.......................................... 3
1.9 Dissenting Shares................................................. 4
1.10 Tax Consequences.................................................. 5
1.11 Accounting Consequences........................................... 5
1.12 Further Action.................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 5
2.1 Due Organization; Subsidiaries; Etc............................... 5
2.2 Articles of Incorporation and Bylaws.............................. 5
2.3 Capitalization, Etc............................................... 6
2.4 SEC Filings; Financial Statements................................. 7
2.5 Absence of Changes................................................ 8
2.6 Leasehold; Equipment.............................................. 9
2.7 Title to Assets................................................... 10
2.8 Receivables; Significant Customers................................ 10
2.9 Proprietary Assets................................................ 10
2.10 Contracts......................................................... 12
2.11 Year 2000 Liabilities............................................. 14
2.12 Compliance with Legal Requirements................................ 14
2.13 Certain Business Practices........................................ 14
2.14 Governmental Authorizations....................................... 14
2.15 Tax Matters....................................................... 15
2.16 Employee and Labor Matters; Benefit Plans......................... 16
2.17 Environmental Matters............................................. 17
2.18 Insurance......................................................... 18
2.19 Transactions with Affiliates...................................... 18
2.20 Legal Proceedings; Orders......................................... 18
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement............................................. 19
2.22 No Existing Discussions........................................... 19
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2.23 Accounting Matters................................................ 19
2.24 Vote Required..................................................... 19
2.25 Non-Contravention; Consents....................................... 19
2.26 Fairness Opinion.................................................. 20
2.27 Financial Advisor................................................. 20
2.28 Full Disclosure................................................... 21
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB..................................................... 21
3.1 Organization, Standing and Power.................................. 21
3.2 Capitalization, Etc............................................... 21
3.3 SEC Filings; Financial Statements................................. 22
3.4 Disclosure........................................................ 22
3.5 Absence of Certain Changes or Events.............................. 23
3.6 Authority; Binding Nature of Agreement............................ 23
3.7 Non-Contravention; Consents....................................... 23
3.8 Vote Required..................................................... 23
3.9 Valid Issuance.................................................... 23
3.10 Accounting Matters................................................ 23
3.11 Fairness Opinion.................................................. 23
3.12 Tax Matters....................................................... 24
3.13 Environmental Matters............................................. 24
3.14 Significant Customers............................................. 25
3.15 Year 2000 Liabilities............................................. 25
SECTION 4. CERTAIN COVENANTS OF THE COMPANY.............................. 25
4.1 Access and Investigation.......................................... 25
4.2 Operation of the Company's Business............................... 26
4.3 No Solicitation................................................... 28
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES........................... 29
5.1 Registration Statement; Joint Proxy Statement/Prospectus.......... 29
5.2 Company Shareholders' Meeting..................................... 30
5.3 Parent Stockholders' Meeting...................................... 31
5.4 Regulatory Approvals.............................................. 31
5.5 Stock Options..................................................... 32
5.6 Form S-8.......................................................... 32
5.7 Warrants.......................................................... 32
5.8 Indemnification of Officers and Directors......................... 33
5.9 Pooling of Interests; Tax Free Reorganization..................... 33
5.10 Additional Agreements............................................. 33
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5.11 Confidentiality................................................... 34
5.12 Disclosure........................................................ 34
5.13 Tax Matters....................................................... 34
5.14 Resignation of Officers and Directors............................. 34
5.15 Nasdaq Listing.................................................... 35
5.16 FIRPTA Matters.................................................... 35
5.17 Parent Board of Directors......................................... 35
5.18 Access to Information............................................. 35
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER
SUB........................................................... 35
6.1 Accuracy of Representations....................................... 35
6.2 Performance of Covenants.......................................... 35
6.3 Effectiveness of Registration Statement........................... 35
6.4 Stockholder Approval.............................................. 35
6.5 Consents.......................................................... 36
6.6 Agreements and Documents.......................................... 36
6.7 No Material Adverse Change........................................ 36
6.8 FIRPTA Compliance................................................. 36
6.9 Listing........................................................... 36
6.10 No Restraints..................................................... 36
6.11 No Governmental Litigation........................................ 36
6.12 No Other Litigation............................................... 37
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY............. 37
7.1 Accuracy of Representations....................................... 37
7.2 Performance of Covenants.......................................... 37
7.3 Effectiveness of Registration Statement........................... 37
7.4 Stockholder Approval.............................................. 37
7.5 Documents......................................................... 37
7.6 No Material Adverse Change........................................ 38
7.7 Listing........................................................... 38
7.8 No Restraints..................................................... 38
SECTION 8. TERMINATION................................................... 38
8.1 Termination....................................................... 38
8.2 Notice of Termination; Effect of Termination...................... 39
8.3 Expenses; Termination Fees........................................ 39
SECTION 9. MISCELLANEOUS PROVISIONS...................................... 39
9.1 Amendment......................................................... 39
9.2 Waiver............................................................ 40
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9.3 No Survival of Representations and Warranties..................... 40
9.4 Entire Agreement; Counterparts.................................... 40
9.5 Applicable Law; Jurisdiction...................................... 40
9.6 Disclosure Schedule............................................... 40
9.7 Attorneys' Fees................................................... 41
9.8 Assignability..................................................... 41
9.9 Notices........................................................... 41
9.10 Cooperation....................................................... 41
9.11 Construction...................................................... 41
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AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("AGREEMENT") is made
and entered into as of September 9, 1998, by and among: FIRST CONSULTING GROUP,
INC., a Delaware corporation ("PARENT"); FOXTROT ACQUISITION SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("MERGER SUB"); and
Integrated Systems Consulting Group, Inc., a Pennsylvania corporation (the
"COMPANY"). Certain capitalized terms used in this Agreement are defined in
Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"MERGER") of Merger Sub with and into the Company in accordance with this
Agreement and the Pennsylvania Business Corporation Law of 1988, as amended (the
"PBCL"), and the Delaware General Corporation Law, as amended (the "DGCL"). Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. The Board of Directors of the Company has (i) determined that the Merger
is consistent with and in furtherance of the long-term strategy of the Company
and fair to, and in the best interests of, the Company and its shareholders,
(ii) approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) determined to recommend that the shareholders of the
Company adopt and approve this Agreement and approve the Merger.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
affiliate shareholders of the Company listed on Exhibit B-1 hereto is entering
into a Voting Agreement substantially in the form attached hereto as Exhibit
C-1; and as a condition and inducement to the Company's willingness to enter
into this Agreement, each of the affiliate stockholders of Parent listed on
Exhibit B-2 hereto is entering into a Voting Agreement substantially in the form
attached hereto as Exhibit C-2.
F. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
Persons identified on Exhibit D-1 hereto is entering into an Affiliate Agreement
substantially in the form attached hereto as Exhibit E-1. Concurrently with the
execution of this Agreement, and as a condition and inducement to the Company's
willingness to enter into this Agreement, each of the Persons identified on
Exhibit D-2 hereto is entering into an Affiliate Agreement substantially in the
form attached hereto as Exhibit E-2.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION.
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "SURVIVING CORPORATION").
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1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the PBCL and the DGCL.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Cooley Godward LLP, Five Palo Alto Square, 0000 Xx Xxxxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx, at 10:00 a.m. on a date to be designated by Parent (the "CLOSING
DATE"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Sections 6 and 7. Contemporaneously
with or as promptly as practicable after the Closing, properly executed articles
of merger conforming to the requirements of the PBCL (the "ARTICLES OF MERGER")
shall be filed with the Department of State of the Commonwealth of Pennsylvania
and a properly executed certificate of merger conforming to the requirements of
the DGCL shall be filed with the Secretary of State of the State of Delaware.
The Merger shall take effect at the later of (a) the time the Articles of Merger
is accepted for filing by the Department of State of the Commonwealth of
Pennsylvania, (b) the time the certificate of merger is accepted for filing by
the Secretary of State of the State of Delaware and (c) at such later time as
may be specified in the Articles of Merger (the "EFFECTIVE TIME").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND
OFFICERS. Unless otherwise determined by Parent prior to the Effective Time:
(A) the Articles of Incorporation and Bylaws of the Surviving
Corporation shall be amended and restated as of the Effective Time to
conform to the Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws substantially in the form attached hereto as Exhibits
F-1 and F-2, respectively; PROVIDED, HOWEVER, that at the Effective Time the
Articles of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be Integrated Systems
Consulting Group, Inc.; and
(B) the directors and officers of the Surviving Corporation immediately
after the Effective Time shall be the directors and officers of Merger Sub
immediately prior to the Effective Time, until their respective successors
are elected and qualified or duly appointed, as the case may be.
1.5 CONVERSION OF SHARES.
(A) Subject to Section 1.5(d), at the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Merger Sub, the
Company or any shareholder of the Company:
(I) any shares of Company Common Stock then held by the Company or
any subsidiary of the Company (or held in the Company's treasury) shall
be canceled;
(II) any shares of Company Common Stock then held by Parent, Merger
Sub or any other subsidiary of Parent shall be canceled;
(III) except as provided in clauses "(i)" and "(ii)" above and
subject to Sections 1.5(b) and (d) and Section 1.9, each share of Company
Common Stock then outstanding shall be converted into the right to
receive 0.77 of a share of Parent Common Stock; and
(IV) each share of the common stock, no par value per share, of
Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(B) The fraction of a share of Parent Common Stock into which each
outstanding share of Company Common Stock is to be converted pursuant to
Section 1.5(a)(iii) (as such fraction may be adjusted in accordance with
this Section 1.5(b)) is referred to as the "EXCHANGE RATIO." If, between the
date of this Agreement and the Effective Time, the outstanding shares of
Company Common Stock or Parent Common Stock are changed into a different
number or class of shares by reason of any stock split, stock dividend,
reverse stock split, reclassification, recapitalization or other similar
transaction, then the Exchange Ratio shall be appropriately adjusted.
2
(C) If any shares of Company Common Stock outstanding immediately prior
to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common
Stock will also be unvested and subject to the same repurchase option, risk
of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly be marked with appropriate
legends. The Company shall take all action that may be necessary to ensure
that, from and after the Effective Time, Parent is entitled to exercise any
such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(D) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any holder of
Company Common Stock who would otherwise be entitled to receive a fraction
of a share of Parent Common Stock (after aggregating all fractional shares
of Parent Common Stock issuable to such holder) shall, upon surrender of
such holder's Company Stock Certificate(s) (as defined in Section 1.7), be
paid in cash the dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the closing price of a
share of Parent Common Stock on Nasdaq on the Effective Date.
1.6 STOCK OPTIONS AND WARRANTS. At the Effective Time, all Company Options
(as defined in Section 2.3(b)) shall be assumed by Parent in accordance with
Section 5.5, and all Company Warrants (as defined in Section 2.3(c)) shall be
assumed by Parent in accordance with Section 5.7.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time: (a)
all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Common
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as shareholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Common Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Common Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of Company Common Stock
(a "COMPANY STOCK CERTIFICATE") is presented to the Exchange Agent (as defined
in Section 1.8) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.8.
1.8 EXCHANGE OF CERTIFICATES.
(A) Prior to the Closing Date, Parent shall select a reputable bank or
trust company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Promptly after the Effective Time, Parent shall deposit with the Exchange
Agent (i) certificates representing the shares of Parent Common Stock
issuable pursuant to this Section 1 and (ii) cash sufficient to make
payments in lieu of fractional shares in accordance with Section 1.5(d). The
shares of Parent Common Stock and cash amounts so deposited with the
Exchange Agent, together with any dividends or distributions received by the
Exchange Agent with respect to such shares, are referred to collectively as
the "EXCHANGE FUND."
(B) As soon as practicable after the Effective Time, the Exchange Agent
will mail to the registered holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that
delivery of Company Stock Certificates shall be effected, and risk of loss
and title to Company Stock Certificates shall pass, only upon delivery of
such Company Stock Certificates to the Exchange Agent), and (ii)
instructions for use in effecting the surrender of Company Stock
Certificates in exchange for certificates representing Parent Common Stock.
Subject to Section 1.5(d), upon surrender of a Company Stock Certificate to
the Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
3
Exchange Agent or Parent, (A) the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing
the number of shares of Parent Common Stock that such holder has the right
to receive pursuant to the provisions of Section 1.5(a)(iii) together with
any cash in lieu of fractional share(s) pursuant to the provisions of
Section 1.5(d), and (B) the Company Stock Certificate so surrendered shall
be canceled. Until surrendered as contemplated by this Section 1.8(b), each
Company Stock Certificate shall be deemed, from and after the Effective
Time, to represent only the right to receive shares of Parent Common Stock
(and cash in lieu of any fractional share of Parent Common Stock) as
contemplated by Section 1.5. If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a
condition precedent to the issuance of any certificate representing Parent
Common Stock, require the owner of such lost, stolen or destroyed Company
Stock Certificate to provide an appropriate affidavit and to deliver a bond
(in such sum as Parent may reasonably direct) as indemnity against any claim
that may be made against the Exchange Agent, Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(C) No dividends or other distributions declared or made with respect to
Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, until such
holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions, without interest).
(D) Any portion of the Exchange Fund that remains undistributed to
holders of Company Stock Certificates as of the date 180 days after the date
on which the Merger becomes effective shall be delivered to Parent upon
demand, and any holders of Company Stock Certificates who have not
theretofore surrendered their Company Stock Certificates in accordance with
this Section 1.8 shall thereafter look only to Parent for satisfaction of
their claims for Parent Common Stock, cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions with respect to
Parent Common Stock.
(E) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former
holder of Company Common Stock such amounts as may be required to be
deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal
Requirement. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having
been paid to the Person to whom such amounts would otherwise have been paid.
(F) Neither Parent nor the Surviving Corporation shall be liable to any
holder or former holder of Company Common Stock with respect to any shares
of Parent Common Stock (or dividends or distributions with respect thereto),
or for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar Legal Requirement.
1.9 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, shares, if any, of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time that are held by any
shareholder who has not voted such shares in favor of the Merger and who shall
have delivered a written notice of intention to demand payment of fair value of
such shares in the manner provided in Section 1574 of the PBCL ("DISSENTING
SHARES") shall not be converted into or be exchangeable for the right to receive
the consideration provided in Section 1.5(a)(iii) (or cash in lieu of fractional
shares in accordance with Section 1.5(d)) unless and until such holder shall
have failed to perfect or shall have effectively withdrawn or lost his right to
be paid fair value under the PBCL. If such holder shall have failed to perfect
or have effectively withdrawn or lost such right, his shares of Company Common
Stock shall thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective
4
Time, the right to receive the consideration provided in Section 1.5(a)(iii) (or
cash in lieu of fractional shares in accordance with Section 1.5(d)) without any
interest thereon.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 ACCOUNTING CONSEQUENCES. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.12 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Parent and Merger Sub that, except as
set forth in the disclosure schedule that has been prepared by the Company in
accordance with the requirements of Section 9.6 and that has been delivered by
the Company to Parent on the date of this Agreement and signed by the President
of the Company (the "COMPANY DISCLOSURE SCHEDULE"):
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(A) The Company has no Subsidiaries, except for the corporations
identified in Part 2.1(a)(i) of the Company Disclosure Schedule; and neither
the Company nor any of the other corporations identified in Part 2.1(a)(i)
of the Company Disclosure Schedule owns any capital stock of, or any equity
interest of any nature in, any other Entity. (The Company and each of its
Subsidiaries are referred to collectively in this Agreement as the "ACQUIRED
CORPORATIONS".) None of the Acquired Corporations has agreed or is obligated
to make, or is bound by any Contract under which it may become obligated to
make, any future investment in or capital contribution to any other Entity.
None of the Acquired Corporations has, at any time, been a general partner
of any general partnership, limited partnership or other Entity.
(B) Each of the Acquired Corporations is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has all corporate power and authority: (i) to conduct
its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets
are currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(C) None of the Acquired Corporations is or has been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in
Part 2.1(c) of the Company Disclosure Schedule, except where the failure to
be so qualified, authorized, registered or licensed has not had and will not
have a Material Adverse Effect on the Acquired Corporations. Each of the
Acquired Corporations is in good standing as a foreign corporation in each
of the respective jurisdictions identified in Part 2.1(c) of the Company
Disclosure Schedule.
2.2 ARTICLES OF INCORPORATION AND BYLAWS. The Company has delivered to
Parent accurate and complete copies of the articles of incorporation, bylaws and
other charter and organizational documents of the respective Acquired
Corporations, including all amendments thereto. None of the Acquired
Corporations is in violation of any of the provisions of its articles of
incorporation or bylaws or equivalent governing instruments.
5
2.3 CAPITALIZATION, ETC.
(A) The authorized capital stock of the Company consists of: (i)
twenty-five million (25,000,000) shares of Company Common Stock, $.005 par
value per share, of which, as of August 31, 1998, 8,076,404 shares (which
amount does not materially differ from the amount issued and outstanding as
of the date of this Agreement) have been issued and are outstanding; and
(ii) five hundred thousand (500,000) shares of preferred stock, $1.00 par
value per share, of which no shares are outstanding as of the date of this
Agreement. All of the outstanding shares of Company Common Stock have been
duly authorized and validly issued, and are fully paid and nonassessable. As
of the date of this Agreement, there are 1,151,109 shares of Company Common
Stock held in treasury by the Company and no shares of stock held in
treasury by any of the other Acquired Corporations. (i) None of the
outstanding shares of Company Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any
similar right; (ii) none of the outstanding shares of Company Common Stock
is subject to any right of first refusal in favor of the Company; and (iii)
there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or similar right
with respect to), any shares of Company Common Stock. Upon consummation of
the Merger, (A) the shares of Parent Common Stock issued in exchange for any
shares of Company Common Stock that are subject to a Contract pursuant to
which the Company has the right to repurchase, redeem or otherwise reacquire
any shares of Company Common Stock will, without any further act of Parent,
the Company or any other Person, become subject to the restrictions,
conditions and other provisions contained in such Contract, and (B) Parent
will automatically succeed to and become entitled to exercise the Company's
rights and remedies under any such Contract. None of the Acquired
Corporations is under any obligation to repurchase, redeem or otherwise
acquire any outstanding shares of Company Common Stock.
(B) As of August 31, 1998, 957,725 shares (which amount does not
materially differ from the amount subject to options outstanding as of the
date of this Agreement) of Company Common Stock are subject to issuance
pursuant to outstanding options to purchase Company Common Stock. (Stock
options granted by the Company pursuant to the Company's stock option plans
are referred to in this Agreement as "COMPANY OPTIONS.") Part 2.3(b)(i) of
the Company Disclosure Schedule sets forth the following information with
respect to each Company Option outstanding as of August 31, 1998: (i) the
particular plan pursuant to which such Company Option was granted; (ii) the
name of the optionee; (iii) the number of shares of Company Common Stock
subject to such Company Option; (iv) the exercise price of such Company
Option; (v) the date on which such Company Option was granted; (vi) the
applicable vesting schedule and the extent to which such Company Option is
vested and exercisable as of the date of this Agreement; and (vii) the date
on which such Company Option expires. The Company has delivered to Parent
accurate and complete copies of all stock option plans pursuant to which the
Company has ever granted stock options and the form of all stock option
agreements evidencing such options. There are no commitments or agreements
of any character to which the Company is bound obligating the Company to
accelerate the vesting of any Company Option.
(C) As of the date of this Agreement, six hundred seventy-nine thousand,
seven hundred twenty-three (679,723) shares of Company Common Stock are
subject to issuance pursuant to outstanding warrants to purchase Company
Common Stock ("COMPANY WARRANTS"). Part 2.3(c) of the Company Disclosure
Schedule sets forth the following information with respect to each Company
Warrant outstanding as of the date of this Agreement: (i) the name of the
warrant holder; (ii) the number of shares of Company Common Stock subject to
such Company Warrant; (iii) the exercise price of such Company Warrant; (iv)
the date on which such Company Warrant was granted; (v) the applicable
vesting schedule and the extent to which such Company Warrant is vested and
exercisable as of the date of this Agreement; and (vii) the date on which
such Company Warrant expires. The Company has
6
delivered to Parent accurate and complete copies of all agreements,
certificates and other documents evidencing all warrants which the Company
has ever granted.
(D) Except as set forth in Parts 2.3(b), 2.3(c) or 2.3(d) of the Company
Disclosure Schedule there is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any
shares of the capital stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital stock or
other securities of the Company; (iii) shareholder rights plan (or similar
plan commonly referred to as a "poison pill") or Contract under which the
Company is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities; or (iv) condition or circumstance
that may give rise to or provide a basis for the assertion of a claim by any
Person to the effect that such Person is entitled to acquire or receive any
shares of capital stock or other securities of the Company.
(E) 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 with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts.
(F) All of the outstanding shares of capital stock of each of the
Entities identified in Part 2.1(a)(i) of the Company Disclosure Schedule are
validly issued, fully paid and nonassessable and are owned beneficially and
of record by the Company, free and clear of any Encumbrances.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(A) The Company has delivered to Parent accurate and complete copies of
all registration statements, proxy statements and other statements, reports,
schedules, forms and other documents filed by the Company with the SEC and
will deliver to Parent accurate and complete copies of all such registration
statements, proxy statements and other statements, reports, schedules, forms
and other documents filed after the date of this Agreement and prior to the
Effective Time (collectively, the "COMPANY SEC DOCUMENTS"). All statements,
reports, schedules, forms and other documents required to have been filed by
the Company with the SEC have been so filed. As of the time it was filed
with the SEC (or, if amended or superseded by a later filing, then on the
date of such filing): (i) each of the Company SEC Documents filed with the
SEC complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be) as of the date
of such filing and any Company SEC Documents filed after the date hereof
will so comply; and (ii) none of the Company SEC Documents contained any
untrue statement of material fact or omitted to state a material fact
required to be state therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(B) The consolidated financial statements (including any related notes)
contained in the Company SEC Documents filed with the SEC (the "COMPANY
FINANCIAL STATEMENTS"): (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable thereto; (ii)
were prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered
(except as may be indicated in the notes to such financial statements or, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC, and
except that the unaudited financial statements may not contain footnotes and
other information required for complete financial statements), and (iii)
fairly present the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof and the consolidated results
of operations of the Company and its subsidiaries for the periods covered
thereby. All adjustments (consisting of recurring accruals) considered
necessary for a fair presentation of the financial statements have been
included. The audited consolidated balance sheet of the Company and its
subsidiaries included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 is sometimes referred to herein as the "COMPANY
BALANCE SHEET" and the unaudited
7
consolidated balance sheet of the Company and its subsidiaries as of June
30, 1998 included in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 is sometimes referred to herein as the "COMPANY
UNAUDITED INTERIM BALANCE SHEET." All financial statements (including any
related notes) contained in Company SEC Documents filed after the date
hereof shall meet the conditions set forth in (i), (ii) and (iii) of this
Section 2.4(b).
2.5 ABSENCE OF CHANGES. Since the date of the Company Unaudited Interim
Balance Sheet:
(A) there has not been any material adverse change in the business,
condition, assets, liabilities, operations, financial performance or
prospects of the Acquired Corporations taken as a whole, and no event has
occurred that could reasonably be expected to have a Material Adverse Effect
on the Acquired Corporations;
(B) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the assets of any of the
Acquired Corporations (whether or not covered by insurance);
(C) none of the Acquired Corporations has (i) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(D) none of the Acquired Corporations has sold, issued, granted or
authorized the issuance or grant of (i) any capital stock or other security
(except for Company Common Stock issued upon the exercise of outstanding
Company Options or Company Warrants), (ii) any option, call, warrant or
right to acquire any capital stock or any other security (except for Company
Options described in Part 2.3(b)(i) of the Company Disclosure Schedule), or
(iii) any instrument convertible into or exchangeable for any capital stock
or other security;
(E) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of the
Company's stock option plans, (ii) any provision of any agreement evidencing
any outstanding Company Option or Company Warrant, or (iii) any restricted
stock purchase agreement;
(F) except as provided in Part 2.5(f) of the Company Disclosure
Schedule, there has been no amendment to the articles of incorporation,
bylaws or other charter or organizational documents of any of the Acquired
Corporations, and none of the Acquired Corporations has effected or been a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(G) except as provided in Part 2.5(g) of the Company Disclosure
Schedule, none of the Acquired Corporations has (i) received any Acquisition
Proposal, or (ii) solicited, initiated, encouraged or induced, or provided
any nonpublic information to or entered into any discussions with any Person
for the purpose of soliciting, initiating, encouraging or inducing, the
making or submission of any Acquisition Proposal;
(H) none of the Acquired Corporations has formed any subsidiary or
acquired any equity interest or other interest in any other Entity;
(I) none of the Acquired Corporations has made any capital expenditures
which exceed $800,000 in the aggregate;
(J) except in the ordinary course of business and consistent with past
practices, none of the Acquired Corporations has (i) entered into or
permitted any of the assets owned or used by it to become bound by any
Material Contract (as defined in Section 2.10), or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any
Material Contract;
8
(K) none of the Acquired Corporations has (i) acquired, leased or
licensed any material right or other material asset from any other Person,
(ii) sold or otherwise disposed of, or leased or licensed, any material
right or other material asset to any other Person, or (iii) waived or
relinquished any right, except for rights or other assets acquired, leased,
licensed or disposed of in the ordinary course of business and consistent
with past practices;
(L) none of the Acquired Corporations has written off as uncollectible,
or established any extraordinary reserve with respect to, any account
receivable or other indebtedness in excess of $25,000 with respect to any
single matter, or in excess of $50,000 in the aggregate;
(M) except as set forth on Part 2.5(m) of the Company Disclosure
Schedule, none of the Acquired Corporations has made any pledge of any of
its assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of immaterial assets made in the ordinary
course of business and consistent with past practices;
(N) except as set forth in Part 2.5(n) of the Company Disclosure
Schedule and except for intercompany indebtedness among the Acquired
Corporations and relocation and travel advances referred to in Section
2.8(b), none of the Acquired Corporations has (i) lent money to any Person,
or (ii) incurred or guaranteed any indebtedness for borrowed money;
(O) except as provided in Part 2.5(o) of the Company Disclosure
Schedule, none of the Acquired Corporations has (i) established or adopted
any Plan (as defined in Section 2.16(a)), (ii) caused or permitted any Plan
to be amended in any material respect, or (iii) paid any bonus or made any
profit-sharing or similar payment to, or materially increased the amount of
the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees;
(P) none of the Acquired Corporations has changed any of its methods of
accounting or accounting practices in any respect;
(Q) none of the Acquired Corporations has made any material election
with respect to Taxes;
(R) except as set forth in Part 2.5(r) of the Company Disclosure
Schedule, none of the Acquired Corporations has commenced or settled any
Legal Proceeding;
(S) none of the Acquired Corporations has entered into any material
transaction or taken any other material action that has had, or could
reasonably be expected to have, a Material Adverse Effect on the Acquired
Corporations; and
(T) except as set forth in Part 2.5(t) of the Company Disclosure
Schedule, none of the Acquired Corporations has agreed or committed to take
any of the actions referred to in clauses "(c)" through "(s)" above.
2.6 LEASEHOLD; EQUIPMENT. None of the Acquired Corporations own any real
property or any interest in real property, except for the leaseholds created
under the real property leases identified in Part 2.6 of the Company Disclosure
Schedule. All such real property is being leased pursuant to lease agreements
that are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would result in a Material Adverse Effect
on the Acquired Corporations. Part 2.6 of the Company Disclosure Schedule
accurately identifies all material items of equipment leased by the Acquired
Corporations. All material items of equipment and other tangible assets owned by
or leased to the Acquired Corporations are adequate for the uses to which they
are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the business of the Acquired
Corporations in the manner in which such business is currently being conducted.
9
2.7 TITLE TO ASSETS. The Acquired Corporations own, and have good, valid
and marketable title to, or in the case of leased properties and assets, valid
leasehold interests in, all of their respective tangible properties and assets,
real, personal and mixed, used or held for use in their business, including: (i)
all assets reflected on the Company Unaudited Interim Balance Sheet; and (ii)
all other assets reflected in the books and records of the Acquired Corporations
as being owned or leased by the Acquired Corporations. Except as set forth in
Part 2.7 of the Company Disclosure Schedule, all of said assets are owned or
leased by the Acquired Corporations free and clear of any Encumbrances, except
for (x) any lien for current taxes not yet due and payable, and (y) minor liens
that have arisen in the ordinary course of business and that do not (in any case
or in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of any of the Acquired Corporations.
2.8 RECEIVABLES; SIGNIFICANT CUSTOMERS.
(A) Part 2.8 of the Company Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable of the Acquired
Corporations as of the date of the Company Unaudited Interim Balance Sheet.
All existing accounts receivable of the Acquired Corporations (including
those accounts receivable reflected on the Company Unaudited Interim Balance
Sheet that have not yet been collected and those accounts receivable that
have arisen since the date of the Company Unaudited Interim Balance Sheet
and have not yet been collected) (i) represent valid obligations of
customers of the Acquired Corporations arising from bona fide transactions
entered into in the ordinary course of business, (ii) are current and will
be collected in full when due, without any counterclaim or set off and are
not subject to any dispute or threat of nonpayment (net of the allowance for
doubtful accounts set forth on the Company Unaudited Interim Balance Sheet
and an additional amount not to exceed $250,000 in the aggregate) and (iii)
represent revenues that have been recognized in accordance with GAAP.
(B) Part 2.8(b) of the Company Disclosure Schedule contains an accurate
and complete list as of August 31, 1998 of all loans and advances made by
any of the Acquired Corporations to any employee, director, consultant or
independent contract of such Acquired Corporation, other than routine travel
or relocation advances made to employees in the ordinary course of business,
which loan and advances do not materially differ from the loans and advances
as of the date of this Agreement.
(C) Part 2.8(c) of the Company Disclosure Schedule sets forth a complete
and accurate list of all Significant Customers. For purposes of this
Agreement, "SIGNIFICANT CUSTOMERS" are the twenty (20) customers of the
Company that have effected the most purchases, in dollar terms, and
accounted for the most revenues, in dollar terms, during the four (4) fiscal
quarter period ended June 30, 1998. None of the Company's Significant
Customers has canceled, returned or substantially reduced or, to the
knowledge of the Company, is currently attempting or threatening to cancel,
return or substantially reduce, any purchases from, orders to or services
provided by the Company. The Company has not received any material customer
complaints concerning its products and/or services.
2.9 PROPRIETARY ASSETS.
(A) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body,
(i) a brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. The
Company owns no Proprietary Assets other than the Company Proprietary Assets
set forth in Part 2.9(a)(i) of the Company Disclosure Schedule. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of
less than $10,000), and identifies the license agreement under which such
Proprietary Asset is being licensed to the Company. To the best of the
knowledge of the Company, the Company has good, valid and marketable title
to all of the Company Proprietary Assets
10
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Disclosure Schedule,
free and clear of all liens and other Encumbrances, and has a valid right to
use all Proprietary Assets identified in Part 2.9(a)(iii) of the Disclosure
Schedule. Except as set forth in Part 2.9(a)(v) of the Disclosure Schedule,
to the best of the knowledge of the Company, the Company is not obligated to
make any payment to any Person for the use of any Company Proprietary Asset.
The Company has not developed jointly with any other Person any Company
Proprietary Asset with respect to which such other Person has any rights.
(B) The Company has taken all commercially reasonable measures and
precautions necessary to protect and maintain the confidentiality and
secrecy of all Company Proprietary Assets (except Company Proprietary Assets
whose value would be unimpaired by public disclosure) and otherwise to
maintain and protect the value of all Company Proprietary Assets.
(C) To the best of the knowledge of the Company, none of the Company
Proprietary Assets infringes or conflicts with any Proprietary Asset owned
or used by any other Person. Except as set forth in Part 2.9(c) of the
Company Disclosure Schedule, to the best of the knowledge of the Company,
the Company is not infringing, misappropriating or making any unlawful use
of, and the Company has not at any time infringed, misappropriated or made
any unlawful use of, or received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset
owned or used by any other Person. To the best of the knowledge of the
Company, no other Person is infringing, misappropriating or making any
unlawful use of, and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Company Proprietary Asset.
(D) (i) Each Company Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation
or statement made or provided with respect thereto by or on behalf of the
Company; and (ii) there has not been any claim by any customer or other
Person alleging that any Company Proprietary Asset (including each version
thereof that has ever been licensed or otherwise made available by the
Company to any Person) does not conform in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided by or on behalf of the Company, and, to the best
of the knowledge of the Company, there is no basis for any such claim. To
the best of the knowledge of the Company, the Company has established
adequate reserves on the Company Unaudited Interim Balance Sheet to cover
all costs associated with any obligations that the Company may have with
respect to the correction or repair of programming errors or other defects
in the Company Proprietary Assets.
(E) The Company Proprietary Assets constitute all the Proprietary Assets
necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in
Part 2.9(e) of the Company Disclosure Schedule, (i) the Company has not
licensed any of the Company Proprietary Assets to any Person on an exclusive
basis, and (ii) the Company has not entered into any covenant not to compete
or Contract limiting its ability to exploit fully any of its Proprietary
Assets or to transact business in any market or geographical area or with
any Person.
(F) All employees set forth in Part 2.9(f) of the Company Disclosure
Schedule have executed and delivered an agreement to the Company (containing
no exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Employment Agreement or Employee
Agreement previously delivered to Parent by the Company. Substantially all
other current and substantially all former employees of the Company have
executed and delivered to the Company an agreement (containing no exceptions
to or exclusions from the scope of its coverage) that is substantially
identical to the form of confidential information and invention assignment
agreement previously delivered to Parent. Substantially all current and
former consultants and independent contractors to the Company have executed
and delivered to the Company an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is substantially identical
to the form
11
of consultant confidential information and invention assignment agreement
previously delivered to Parent.
(G) Except as set forth in Part 2.9(g) of the Company Disclosure
Schedule, to the best of the knowledge of the Company, each of the Acquired
Corporations has taken adequate steps to ensure that all software (and
related Proprietary Assets) used in its operations are Year 2000 Compliant
(as defined below). For purposes of this Agreement, "YEAR 2000 COMPLIANT"
shall mean that software that can individually, and in combination and in
conjunction with all other systems, products or processes with which they
are required or designed to interface, continue to be used normally and to
operate successfully (both in functionality and performance in all material
respects) over the transition into the twenty first century when used in
accordance with the documentation relating to all software (and related
Acquired Corporation Proprietary Assets) that is sold, licensed or
transferred by any Acquired Corporation to any Person, including being able
to, before, on and after January 1, 2000 substantially conform to the
following: (i) use logic pertaining to dates which allow users to identify
and/or use the century portion of any date fields without special
processing; and (ii) respond to all date elements and date input so as to
resolve any ambiguity as to century in a disclosed, defined and
pre-determined manner and provide date information in ways which are
unambiguous as to century, either by permitting or requiring the century to
be specified or where the data element is represented without a century, the
correct century is unambiguous for all manipulations involving that element.
2.10 CONTRACTS.
(A) Part 2.10 of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a "Material Contract." For
purposes of this Agreement, each of the following shall be deemed to
constitute a "MATERIAL CONTRACT":
(I) (A) any Contract or outstanding offer relating to the employment
of, or the performance of services by, any employee, (B) any Contract
pursuant to which any of the Acquired Corporations is required to make
any severance, termination or similar payment, bonus or relocation
payment or any other payment (other than payments in respect of salary)
to any current or former employee or director of any of the Acquired
Corporations and (C) any Contract or Plan (including, without limitation,
any stock option plan, stock appreciation plan or stock purchase plan),
any of the benefits of which may be increased, or the vesting of benefits
of which may be accelerated;
(II) any Contract (A) relating to the acquisition, transfer,
development, sharing, license (to or by any of the Acquired
Corporations), use or other exploitation of any Proprietary Asset (except
for any Contract pursuant to which any Proprietary Asset is licensed to
the Acquired Corporations under any third party software license
generally available to the public); or (B) with respect to the
distribution or marketing of any products of the Acquired Corporations;
(III) any Contract which provides for indemnification of any officer,
director, employee or agent of any of the Acquired Corporations;
(IV) any Contract imposing any restriction on the right or ability of
any Acquired Corporation (A) to compete in any market or geographic area
with any other Person, (B) to acquire any product or other asset or any
services from any other Person, to sell any product or other asset to or
perform any services for any other Person or to transact business or deal
in any other manner with any other Person, or (C) to develop or
distribute any technology;
(V) any Contract (A) relating to the acquisition, issuance, voting,
registration, sale or transfer of any securities (other than the issuance
of Company Common Stock upon the valid exercise of Company Options or
Company Warrants outstanding as of the date of this Agreement), (B)
providing any Person with any preemptive right, right of participation,
right of
12
maintenance or any similar right with respect to any securities, or (C)
providing the Company with any right of first refusal with respect to, or
right to repurchase or redeem, any securities;
(VI) any Contract requiring that the Company give any notice or
provide any information to any Person prior to accepting any Acquisition
Proposal;
(VII) any Contract that (A) contemplates or involves payment or
delivery of cash or other consideration in an amount or having a value in
excess of $7,500 per month and (B) has a term of more than 90 days and
that may not be terminated by such Acquired Corporation within 90 days
after the delivery of a termination notice by such Acquired Corporation;
(VIII) any Contract that contemplates or involves payment or delivery
of cash or other consideration by any of the Acquired Corporations in an
amount or having a value in excess of $100,000 in the aggregate;
(IX) except as set forth in Part 2.10(a)(ix) of the Company
Disclosure Schedule, any Contract or Plan (including, without limitation,
any stock option plan, stock appreciation 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 execution of this Agreement
or the consummation of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement;
(X) any joint marketing or development Contract currently in force
under which an Acquired Corporation has continuing material obligations
to jointly market any product, technology or service and which may not be
canceled without penalty upon notice of 30 days or less, or any material
Contract pursuant to which an Acquired Corporation has continuing
material obligations to jointly develop any Proprietary Asset that will
not be owned, in whole or in part, by an Acquired Corporation and which
may not be canceled without penalty upon notice of 90 days or less;
(XI) any Contract currently in force to disclose or deliver to any
Person, or permit the disclosure or delivery to any escrow agent or other
Person, of the source code, or any portion or aspect of the source code,
or any proprietary information or algorithm contained in or relating to
any source code, of any Acquired Corporation Proprietary Asset that is
material to the Acquired Corporations taken as a whole;
(XII) any Contract (not otherwise identified in clauses "(i)" through
"(xi)" of this sentence) that is or would be material to any of the
Acquired Corporations, to the business, condition, capitalization or
operations of any of the Acquired Corporations or to any of the
transactions contemplated by this Agreement; and
(XIII) any other Contract, if a breach of such Contract could
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.
(B) Each Material Contract is valid and in full force and effect, and is
enforceable by an Acquired Corporation in accordance with its terms, subject
to (i) laws of general application relating to bankruptcy, insolvency and
the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. To the best of the knowledge
of the Company, no Person has violated or breached, or committed any default
under, any Material Contract.
(C) (i) None of the Acquired Corporations has violated or breached, or
committed any default under, any Acquired Corporation Contract, and, to the
best of the knowledge of the Company, no other Person has violated or
breached, or committed any default under, any Acquired Corporation Contract
that will have a Material Adverse Effect on the Acquired Corporations; (ii)
to the best of the knowledge of the Company, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a violation or
13
breach of any of the provisions of any Acquired Corporation Contract, (B)
give any Person the right to declare a default or exercise any remedy under
any Acquired Corporation Contract, (C) give any Person the right to a
rebate, chargeback, penalty or change in delivery schedule under any
Acquired Corporation Contract, (D) give any Person the right to accelerate
the maturity or performance of any Acquired Corporation Contract, or (E)
give any Person the right to cancel, terminate or modify any Acquired
Corporation Contract that will have a Material Adverse Effect on the
Acquired Corporations; (iii) none of the Acquired Corporations or any of
their Representatives has received any notice or other communication
regarding any actual or possible violation or breach of, or default under,
any Acquired Corporation Contract that will have a Material Adverse Effect
on the Acquired Corporation; and (iv) each of the Acquired Corporations has
obtained all necessary export licenses related to the export of its
products.
(D) Except as set forth in Part 2.10(d) of the Company Disclosure
Schedule, there is no Acquired Corporation Contract to which any
Governmental Body is a party or under which any Governmental Body has any
rights or obligations, or directly or indirectly benefiting any Governmental
Body (including any subcontract or other Contract between any Acquired
Corporation and any contractor or subcontractor to any Governmental Body).
(E) No Person is renegotiating, or has a right pursuant to the terms of
any Material Contract to renegotiate, any amount paid or payable to any
Acquired Corporation under any Material Contract or any other material term
or provision of any Material Contract, except for Acquired Corporation
Contracts, which are being renegotiated or provide for renegotiation
pursuant to their terms in the ordinary course of the Company's business.
2.11 YEAR 2000 LIABILITIES. None of the Acquired Corporations has any
accrued, contingent or other liabilities of any nature, either matured or
unmatured, including, without limitation, any liabilities relating to costs
associated with insuring that all software (and related Acquired Corporation
Proprietary Assets) that is sold, licensed or transferred by any Acquired
Corporation to any Person, computer systems, any software utilized by the
Acquired Corporations or other components of the Acquired Corporations'
information technology infrastructure are Year 2000 Compliant (whether or not
required to be reflected in financial statements in accordance with GAAP, and
whether due or to become due), except for: (a) liabilities identified as such in
the "liabilities" column of the Company Unaudited Interim Balance Sheet; and (b)
normal and recurring liabilities that have been incurred by the Acquired
Corporations since the date of the Company Unaudited Interim Balance Sheet in
the ordinary course of business and consistent with past practices.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired Corporations
is, and has at all times since June 3, 1996 been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and will not have a Material Adverse Effect on
the Acquired Corporations. Since June 3, 1996, none of the Acquired Corporations
has received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.13 CERTAIN BUSINESS PRACTICES. None of the Acquired Corporations nor any
director, officer, agent or employee of any of the Acquired Corporations has, on
behalf of any of the Acquired Corporations, (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
2.14 GOVERNMENTAL AUTHORIZATIONS. The Acquired Corporations hold all
Governmental Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such businesses are
currently being conducted. All such Governmental Authorizations are valid and in
full force and effect. Each Acquired Corporation is, and at all times since June
3, 1996 has been, in
14
substantial compliance with the terms and requirements of such Governmental
Authorizations. Since June 3, 1996, none of the Acquired Corporations has
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
2.15 TAX MATTERS.
(A) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, all Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to
any taxable period ending on or before the Closing Date (the "ACQUIRED
CORPORATION RETURNS") (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date if properly
obtained), and (ii) have been, or will be when filed, prepared in all
material respects in compliance with all applicable Legal Requirements. All
amounts shown on the Acquired Corporation Returns to be due on or before the
Closing Date have been or will be paid on or before the Closing Date.
(B) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with GAAP. Each Acquired Corporation will
establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period
from the date of this Agreement through the Closing Date.
(C) Except as set forth in Part 2.15(c) of the Company Disclosure
Schedule, since the Acquired Corporation Return for the taxable period ended
December 31, 1994, no Acquired Corporation Return has ever been examined or
audited by any Governmental Body. No extension or waiver of the limitation
period applicable to any of the Acquired Corporation Returns has been
granted (by the Company or any other Person), and no such extension or
waiver has been requested from any Acquired Corporation.
(D) No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Company, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. There are no
unsatisfied liabilities for material Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by any
Acquired Corporation with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or
similar document which are being contested in good faith by the Acquired
Corporations and with respect to which adequate reserves for payment have
been established). There are no liens for material Taxes upon any of the
assets of any of the Acquired Corporations except liens for current Taxes
not yet due and payable. None of the Acquired Corporations has entered into
or become bound by any agreement or consent pursuant to Section 341(f) of
the Code. None of the Acquired Corporations has been, and none of the
Acquired Corporations will be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 of
the Code or any comparable provision under state or foreign Tax laws as a
result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(E) Except as set forth in Part 2.15(e) of the Company Disclosure
Schedule, there is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that, considered
individually or considered collectively with any other such Contracts, will,
or could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
or Section 162 of the Code. None of the Acquired Corporations is, or has
ever been, a party to or bound by any tax indemnity agreement, tax sharing
agreement, tax allocation agreement or similar Contract.
15
2.16 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(A) Part 2.16(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program or agreement
(collectively, the "PLANS") sponsored, maintained, contributed to or
required to be contributed to by any of the Acquired Corporations for the
benefit of any current or former employee of any of the Acquired
Corporations.
(B) Except as set forth in Part 2.16(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or
contributes to, and none of the Acquired Corporations has at any time in the
past maintained, sponsored or contributed to, any employee pension benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not excluded from coverage
under specific Titles or Merger Subtitles of ERISA) for the benefit of
employees or former employees of any of the Acquired Corporations (a
"PENSION PLAN"). None of the Plans identified in Part 2.16(a) of the Company
Disclosure Schedule is subject to Title IV of ERISA or Section 412 of the
Code.
(C) Except as set forth in Part 2.16(a) or Part 2.16(c) of the Company
Disclosure Schedule, none of the Acquired Corporations maintains, sponsors
or contributes to any: (i) employee welfare benefit plan (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of any employees or
former employees of any of the Acquired Corporations (a "WELFARE PLAN"), or
(ii) self-funded medical, dental or other similar Plan. None of the Plans
identified in Part 2.16(a) of the Company Disclosure Schedule is a
multi-employer plan (within the meaning of Section 3(37) of ERISA).
(D) With respect to each Plan, the Company has delivered to Parent: (i)
an accurate and complete copy of such Plan (including all amendments
thereto); (ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary plan
description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, (iv) if such Plan is funded
through a trust or any third party funding vehicle, an accurate and complete
copy of the trust or other funding agreement (including all amendments
thereto) and accurate and complete copies the most recent financial
statements thereof; (v) accurate and complete copies of all Contracts
relating to such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and (vi) an accurate and complete copy of the most
recent determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under Section
401(a) of the Code).
(E) None of the Acquired Corporations is or has ever been required to be
treated as a single employer with any other Person under Section 4001(b)(1)
of ERISA or Section 414(b), (c), (m) or (o) of the Code. None of the
Acquired Corporations has ever been a member of an "affiliated service
group" within the meaning of Section 414(m) of the Code. None of the
Acquired Corporations has ever made a complete or partial withdrawal from a
multi-employer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal liability," as such term is defined in Section 4201
of ERISA (without regard to subsequent reduction or waiver of such liability
under either Section 4207 or 4208 of ERISA).
(F) None of the Acquired Corporations has any plan or commitment to
create any Welfare Plan or any additional Pension Plan, or to modify or
change any existing Pension Plan (other than to comply with applicable law)
in a manner that would affect any employee of any of the Acquired
Corporations.
16
(G) Except as set forth in Part 2.16(g) of the Company Disclosure
Schedule, no Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former employee of any of the
Acquired Corporations after any such employee's termination of service
(other than (i) benefit coverage mandated by applicable law, including
coverage provided pursuant to Section 4980B of the Code, (ii) deferred
compensation benefits accrued as liabilities on the Company Balance Sheet,
and (iii) benefits the full cost of which are borne by current or former
employees of any of the Acquired Corporations (or the employees'
beneficiaries)).
(H) With respect to any Plan constituting a group health plan within the
meaning of Section 4980B(g)(2) of the Code, the provisions of Section 4980B
of the Code ("COBRA") have been complied with in all material respects. Part
2.16(h) of the Company Disclosure Schedule describes all obligations of the
Acquired Corporations as of the date of this Agreement under any of the
provisions of COBRA.
(I) Each of the Plans has been operated and administered in all material
respects in accordance with applicable Legal Requirements, including but not
limited to ERISA and the Code.
(J) Each of the Plans intended to be qualified under Section 401(a) of
the Code has received a favorable determination from the Internal Revenue
Service, and the Company is not aware of any reason why any such
determination letter should be revoked.
(K) Except as set forth in Part 2.16(k) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any
bonus, golden parachute or severance payment) to any current or former
employee or director of any of the Acquired Corporations (whether or not
under any Plan), or materially increase the benefits payable under any Plan,
or result in any acceleration of the time of payment or vesting of any such
benefits.
(L) Part 2.16(l) of the Company Disclosure Schedule contains a list of
all salaried employees of each of the Acquired Corporations as of the date
of this Agreement, and correctly reflects, in all material respects, their
base salaries, their targeted annual bonus amounts, their dates of
employment and their positions. None of the Acquired Corporations is a party
to any collective bargaining contract or other Contract with a labor union
involving any of its employees. All of the employees of the Acquired
Corporations are "at will" employees.
(M) Part 2.16(m) of the Company Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date
of return to full service.
(N) Each Plan complies in all material respects with all applicable
Legal Requirements. Each of the Acquired Corporations is in compliance in
all material respects with all Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters.
(O) Except as set forth in Part 2.16(o) of the Company Disclosure
Schedule, each of the Acquired Corporations has good labor relations, and
none of the Acquired Corporations has any knowledge of any facts indicating
that (i) the consummation of the Merger or any of the other transactions
contemplated by this Agreement will have a material adverse effect on the
labor relations of any of the Acquired Corporations, or (ii) any of the
employees of the Acquired Corporations intends to terminate his or her
employment with the Acquired Corporation with which such employee is
employed.
2.17 ENVIRONMENTAL MATTERS. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the
17
Acquired Corporations of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. None of the Acquired Corporations has received any notice or
other communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that any of the Acquired
Corporations is not in compliance with any Environmental Law, and, to the best
of the knowledge of the Company, there are no circumstances that may prevent or
interfere with the compliance by any of the Acquired Corporations with any
Environmental Law in the future. To the best of the knowledge of the Company, no
current or prior owner of any property leased or controlled by any of the
Acquired Corporations has received any notice or other communication (in writing
or otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or any of the Acquired
Corporations is not in compliance with any Environmental Law. To the best of the
knowledge of the Company, all property that is leased to, controlled by or used
by the Company, and all surface water, groundwater and soil associated with or
adjacent to such property is in clean and healthful condition and is free of any
material environmental contamination of any nature. (For purposes of this
Section 2.17 and Section 3.13: (i) "ENVIRONMENTAL LAW" means any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "MATERIALS OF ENVIRONMENTAL
CONCERN" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
2.18 INSURANCE. The Company has delivered to Parent a copy of each
insurance policy and each self insurance program relating to the business,
assets or operations of any of the Acquired Corporations. Each such insurance
policy is in full force and effect. Since June 3, 1996, none of the Acquired
Corporations has received any notice or other communication regarding any actual
or possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any material claim under any insurance
policy, or (c) material adjustment in the amount of the premiums payable with
respect to any insurance policy. Except as set forth in Part 2.18 of the Company
Disclosure Schedule, there is no pending claim (including any workers'
compensation claim) under or based upon any insurance policy of any of the
Acquired Corporations; and, to the best of the knowledge of the Company, no
event has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) directly or indirectly give rise to or serve as
a basis for any such claim.
2.19 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Company SEC
Documents, since the date of the Company's last proxy statement filed with the
SEC, no event has occurred that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC. Part 2.19 of the
Company Disclosure Schedule identifies each person who is an "affiliate" (as
that term is used in Rule 145 promulgated under the Securities Act) of the
Company as of the date of this Agreement.
2.20 LEGAL PROCEEDINGS; ORDERS.
(A) Except as set forth in Part 2.20(a) of the Company Disclosure
Schedule, there is no pending Legal Proceeding (including, to the best
knowledge of the Company, any investigation), and no Person has overtly
threatened to commence any Legal Proceeding: (i) that involves any of the
Acquired Corporations or any of the assets owned or used by any of the
Acquired Corporations, including, without limitation, any Acquired Company
Proprietary Asset; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the
Merger or any of the other transactions contemplated by this Agreement. To
the best of the knowledge of the Company, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or
18
that could reasonably be expected to, give rise to or serve as a basis for
the commencement of any such Legal Proceeding. To the best of the knowledge
of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, cause or provide a basis for a director, officer or other
Representative of any of the Acquired Corporations to seek indemnification
from, or commence a Legal Proceeding against or involving, any of the
Acquired Corporations.
(B) There is no order, writ, injunction, judgment or decree to which any
of the Acquired Corporations, or any of the assets owned or used by any of
the Acquired Corporations, is subject. To the best of the knowledge of the
Company, no officer or other employee of any of the Acquired Corporations is
subject to any order, writ, injunction, judgment or decree that prohibits
such officer or other employee from engaging in or continuing any conduct,
activity or practice relating to the business of any of the Acquired
Corporations.
2.21 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES; BINDING NATURE
OF AGREEMENT. The Company has the absolute and unrestricted right, corporate
power and authority to enter into and to perform its obligations under this
Agreement. The Board of Directors of the Company (at a meeting duly called and
held) has (a) unanimously determined that the Merger is advisable and fair and
in the best interests of the Company and its shareholders, (b) unanimously
approved the execution, delivery and performance of this Agreement by the
Company and has unanimously approved the Merger, (c) unanimously recommended the
adoption and approval of this Agreement and the Merger by the holders of Company
Common Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's shareholders at the Company Shareholders' Meeting
(as defined in Section 5.2), and (d) approved, and the stockholders of the
Company have adopted, an amendment to the Company's Articles of Incorporation
having the effect of causing the Company not to be subject to any state takeover
law or similar Legal Requirement that might otherwise apply to the Merger or any
of the other transactions contemplated by this Agreement except as set forth in
Part 2.21 of the Company Disclosure Schedule. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
2.22 NO EXISTING DISCUSSIONS. None of the Acquired Corporations, and no
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
2.23 ACCOUNTING MATTERS. To the best of the knowledge of the Company,
neither the Company nor any of its affiliates has taken or agreed to, or plans
to, take any action that would prevent Parent from accounting for the Merger as
a "pooling of interests."
2.24 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Shareholder Meeting (the "REQUIRED COMPANY SHAREHOLDER VOTE") is the
only vote of the holders of any class or series of the Company's capital stock
necessary to adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement.
2.25 NON-CONTRAVENTION; CONSENTS. Neither (i) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (ii) the consummation of the
19
Merger or any of the other transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(A) contravene, conflict with or result in a violation of (i) any of the
provisions of the articles of incorporation, bylaws or other charter or
organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the shareholders, the board of directors or any
committee of the board of directors of any of the Acquired Corporations;
(B) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger or any
of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which any of the Acquired Corporations, or
any of the assets owned or used by any of the Acquired Corporations, is
subject;
(C) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Acquired Corporations or that
otherwise relates to the business of any of the Acquired Corporations or to
any of the assets owned or used by any of the Acquired Corporations;
(D) except as set forth in Part 2.25(d) of the Company Disclosure
Schedule, contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute a Material Contract, or give any Person
the right to (i) declare a default or exercise any remedy under any such
Acquired Corporation Contract, (ii) a rebate, chargeback, penalty or change
in delivery schedule under any such Acquired Corporation Contract, (iii)
accelerate the maturity or performance of any such Acquired Corporation
Contract, or (iv) cancel, terminate or modify any term of such Acquired
Corporation Contract; or
(E) result in the imposition or creation of any Encumbrance upon or with
respect to any asset owned or used by any of the Acquired Corporations
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or
materially impair the operations of any of the Acquired Corporations).
Except as may be required by the Exchange Act, the PBCL, the DGCL and the rules
of the National Association of Securities Dealers, Inc. ("NASD") (as they relate
to the S-4 Registration Statement and the Joint Proxy Statement/Prospectus, as
defined in Section 2.28(b)), none of the Acquired Corporations was, is or will
be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.26 FAIRNESS OPINION. The Company's Board of Directors has received the
written opinion of Xxxxxx X. Xxxxx & Co. Incorporated, financial advisor to the
Company, dated the date of this Agreement, to the effect that the Exchange Ratio
is fair to the shareholders of the Company from a financial point of view. The
Company has furnished an accurate and complete copy of said written opinion to
Parent.
2.27 FINANCIAL ADVISOR. Except for Xxxxxx X. Xxxxx & Co. Incorporated, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or any of the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Acquired Corporations. The Company has communicated to
Parent the fee formula pursuant to which fees, commissions and other amounts
will be paid by the Company to Xxxxxx X. Xxxxx & Co. Incorporated if the Merger
is consummated. The Company has furnished to Parent accurate and complete copies
of all agreements under which any such fees, commissions or other amounts have
been paid or may become payable and all indemnification and other agreements
relating to the engagement of Xxxxxx X. Xxxxx & Co. Incorporated.
20
2.28 FULL DISCLOSURE.
(A) This Agreement (including the Company Disclosure Schedule) does not,
and the certificate referred to in Section 6.6(e) will not, (i) contain any
representation, warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
(B) None of the information supplied or to be supplied by or on behalf
of the Company for inclusion or incorporation by reference in the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of Parent Common Stock in the Merger (the "S-4
REGISTRATION STATEMENT") will, at the time the S-4 Registration Statement is
filed with the SEC or at the time it becomes effective under the Securities
Act, 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 the light of the circumstances under which they
are made, not misleading. None of the information supplied or to be supplied
by or on behalf of the Company for inclusion or incorporation by reference
in the Joint Proxy Statement/Prospectus to be filed with the SEC as part of
the S-4 Registration Statement (the "JOINT PROXY STATEMENT/PROSPECTUS"),
will, at the time the Joint Proxy Statement/Prospectus is mailed to the
shareholders of the Company, at the time of the Company Shareholders'
Meeting or as of the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading. The Joint
Proxy Statement/Prospectus will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub, jointly and severally, represent and warrant to the
Company that, except as set forth in the disclosure schedule delivered to the
Company on the date of this Agreement and signed by an executive officer of
Parent (the "PARENT DISCLOSURE SCHEDULE"):
3.1 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 State of Delaware. Each of Parent and Merger Sub has all corporate power
and authority to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent and Merger Sub.
3.2 CAPITALIZATION, ETC. The authorized capital stock of Parent consists
of: (i) fifty million (50,000,000) shares of Parent Common Stock, $.001 par
value per share, of which, as of August 31, 1998, 15,925,602 shares (which
amount does not materially differ from the amount issued and outstanding as of
the date of this Agreement) were issued and outstanding; and (ii) ten million
(10,000,000) shares of preferred stock, $.001 par value per share, of which no
shares are outstanding as of the date of this Agreement. As of the date of this
Agreement, there are no outstanding subscriptions, options, calls, warrants or
rights to acquire shares of Parent Common Stock other than pursuant to stock
issuance or stock option plans or other arrangements disclosed in the Parent SEC
Documents. The authorized capital stock of Merger Sub consists of one hundred
(100) shares of Common Stock ("MERGER SUB COMMON STOCK"), $.001 par value per
share, all of which have been issued and are outstanding as of the date of this
Agreement and are held by Parent. As of the date of this Agreement, there are no
shares of Parent Common Stock held in treasury by Parent. None of the
outstanding shares of Parent Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right.
21
3.3 SEC FILINGS; FINANCIAL STATEMENTS.
(A) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a
form other than Form S-8) and definitive proxy statement filed by Parent
with the SEC between November 26, 1997 and the date of this Agreement and
will deliver to the Company accurate and complete copies of all such
registration statements, proxy statements and other statements, reports,
schedules, forms and other documents filed after the date of this Agreement
and prior to the Effective Date (the "PARENT SEC DOCUMENTS"), which are all
of the forms, reports and documents required to be filed by Parent with the
SEC since November 26, 1997. As of the time it was filed with the SEC (or,
if amended or superseded by a later filing, then on the date of such
filing): (i) each of the Parent SEC Documents filed with the SEC was timely
filed and complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act (as the case may be) as of the
date of such filing and any Parent SEC Documents filed after the date hereof
and prior to the Effective Time will so comply; and (ii) none of the Parent
SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(B) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered (except as may be indicated in the notes to such
financial statements and, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may
not contain footnotes and other information required to complete financial
statements); and (iii) fairly present the consolidated financial position of
Parent and its subsidiaries as of the respective dates thereof and the
consolidated results of operations of Parent and its subsidiaries for the
periods covered thereby. All adjustments (consisting of recurring accruals)
considered necessary for a fair presentation of the financial statements
have been included. The audited consolidated balance sheet of Parent and its
subsidiaries for the year ended December 31, 1997 included in the Company's
final Prospectus dated February 13, 1998 is sometimes referred to herein as
the "PARENT BALANCE SHEET" and the unaudited consolidated balance sheet of
Parent and its subsidiaries as of June 30, 1998 included in Parent's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
sometimes referred to herein as the "PARENT UNAUDITED INTERIM BALANCE
SHEET." All financial statements (including any related notes) contained in
Company SEC Documents filed after the date hereof shall meet the conditions
set forth in (i), (ii) and (iii) of this Section 3.3(b).
3.4 DISCLOSURE.
(A) This Agreement (including the Parent Disclosure Schedule) does not,
and the certificate referred to in Section 7.5(e) will not, (i) contain any
representation, warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
(B) None of the information to be supplied by or on behalf of Parent for
inclusion in the S-4 Registration Statement will, at the time the S-4
Registration Statement becomes effective under the Securities Act, 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 the light of the circumstances under which they are made, not
misleading. None of the information to be supplied by or on behalf of Parent
for inclusion in the Joint Proxy Statement/Prospectus will, at the time the
Joint Proxy Statement/Prospectus is mailed to the shareholders of Parent, at
the time of the Parent Shareholders' Meeting or as of the Effective Time,
contain any untrue statement of a material fact or
22
omit to state any 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 are made, not misleading. The S-4 Registration Statement
will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations promulgated by the SEC
thereunder, except that no representation or warranty is made by Parent with
respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by
reference in the Joint Proxy Statement/Prospectus. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated
by the SEC thereunder.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Part 3.5
of the Parent Disclosure Schedule between the date of the Parent Unaudited
Interim Balance Sheet and the date of this Agreement: (i) there has not been any
event that has had a Material Adverse Effect on Parent; (ii) Parent has not
declared, accrued, set aside or paid any dividend; and (iii) Parent has not
incurred any liabilities other than in the ordinary course of business and
consistent with past practices.
3.6 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have the
absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement have been duly authorized by all
necessary action on the part of Parent and Merger Sub and their respective
boards of directors. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.7 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of
this Agreement by Parent and Merger Sub nor the consummation by Parent and
Merger Sub of the Merger will (a) conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws of Parent or the
articles of incorporation or bylaws of Merger Sub, or (b) result in a default by
Parent or Merger Sub under any Contract to which Parent or Merger Sub is a
party, except for any default which has not had and will not have a Material
Adverse Effect on Parent, or (c) result in a violation by Parent or Merger Sub
of any law, statute, rule, regulation, order, writ, injunction, judgment or
decree to which Parent or Merger Sub is subject, except for any violation which
has not had and will not have a Material Adverse Effect on Parent. Except as may
be required by the Securities Act, the Exchange Act, state securities or "blue
sky" laws, the PBCL, the DGCL and the rules of the NASD (as they relate to the
S-4 Registration Statement and the Joint Proxy Statement/Prospectus), Parent is
not and will not be required to make any filing with or give any notice to, or
to obtain any Consent from, any Person in connection with the execution and
delivery of this Agreement, or the consummation of the Merger.
3.8 VOTE REQUIRED. The only vote of Parent's stockholders required to
approve the issuance of Parent Common Stock in the Merger is the vote of a
majority of votes cast in person or by proxy as prescribed by rules of the NASD
(the "REQUIRED PARENT STOCKHOLDER VOTE").
3.9 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
3.10 ACCOUNTING MATTERS. To the best of the knowledge of Parent, Parent
has not taken and has not agreed, and does not plan, to take any action that
would prevent Parent from accounting for the Merger as a "pooling of interests."
3.11 FAIRNESS OPINION. Parent's Board of Directors has received the
written opinion of Xxxxxxxxx & Xxxxx LLC, financial advisor to Parent, dated as
of the date of this Agreement, to the effect that
23
the Exchange Ratio is fair to Parent from a financial point of view. Parent has
furnished an accurate and complete copy of said written opinion to the Company.
3.12 TAX MATTERS.
(A) All Tax Returns required to be filed by or on behalf of the Parent
and its Subsidiaries with any Governmental Body with respect to any taxable
period ending on or before the Closing Date (the "PARENT RETURNS") (i) have
been or will be filed on or before the applicable due date (including any
extensions of such due date if properly obtained), and (ii) have been, or
will be when filed, prepared in all material respects in compliance with all
applicable Legal Requirements. All amounts shown on the Parent Returns to be
due on or before the Closing Date have been or will be paid on or before the
Closing Date.
(B) The Parent financial statements in the Parent SEC Documents fully
accrue all actual and contingent liabilities for Taxes with respect to all
periods through the dates thereof in accordance with GAAP. Parent will
establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period
from the date of this Agreement through the Closing Date.
(C) Since the Parent Return for the taxable period ended December 31,
1992, no Parent Return has ever been examined or audited by any Governmental
Body. No extension or waiver of the limitation period applicable to any of
the Parent Returns has been granted (by Parent or any other Person), and no
such extension or waiver has been requested from Parent or any of its
Subsidiaries.
(D) No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Parent, has been threatened against or with respect to
Parent or any of its Subsidiaries in respect of any material Tax. There are
no unsatisfied liabilities for material Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Parent
or any of its Subsidiaries with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or
similar document which are being contested in good faith by Parent or any of
its Subsidiaries and with respect to which adequate reserves for payment
have been established). There are no liens for material Taxes upon any of
the assets of any of Parent or any of its Subsidiaries except liens for
current Taxes not yet due and payable. Neither Parent nor any of its
Subsidiaries has entered into or become bound by any agreement or consent
pursuant to Section 341(f) of the Code. Neither Parent nor any of its
Subsidiaries has been, and neither Parent nor any of its Subsidiaries will
be, required to include any adjustment in taxable income for any tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to
the Closing.
(E) There is no agreement, plan, arrangement or other Contract covering
any employee or independent contractor or former employee or independent
contractor of Parent or any of its Subsidiaries that, considered
individually or considered collectively with any other such Contracts, will,
or could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
or Section 162 of the Code. Neither Parent nor any of its Subsidiaries is,
or has ever been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar Contract.
3.13 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.13 of the Parent
Disclosure Schedule, each of Parent and its Subsidiaries is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes the possession by each of Parent and its Subsidiaries of all permits
and other Governmental Authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof. Neither Parent nor
any of its Subsidiaries has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
24
employee or otherwise, that alleges that any of Parent or its Subsidiaries is
not in compliance with any Environmental Law, and, to the knowledge of Parent,
there are no circumstances that may prevent or interfere with the compliance by
Parent or any of its Subsidiaries with any Environmental Law in the future. To
the knowledge of the Parent, no current or prior owner of any property leased or
controlled by Parent or any of its Subsidiaries has received any notice or other
communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or Parent or any of its Subsidiaries is not in compliance with any
Environmental Law. To the knowledge of Parent, all property that is leased to,
controlled by or used by Parent, and all surface water, groundwater and soil
associated with or adjacent to such property is in clean and healthful condition
and is free of any material environmental contamination of any nature.
3.14 SIGNIFICANT CUSTOMERS. Part 3.14 of the Parent Disclosure Schedule
sets forth a complete and accurate list of all Parent's Significant Customers.
For purposes of this Agreement, "PARENT'S SIGNIFICANT CUSTOMERS" are the twenty
(20) customers of the Parent that have effected the most purchases, in dollar
terms, and accounted for the most revenues, in dollar terms, during the fiscal
year ended December 31, 1997. None of the Parent's Significant Customers has
canceled, returned or substantially reduced or, to the knowledge of the Parent,
is currently attempting or threatening to cancel, return or substantially
reduce, any purchases from, orders to or services provided by the Parent. Parent
has not received any material customer complaints concerning its products and/or
services.
3.15 YEAR 2000 LIABILITIES. Neither Parent nor any of its Subsidiaries has
any accrued, contingent or other liabilities of any nature, either matured or
unmatured, including, without limitation, any liabilities relating to costs
associated with insuring that all software (and related Parent Proprietary
Assets) that is sold, licensed or transferred by Parent or any of its
Subsidiaries to any Person, computer systems, any software utilized by the
Parent or other components of the Parent's information technology infrastructure
are Year 2000 Compliant (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due or to become due), except
for: (a) liabilities identified as such in the "liabilities" column of the
Parent Unaudited Interim Balance Sheet as of June 30, 1998 included in the
Parent's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998; and
(b) normal and recurring liabilities that have been incurred by Parent since the
date of the Parent Unaudited Interim Balance Sheet in the ordinary course of
business and consistent with past practices.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY.
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "PRE-CLOSING PERIOD"), the Company
shall, and shall cause the respective Representatives of the Acquired
Corporations to: (a) provide Parent and Parent's Representatives with reasonable
access to the Acquired Corporations' Representatives, personnel and assets and
to all existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and (b) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations, and with such additional financial, operating and other
data and information regarding the Acquired Corporations, as Parent may
reasonably request. Without limiting the generality of the foregoing, during the
Pre-Closing Period, the Company shall promptly provide Parent with copies of:
(A) any written materials or communications sent by or on behalf of the
Company to its shareholders;
(B) any material notice, document or other communication sent by or on
behalf of any of the Acquired Corporations to any party to any Material
Contract or sent to any of the Acquired Corporations by any party to any
Material Contract (other than any communication that relates solely to
commercial transactions between the Company and the other party to any such
Material Contract and that is of the type sent in the ordinary course of
business and consistent with past practices);
25
(C) any notice, report or other document filed with or sent to any
Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(D) any material notice, report or other document received by any of the
Acquired Corporations from any Governmental Body.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(A) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Corporations conducts its business and operations (A)
in the ordinary course and in accordance with past practices and (B) in
compliance with all applicable Legal Requirements and the requirements of
all Acquired Company Contracts that constitute Material Contracts; (ii) the
Company shall use all reasonable efforts to ensure that each of the Acquired
Corporations preserves intact its current business organization, keeps
available the services of its current officers and employees and maintains
its relations and goodwill with all suppliers, customers, landlords,
creditors, licensors, licensees, employees and other Persons having business
relationships with the respective Acquired Corporations; (iii) the Company
shall keep in full force all insurance policies referred to in Section 2.18;
(iv) the Company shall provide all notices, assurances and support required
by any Acquired Corporation Contract relating to any Proprietary Asset in
order to ensure that no condition under such Acquired Corporation Contract
occurs which could result in, or could increase the likelihood of, (A) any
transfer or disclosure by any Acquired Corporation of any source code
materials or other Proprietary Asset, or (B) a release from any escrow of
any source code materials or other Proprietary Asset which have been
deposited or are required to be deposited in escrow under the terms of such
Acquired Corporation Contract; and (v) the Company shall (to the extent
requested by Parent) cause its officers to report regularly to Parent
concerning the status of the Company's business.
(B) During the Pre-Closing Period, the Company shall not (without the
prior written consent of Parent), and shall not permit any of the other
Acquired Corporations to:
(I) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
(II) sell, issue, grant or authorize the issuance or grant of (i)
any capital stock or other security, (ii) any option, call, warrant or
right to acquire any capital stock or other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or
other security (except that the Company may (A) issue Company Common
Stock upon the valid exercise of Company Options or Company Warrants
outstanding as of the date of this Agreement and (B) in the ordinary
course of business and consistent with past practices, grant options
exercisable into not more than two hundred fifty (250) shares of Company
Common Stock per newly-hired employee);
(III) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the
terms of any outstanding option, warrant or other security or any related
Contract;
(IV) amend or permit the adoption of any amendment to its articles of
incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(V) form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(VI) make any capital expenditure (except that the Acquired
Corporations may make capital expenditures that, when added to all other
capital expenditures made on behalf of the Acquired
26
Corporations during the Pre-Closing Period, do not exceed $50,000 with
respect to any single capital expenditure or $100,000 in the aggregate);
(VII) enter into or become bound by, or permit any of the assets
owned or used by it to become bound by, any Material Contract (other than
Contracts identified pursuant to Section 2.10(a)(viii) hereunder), or
amend or prematurely terminate, or waive or exercise any material right
or remedy (including any right to repurchase shares of Company Common
Stock) under, any Material Contract (other than Contracts identified
pursuant to Section 2.10(a)(viii) hereunder);
(VIII) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for
immaterial assets acquired, leased, licensed or disposed of by the
Company in the ordinary course of business and consistent with past
practices), or waive or relinquish any material right;
(IX) incur any indebtedness for borrowed money (other than (i) in
connection with the financing of ordinary trade payables; (ii) pursuant
to existing credit facilities; (iii) in connection with leasing
activities in the ordinary course of business; or (iv) for tax planning
purposes in the ordinary course of business) or guarantee any
indebtedness of any person for borrowed money, or issue or sell any debt
securities or warrants or right to acquire debt securities of any of the
Acquired Corporations or guarantee any debt securities of others.
(X) except in the ordinary course of business and consistent with
past practices, establish, adopt or amend any employee benefit plan, pay
any bonus except in accordance with the terms of existing Plans or
pursuant to commitments made prior to the date of this Agreement, or make
any profit-sharing or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees;
(XI) grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past
practices or pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or
made available to Parent, or adopt any new severance plan;
(XII) hire any new employee having an annual salary in excess of
$100,000 or as an officer of the Company or engage any consultant or
independent contractor for a period exceeding sixty (60) days;
(XIII) change the status, title or responsibilities, including without
limitation, termination or promotion, of any officer of the Company or
promote any employee to an officer position in the Company;
(XIV) transfer or license to any Person or otherwise extend the term
of any agreement with respect to, amend or modify in any material respect
any rights (including without limitation distribution rights) to the
Proprietary Assets of the Acquired Corporations, or enter into
assignments of future patent rights, other than non-exclusive licenses
and distribution rights in the ordinary course of business and consistent
with past practice;
(XV) 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, except in the ordinary course
of business consistent with past practice or lend funds to any third
party (other than intracompany loans and travel advances in the ordinary
course of business);
(XVI) change any of its methods of accounting or accounting practices
in any respect;
27
(XVII) make any election with respect to Taxes;
(XVIII) commence or settle any Legal Proceeding;
(XIX) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with past
practices;
(XX) enter into any agreement requiring the consent or approval of
any third party with respect to the Merger; or
(XXI) agree or commit to take any of the actions described in clauses
"(i)" through "(xx)" of this Section 4.2(b).
(C) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the
date of this Agreement and that caused or constitutes a material inaccuracy
in any representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute a
material inaccuracy in any representation or warranty made by the Company in
this Agreement if (A) such representation or warranty had been made as of
the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; (iii)
any event, condition, fact or circumstance hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth or described in the Company Disclosure Schedule;
(iv) any material breach of any covenant or obligation of the Company; and
(v) any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Section 6 or Section 7
impossible or unlikely or that has had or could reasonably be expected to
have a Material Adverse Effect on the Acquired Corporations. No notification
given to Parent pursuant to this Section 4.2(c) shall limit or otherwise
affect any representations, warranties, covenants or obligations of the
Company contained in this Agreement.
(D) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 4.2(c) requires any change in the Company
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming Company Disclosure Schedule were dated
as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Company shall promptly deliver to
Parent an update to the Company Disclosure Schedule specifying such change.
No such update shall be deemed to supplement or amend the Company Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by the Company in this Agreement, or
(ii) determining whether any of the conditions set forth in Section 6 has
been satisfied.
4.3 NO SOLICITATION.
(A) From the date of this Agreement until the earlier of the Effective
Time or termination of this Agreement pursuant to Section 8, the Company
shall not directly or indirectly, and shall not authorize or permit any
subsidiary of the Company or any Representative of any of the Acquired
Corporations directly or indirectly to, (i) solicit, initiate, encourage or
induce the making, submission or announcement of any Acquisition Proposal or
take any action that could reasonably be expected to lead to an Acquisition
Proposal, (ii) furnish any information regarding any of the Acquired
Corporations to any Person in connection with or in response to an
Acquisition Proposal, (iii) engage in discussions with any Person with
respect to any Acquisition Proposal, (iv) approve, endorse or recommend any
Acquisition Proposal or (v) enter into any letter of intent or similar
document or any Contract contemplating or otherwise relating to any
Acquisition Transaction; PROVIDED, HOWEVER, that prior to the approval of
this Agreement by the Required Company Shareholder Vote, this Section 4.3(a)
shall
28
not prohibit the Company from furnishing nonpublic information regarding the
Acquired Corporations to, or entering into discussions with, any Person in
response to a Superior Offer submitted by such Person (and not withdrawn) if
(1) neither the Company nor any Representative of any of the Acquired
Corporations shall have violated any of the restrictions set forth in this
Section 4.3, (2) the Board of Directors of the Company concludes in good
faith, based upon the advice of its outside legal counsel, that such action
is required in order for the Board of Directors of the Company to comply
with its fiduciary obligations to the Company's shareholders under
applicable law, (3) prior to furnishing any such nonpublic information to,
or entering into discussions with, such Person, the Company gives Parent
written notice of the identity of such Person and of the Company's intention
to furnish nonpublic information to, or enter into discussions with, such
Person, and the Company receives from such Person an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of the Company, and (4) prior to furnishing any such
nonpublic information to such Person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by
any Representative of any of the Acquired Corporations, whether or not such
Representative is purporting to act on behalf of any of the Acquired
Corporations, shall be deemed to constitute a breach of this Section 4.3 by
the Company. In addition to the foregoing, the Company shall (i) provide
Parent with at least twenty-four (24) hours prior notice of any meeting of
the Company's Board of Directors at which the Company's Board of Directors
is reasonably expected to consider a Superior Offer and (ii) not recommend a
Superior Offer to its shareholders for a period of not less than the greater
of two (2) business days or forty-eight (48) hours after Parent's receipt of
a copy of such Superior Offer (pursuant to Section 4.3(b) below).
(B) The Company shall promptly advise Parent orally and in writing of
any Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall
keep Parent fully informed with respect to the status of any such
Acquisition Proposal and any modification or proposed modification thereto.
(C) The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition
Proposal.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.
5.1 REGISTRATION STATEMENT; JOINT PROXY STATEMENT/PROSPECTUS.
(A) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC the S-4
Registration Statement, together with the Joint Proxy Statement/Prospectus
and any other documents required by the Securities Act, the Exchange Act or
any other Federal, foreign or Blue Sky or related laws in connection with
the Merger and the transactions contemplated by this Agreement ("OTHER
FILINGS"). Each of Parent and the Company will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the S-4 Registration
Statement, the Joint Proxy Statement/Prospectus or any 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 S-4 Registration Statement, the Joint Proxy
Statement/Prospectus, any Other Filings or the Merger. Each of Parent and
the Company shall use all reasonable efforts to cause the S-4 Registration
Statement (including the Joint Proxy Statement/Prospectus) and any Other
Filings to comply with the rules and regulations promulgated by the SEC, to
respond promptly to any comments of the SEC or its staff and to have the
29
S-4 Registration Statement declared effective under the Securities Act as
promptly as practicable after it is filed with the SEC. Parent will use all
reasonable efforts to cause the Joint Proxy Statement/ Prospectus to be
mailed to Parent's stockholders and the Company will use all reasonable
efforts to cause the Joint Proxy Statement/Prospectus to be mailed to the
Company's shareholders, as promptly as practicable after the Form S-4
Registration Statement is declared effective under the Securities Act. The
Company shall promptly furnish to Parent all information concerning the
Acquired Corporations and the Company's shareholders that may be required or
reasonably requested in connection with any action contemplated by this
Section 5.1. If any event relating to any of the Acquired Corporations
occurs, or if the Company becomes aware of any information, that should be
set forth in an amendment or supplement to the S-4 Registration Statement or
the Joint Proxy Statement/Prospectus, then the Company shall promptly inform
Parent thereof and shall cooperate with Parent in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to the shareholders of the Company and the stockholders of
Parent.
(B) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory approvals needed to ensure that the Parent Common
Stock to be issued in the Merger will be registered or qualified under the
securities law of every jurisdiction of the United States in which any
registered holder of Company Common Stock has an address of record on the
record date for determining the shareholders entitled to notice of and to
vote at the Company Shareholders' Meeting; PROVIDED, HOWEVER, that Parent
shall not be required (i) to qualify to do business as a foreign corporation
in any jurisdiction in which it is not now qualified or (ii) to file a
general consent to service of process in any jurisdiction.
5.2 COMPANY SHAREHOLDERS' MEETING.
(A) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and hold a meeting of
the holders of Company Common Stock (the "COMPANY SHAREHOLDERS' MEETING") to
consider, act upon and vote upon the adoption of this Agreement and approval
of the Merger. The Company Shareholders' Meeting will be held as promptly as
practicable and in any event within forty-five (45) days after the S-4
Registration Statement is declared effective under the Securities Act;
PROVIDED, HOWEVER, that notwithstanding anything to the contrary contained
in this Agreement, the Company may adjourn or postpone the Company
Shareholders' Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Joint Proxy Statement/ Prospectus is provided
to the Company's shareholders in advance of a vote on the Merger and this
Agreement or, if as of the time for which Company Shareholders' Meeting is
originally scheduled (as set forth in the Joint Proxy Statement/Prospectus)
there are insufficient shares of Company Common Stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the business
of the Company's Shareholders' Meeting. The Company shall ensure that the
Company Shareholders' Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited in connection with the Company
Shareholders' Meeting are solicited, in compliance with all applicable Legal
Requirements. The Company's obligation to call, give notice of, convene and
hold the Company Shareholders' Meeting in accordance with this Section
5.2(a) shall not be limited or otherwise affected by the commencement,
disclosure, announcement or submission to the Company of any Acquisition
Proposal, or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of the Company with respect to the
Merger.
(B) Subject to Section 5.2(c): (i) the Board of Directors of the Company
shall unanimously recommend that the Company's shareholders vote in favor of
and adopt and approve this Agreement and the Merger at the Company
Shareholders' Meeting; (ii) the Joint Proxy Statement/Prospectus shall
include a statement to the effect that the Board of Directors of the Company
has unanimously recommended that the Company's shareholders vote in favor of
and adopt and approve this Agreement and the Merger at the Company
Shareholders' Meeting; and (iii) neither the Board of Directors of the
Company nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to
30
withdraw, amend or modify, in a manner adverse to Parent, the unanimous
recommendation of the Board of Directors of the Company that the Company's
shareholders vote in favor of and adopt and approve this Agreement and the
Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(C) Nothing in Section 5.2(b) shall prevent the Board of Directors of
the Company from withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Offer is made to the
Company and is not withdrawn, (ii) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in
Section 4.3, and (iii) the Board of Directors of the Company concludes in
good faith, based upon the advice of its outside counsel, that, in light of
such Superior Offer, the withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of the
Company to comply with its fiduciary obligations to the Company's
shareholders under applicable law. Nothing contained in this Section 5.2
shall limit the Company's obligation to hold and convene the Company
Shareholders' Meeting (regardless of whether the unanimous recommendation of
the Board of Directors of the Company shall have been withdrawn, amended or
modified).
5.3 PARENT STOCKHOLDERS' MEETING.
(A) Parent shall take all action necessary to call, give notice of,
convene and hold a meeting of the holders of Parent Common Stock to consider
and vote upon the issuance of Parent Common Stock in the Merger (the "PARENT
STOCKHOLDERS' MEETING"). The Parent Stockholders' Meeting will be held as
promptly as practicable and in any event within forty-five (45) days after
the S-4 Registration Statement is declared effective under the Securities
Act; PROVIDED, HOWEVER, that notwithstanding anything to the contrary
contained in this Agreement, Parent may adjourn or postpone the Parent
Stockholders' Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Joint Proxy Statement/Prospectus is provided
to Parent's stockholders in advance of a vote on the issuance of Parent
Common Stock in the Merger or, if as of the time for which the Parent
Stockholders' Meeting is originally scheduled (as set forth in the Joint
Proxy Statement/Prospectus) there are insufficient shares of Parent Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Parent's Stockholders' Meeting.
(B) (i) The board of directors of Parent shall unanimously recommend
that Parent's stockholders vote in favor of the issuance of Parent Common
Stock in the Merger; (ii) the Joint Proxy Statement/ Prospectus shall
include a statement to the effect that the board of directors of Parent has
unanimously recommended that Parent's stockholders vote in favor of the
issuance of Parent Common Stock in the Merger; and (iii) neither the board
of directors of Parent nor any committee thereof shall withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify, in a manner
adverse to the Company, the unanimous recommendation of the board of
directors of Parent that Parent's stockholders vote in favor of the issuance
of Parent Common Stock in the Merger. For purposes of this Agreement, said
recommendation of Parent's board of directors shall be deemed to have been
modified in a manner adverse to the Company if said recommendation shall no
longer be unanimous.
5.4 REGULATORY APPROVALS. The Company and Parent shall use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any Governmental
Body with respect to the Merger and the other transactions contemplated by this
Agreement, and to submit promptly any additional information requested by any
such Governmental Body. The Company and Parent shall respond as promptly as
practicable to any inquiries or requests received from any state attorney
general or other Governmental Body in connection with antitrust or related
matters. Each of the Company and Parent shall (1) give the other party prompt
notice of the commencement of any Legal Proceeding by or before any Governmental
Body with respect to the Merger or any of the other transactions contemplated by
this Agreement, (2) keep the other party informed as to
31
the status of any such Legal Proceeding, and (3) promptly inform the other party
of any communication to or from the Federal Trade Commission, the Department of
Justice or any other Governmental Body regarding the Merger. The Company and
Parent will consult and cooperate with one another, and will consider in good
faith the views of one another, in connection with any analysis, appearance,
presentation, memorandum, brief, argument, opinion or proposal made or submitted
in connection with any Legal Proceeding under or any other federal or state
antitrust or fair trade law. In addition, except as may be prohibited by any
Governmental Body or by any Legal Requirement, in connection with any Legal
Proceeding under or any other federal or state antitrust or fair trade law or
any other similar Legal Proceeding, each of the Company and Parent agrees to
permit authorized Representatives of the other party to be present at each
meeting or conference relating to any such Legal Proceeding and to have access
to and be consulted in connection with any document, opinion or proposal made or
submitted to any Governmental Body in connection with any such Legal Proceeding.
5.5 STOCK OPTIONS.
(A) Subject to Section 5.5(b), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding
shall be converted into and become rights with respect to Parent Common
Stock, and Parent shall assume each such Company Option in accordance with
the requirements of Section 424(a) of the Code (as in effect as of the date
of this Agreement) and the terms of the stock option plan under which it was
issued and the stock option agreement by which it is evidenced. From and
after the Effective Time, (i) each Company Option assumed by Parent may be
exercised solely for shares of Parent Common Stock, (ii) the number of
shares of Parent Common Stock subject to each such Company Option shall be
equal to the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounding down to the nearest whole share (with cash, less
the applicable exercise price, being payable for any fraction of a share),
(iii) the per share exercise price under each such Company Option shall be
adjusted by dividing the per share exercise price under such Company Option
by the Exchange Ratio and rounding up to the nearest cent and (iv) any
restriction on the exercise of any such Company Option shall continue in
full force and effect and the term, exercisability, vesting schedule and
other provisions of such Company Option shall otherwise remain unchanged;
PROVIDED, HOWEVER, that each Company Option assumed by Parent in accordance
with this Section 5.5(a) shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction subsequent to the Effective Time.
(B) Notwithstanding anything to the contrary contained in this Section
5.5, in lieu of assuming outstanding Company Options in accordance with
Section 5.5(a), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing equivalent replacement stock options in
substitution therefor that are substantially the same.
(C) The Company shall take all action that may be necessary (under the
plans pursuant to which Company Options are outstanding and otherwise) to
effectuate the provisions of this Section 5.5 and to ensure that, from and
after the Effective Time, holders of Company Options have no rights with
respect thereto other than those specifically provided in this Section 5.5.
5.6 FORM S-8. 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 soon as reasonably practical (and in any event within sixty (60)
days) after the Effective Time.
5.7 WARRANTS. At the Effective Time, all rights with respect to Company
Common Stock under Company Warrants that are then outstanding shall be converted
into and become rights with respect to Parent Common Stock, and Parent shall
assume each Company Warrant in accordance with the terms (as in effect as of the
date hereof) of such Company Warrants. From and after the Effective Time, (a)
each Company Warrant assumed by Parent may be exercised solely for shares of
Parent Common Stock, (b) the
32
number of shares of Parent Common Stock subject to each Company Warrant shall be
equal to the number of shares of Company Common Stock subject to such Company
Warrant immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounding down to the nearest whole share (with cash, less the applicable
exercise price, being payable for any fraction of a share), (c) the per share
exercise price under each such Company Warrant shall be adjusted by dividing the
per share exercise price under such Company Warrant by the Exchange Ratio and
rounding up to the nearest cent and (d) any restriction on the exercise of any
Company Warrant shall continue in full force and effect and the term,
exercisability, schedule and other provisions of such Company Warrant shall
otherwise remain unchanged; PROVIDED, HOWEVER, that such Company Warrant shall,
in accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, recapitalization or other similar
transaction subsequent to the Effective Time. The Company shall take all action
that may be necessary (under the Company Warrants and otherwise) to effectuate
the provisions of this Section 5.7 and to ensure that, from and after the
Effective Time, holders of Company Warrants have no rights with respect thereto
other than those specifically provided herein.
5.8 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(A) All rights to indemnification existing in favor of the current
directors and officers of the Company for acts and omissions occurring prior
to the Effective Time, as provided in the Company's Bylaws (as in effect as
of the date of this Agreement) and as provided in any indemnification
agreements between the Company and said officers and directors (as in effect
as of the date of this Agreement), shall survive the Merger and shall be
observed by Parent and the Surviving Corporation for a period of not less
than six (6) years from the Effective Time.
(B) From the Effective Time until the third anniversary of the date on
which the Merger becomes effective, the Surviving Corporation shall maintain
in effect, for the benefit of the current directors and officers of the
Company with respect to acts or omissions occurring prior to the Effective
Time, the lesser of (i) the existing amount of coverage of the existing
policy of directors' and officers' liability insurance maintained by the
Company as of the date of this Agreement (the "EXISTING POLICY") and (ii)
the amount of coverage purchased by 150% of the amount of the last annual
premium paid by the Company prior to the date of this Agreement for the
Existing Policy; PROVIDED, HOWEVER, that the Surviving Corporation may
substitute for the Existing Policy a policy or policies of comparable
coverage.
5.9 POOLING OF INTERESTS; TAX FREE REORGANIZATION. Each of the Company and
Parent agrees (a) not to take any action during the Pre-Closing Period that
would adversely affect the ability of Parent to account for the Merger as a
"pooling of interests," (b) to use all reasonable efforts to attempt to ensure
that none of its "affiliates" (as that term is used in Rule 145 promulgated
under the Securities Act) takes any action that could adversely affect the
ability of Parent to account for the Merger as a "pooling of interests" and (c)
not to take any action either prior to or after the Effective Time that could
reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" under Section 368(a) of the Code. The Company agrees to provide
KPMG Peat Marwick LLP and Xxxxx Xxxxxxxx LLP such letters as may be reasonably
requested by either of them with respect to the letters referred to in Sections
6.6(b) and 6.6(c).
5.10 ADDITIONAL AGREEMENTS.
(A) Subject to Section 5.10(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, but
subject to Section 5.10(b), each party to this Agreement (i) shall make all
filings (if any) and give all notices (if any) required to be made and given
by such party in connection with the Merger and the other transactions
contemplated by this Agreement, (ii) shall use all reasonable efforts to
obtain each Consent (if any) required to be obtained (pursuant to any
applicable Legal Requirement or Contract,
33
or otherwise) by such party in connection with the Merger or any of the
other transactions contemplated by this Agreement, and (iii) shall use all
reasonable efforts to lift any restraint, injunction or other legal bar to
the Merger. The Company shall promptly deliver to Parent a copy of each such
filing made, each such notice given and each such Consent obtained by the
Company during the Pre-Closing Period.
(B) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose or cause any of its subsidiaries to dispose of any assets, or to
commit to cause any of the Acquired Corporations to dispose of any assets;
(ii) to discontinue or cause any of its subsidiaries to discontinue offering
any product, or to commit to cause any of the Acquired Corporations to
discontinue offering any product; (iii) to license or otherwise make
available, or cause any of its subsidiaries to license or otherwise make
available, to any Person, any technology, software or other Proprietary
Asset, or to commit to cause any of the Acquired Corporations to license or
otherwise make available to any Person any technology, software or other
Proprietary Asset; (iv) to hold separate or cause any of its subsidiaries to
hold separate any assets or operations (either before or after the Closing
Date), or to commit to cause any of the Acquired Corporations to hold
separate any assets or operations; or (v) to make or cause any of its
Subsidiaries to make any commitment (to any Governmental Body or otherwise)
regarding its future operations or the future operations of any of the
Acquired Corporations.
5.11 CONFIDENTIALITY. The parties acknowledge that the Company and Parent
have previously executed a Mutual Non-Disclosure Agreement, dated as of June 16,
1998 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
5.12 DISCLOSURE. Parent and the Company have agreed to the text of a joint
press release announcing the signing of this Agreement and shall consult with
each other before issuing any other press release or otherwise making any public
statement with respect to the Merger or any of the other transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, the Company shall not, and shall not permit any of its
Representatives to, make any disclosure regarding the Merger or any of the other
transactions contemplated by this Agreement unless (a) Parent shall have
approved such disclosure or (b) the Company shall have been advised in writing
by its outside legal counsel that such disclosure is required by applicable law.
5.13 TAX MATTERS.
(A) At or prior to the filing of the S-4 Registration Statement, Parent
and Merger Sub and the Company shall execute and deliver to Cooley Godward
LLP and to Saul, Ewing, Xxxxxx & Xxxx LLP tax representation letters in the
forms attached as Exhibit G-1 and G-2, as applicable;
(B) Parent, Merger Sub and the Company shall each confirm to Xxxxxx
Godward LLP and to Saul, Ewing, Xxxxxx & Xxxx LLP the accuracy and
completeness as of the Effective Time of the tax representation letters
delivered pursuant to Section 5.13(a);
(C) Parent, Merger Sub and the Company shall use all reasonable efforts
to cause the Merger to qualify as a tax free reorganization under Section
368(a)(1) of the Code; and
(D) Following delivery of the tax representation letters pursuant to
Section 5.13(a), each of Parent and the Company shall use its reasonable
efforts to cause Xxxxxx Godward LLP and Saul, Ewing, Xxxxxx & Xxxx LLP,
respectively, to deliver promptly to it a legal opinion satisfying the
requirements of Item 601 of Regulation S-K promulgated under the Securities
Act. In rendering such opinions, each of such counsel shall be entitled to
rely on the tax representation letters delivered pursuant to Section
5.13(a).
5.14 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use all
reasonable efforts to obtain and deliver to Parent prior to the Closing the
resignation of each officer and director of the Company.
34
5.15 NASDAQ LISTING. Parent shall use all reasonable efforts to have the
shares of Parent Common Stock issuable to the shareholders of the Company
pursuant to the Agreement and such other shares required to be reserved for
issuance in connection with the Merger authorized for listing on Nasdaq upon
official notice of issuance.
5.16 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.17 PARENT BOARD OF DIRECTORS. As soon as practicable after the Effective
Time, Parent shall use reasonable efforts to nominate and appoint (i) Xxxxxx X.
Xxxxxx, or such other nominee designated by the Company, to Class I of its Board
of Directors to serve until the annual meeting of stockholders to be held in
1999 and (ii) Xxxxx X. Xxxxxx, or such other nominee designated by the Company,
to Class II of its Board of Directors to serve until the annual meeting of
stockholders to be held in 2000.
5.18 ACCESS TO INFORMATION. During the Pre-Closing Period, Parent shall,
and shall cause its Representatives, to: (a) provide the Company and its
Representatives with reasonable access to Parent's Representatives, personnel
and assets and to all existing books, records, Tax Returns, work papers and
other documents and information relating to Parent and its Subsidiaries; and (b)
provide the Company and its Representatives with such copies of the existing
books, records, Tax Returns, work papers and other documents and information
relating to Parent and its Subsidiaries, and with such additional financial,
operating and other data and information regarding Parent and its Subsidiaries,
as the Company may reasonably request. Without limiting the generality of the
foregoing, during the Pre-Closing Period, Parent shall promptly provide the
Company with copies of any notice, report or other document filed with or sent
to any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
and upon consummation of the Closing, all conditions herein shall be deemed
satisfied and any liability for failure to satisfy any condition herein shall be
precluded:
6.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of the
Company contained in this Agreement shall have been accurate in all material
respects as of the date of this Agreement and shall be accurate in all material
respects as of the Closing Date as if made on and as of the Closing Date;
PROVIDED, HOWEVER, that any representations and warranties qualified by
"Material Adverse Effect" or other materiality qualifications are accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date.
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the Company
is required to comply with or to perform at or prior to the Closing shall have
been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
duly approved by the Required Company Shareholder Vote, and the issuance of
Parent Common Stock in the Merger shall have been duly approved by the Required
Parent Stockholder Vote. Fewer than 10% of the outstanding shares of Company
Common Stock shall be Dissenting Shares.
35
6.5 CONSENTS. All material Consents required to be obtained in connection
with the Merger and the other transactions contemplated by this Agreement
(including the Consents identified in Part 2.25 of the Company Disclosure
Schedule) shall have been obtained and shall be in full force and effect.
6.6 AGREEMENTS AND DOCUMENTS. Parent and Merger Sub shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(A) the statement referred to in Section 5.16(b), executed by the
Company;
(B) a letter from KPMG Peat Marwick LLP, dated as of the Closing Date
and addressed to Parent and the Company, reasonably satisfactory in form and
substance to Parent and Xxxxx Xxxxxxxx LLP, to the effect that, after
reasonable investigation, KPMG Peat Marwick LLP is not aware of any fact
concerning the Company or any of the Company's shareholders or affiliates
that could preclude Parent from accounting for the Merger as a "pooling of
interests" in accordance with GAAP, Accounting Principles Board Opinion No.
16 and all published rules, regulations and policies of the SEC;
(C) a letter from Xxxxx Xxxxxxxx LLP, dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to
Parent, to the effect that, after reasonable investigation, Xxxxx Xxxxxxxx
LLP is not aware of any fact concerning Parent or any of Parent's
stockholders or affiliates that could preclude Parent from accounting for
the Merger as a "pooling of interests" in accordance with GAAP, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC;
(D) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing Date
and addressed to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Xxxxxx Godward LLP may rely upon
the tax representation letters referred to in Section 5.13);
(E) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1,
6.2, 6.4, 6.5, 6.7 and 6.8 have been duly satisfied; and
(F) the written resignations of all officers and directors of the
Company, effective as of the Effective Time.
6.7 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the business, condition, assets, liabilities, operations or financial
performance of the Acquired Corporations since the date of this Agreement.
6.8 FIRPTA COMPLIANCE. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.16.
6.9 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been authorized for listing on Nasdaq, subject to notice of issuance.
6.10 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.11 NO GOVERNMENTAL LITIGATION. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (b) relating to the Merger and seeking to obtain
from Parent or any of its subsidiaries any damages that may be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation; or (d)
which would materially and adversely affect
36
the right of Parent, the Surviving Corporation or any subsidiary of Parent to
own the assets or operate the business of the Company.
6.12 NO OTHER LITIGATION. There shall not be pending any Legal Proceeding
in which there is a reasonable possibility of an outcome that would have a
Material Adverse Effect on the Acquired Corporations or on Parent: (a)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement; (b) relating to
the Merger and seeking to obtain from Parent or any of its subsidiaries any
damages that may be material to Parent, (c) seeking to prohibit or limit in any
material respect Parent's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would affect adversely the right of Parent, the
Surviving Corporation or any subsidiary of Parent to own the assets or operate
the business of the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY.
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following conditions, and upon consummation
of the Closing, all conditions herein shall be deemed satisfied and any
liability for failure to satisfy any condition herein shall be precluded:
7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all material respects as of the date of this Agreement and shall be accurate in
all material respects as of the Closing Date as if made on and as of the Closing
Date; PROVIDED, HOWEVER, that any representations and warranties qualified by
"Material Adverse Effect" or other materiality qualifications are accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
7.4 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
duly approved by the Required Company Shareholder Vote, and the issuance of
Parent Common Stock in the Merger shall have been duly approved by the Required
Parent Stockholder Vote.
7.5 DOCUMENTS. The Company shall have received the following documents:
(A) a Registration Rights Agreement in the form of Exhibit H, executed
by Parent and each person identified on Exhibit I.
(B) a legal opinion of Saul, Ewing, Xxxxxx & Xxxx LLP, dated as of the
Closing Date and addressed to the Company, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368 of the
Code (it being understood that, in rendering such opinion, Saul, Ewing,
Xxxxxx & Xxxx LLP may rely upon tax representation letters including those
referred to in Section 5.13);
(C) a letter from KPMG Peat Marwick LLP, dated as of a date no earlier
than three (3) days prior to the Closing Date and addressed to the Company,
reasonably satisfactory in form and substance to Parent and Xxxxx Xxxxxxxx
LLP, to the effect that, after reasonable investigation, KPMG Peat Marwick
LLP is not aware of any fact concerning the Company or any of the Company's
shareholders or affiliates that could preclude Parent from accounting for
the Merger as a "pooling of
37
interests" in accordance with GAAP, Accounting Principles Board Opinion No.
16 and all published rules, regulations and policies of the SEC;
(D) a letter from Xxxxx Xxxxxxxx LLP, dated as of a date no earlier than
three (3) days prior to the Closing Date and addressed to Parent, reasonably
satisfactory in form and substance to Parent, to the effect that, after
reasonable investigation, Xxxxx Xxxxxxxx LLP is not aware of any fact
concerning Parent or any of Parent's stockholders or affiliates that would
preclude Parent from accounting for the Merger as a "pooling of interests"
in accordance with GAAP, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC; and
(E) a certificate executed on behalf of Parent by an executive officer
of Parent, confirming that conditions set forth in Sections 7.1, 7.2, 7.3
and 7.6 have been duly satisfied.
7.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in Parent's business, condition, assets, liabilities, operations or
financial performance since the date of this Agreement.
7.7 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been authorized for listing on Nasdaq, subject to notice of issuance.
7.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by the Company
illegal.
SECTION 8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of the Merger by the shareholders of the
Company:
(A) by mutual written consent of the Boards of Directors of the Parent
and the Company;
(B) by either Parent or the Company if the Merger shall not have been
consummated by January 31, 1999 (unless the failure to consummate the Merger
is attributable to a failure on the part of the party seeking to terminate
this Agreement to perform any material obligation required to be performed
by such party at or prior to the Effective Time);
(C) by either Parent or the Company if a court of competent jurisdiction
or other Governmental Body shall have issued a final and non-appealable
order, decree or ruling, or shall have taken any other action, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(D) by either Parent or the Company if (i) the Company Shareholders'
Meeting shall have been held (either on the date for which such Meeting was
originally scheduled or pursuant to any permissible adjournment or
postponement) and (ii) this Agreement and the Merger shall not have been
adopted and approved at such meeting by the Company Required Shareholder
Vote (PROVIDED that the right to terminate this Agreement under this Section
8.1(d) shall not be available to the Company where the failure to obtain
Company shareholder approval shall have been caused by the action or failure
to act of the Company and such action or failure to act constitutes a
material breach by the Company of this Agreement);
(E) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the Company Required Shareholder Vote) if a
Triggering Event shall have occurred;
(F) by either Parent or Company if (i) the Parent Stockholders' Meeting
shall have been held (either on the date for which such Meeting was
originally scheduled or pursuant to any permissible
38
adjournment or postponement) and (ii) issuance of the Parent Common Stock in
the Merger shall not have been approved at such meeting by the Parent
Required Stockholder Vote;
(G) by Parent if any of the Company's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of the Company's covenants contained in this Agreement
shall have been breached in any material respect; PROVIDED, HOWEVER, that if
an inaccuracy in the Company's representations and warranties or a breach of
a covenant by the Company is curable by the Company and the Company is
continuing to exercise all reasonable efforts to cure such inaccuracy or
breach, then Parent may not terminate this Agreement under this Section
8.1(g) on account of such inaccuracy or breach; or
(H) by the Company if any of Parent's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of Parent's covenants contained in this Agreement
shall have been breached in any material respect; PROVIDED, HOWEVER, that if
an inaccuracy in Parent's representations and warranties or a breach of a
covenant by Parent is curable by Parent and Parent is continuing to exercise
all reasonable efforts to cure such inaccuracy or breach, then the Company
may not terminate this Agreement under this Section 8.1(h) on account of
such inaccuracy or breach.
8.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination 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 as provided in Section 8.1, this Agreement shall
be of no further force or effect; PROVIDED, HOWEVER, that (i) this Section 8.2,
Section 8.3 and Section 9 shall survive the termination of this Agreement and
shall remain in full force and effect, (ii) the termination of this Agreement
shall not relieve any party from any liability for any breach of this Agreement
and (iii) 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.
8.3 EXPENSES; TERMINATION FEES.
(A) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
by this Agreement shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; PROVIDED, HOWEVER, that Parent and
the Company shall share equally all fees and expenses, other than attorneys'
fees, incurred in connection with the printing and filing of the S-4
Registration Statement and the Joint Proxy Statement/ Prospectus and any
amendments or supplements thereto.
(B) If this Agreement is terminated by Parent pursuant to Section
8.1(e), then the Company shall pay to Parent (at the time specified in
Section 8.3(c)), a nonrefundable fee equal to five million dollars
($5,000,000) (the "TERMINATION FEE") in cash within three (3) days of such
termination.
(C) If this Agreement is terminated by Company or Parent pursuant to
Section 8.1(d) and an Acquisition Transaction is consummated or a proposed
Acquisition Transaction is publicly announced at anytime prior to the first
anniversary of the date of this Agreement, Company shall pay to Parent the
Termination Fee contemporaneously with the earlier of the consummation of
such Acquisition Transaction or such announcement regarding a proposed
Acquisition Agreement.
SECTION 9. MISCELLANEOUS PROVISIONS.
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after approval of this Agreement and the Merger by the shareholders of
the Company; and whether before or after approval of the issuance of Parent
Common Stock in the Merger by Parent's stockholders); PROVIDED, HOWEVER, that
(i) after any such approval of this Agreement and the Merger by the Company's
shareholders, no amendment shall be made
39
which by law or NASD regulation requires further approval of the shareholders of
the Company without the further approval of such shareholders, and (ii) after
any such approval of the issuance of Parent Company Stock in the Merger by
Parent's stockholders, no amendment shall be made which by law or NASD
regulation requires further approval of Parent's stockholders without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
9.2 WAIVER.
(A) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy.
(B) No party shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement and the other
agreements referred to herein constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among or between any
of the parties with respect to the subject matter hereof and thereof. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same instrument.
9.5 APPLICABLE LAW; JURISDICTION. THIS AGREEMENT IS MADE UNDER, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. In any action between
or among any of the parties, whether arising out of this Agreement or otherwise,
(a) each of the parties irrevocably and unconditionally consent in the State of
California; (b) if any such action is commenced in a state court, then, subject
to applicable law, no party shall object to the removal of such action to any
federal court located in the law, no party shall object to the removal of such
action to any federal court located in the State of California; (c) each of the
parties irrevocably waivers the right to trial by jury; and (d) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 9.9.
9.6 DISCLOSURE SCHEDULE. Each of the Company Disclosure Schedule and the
Parent Disclosure Schedule shall be arranged in separate parts corresponding to
the numbered and lettered sections contained in Sections 2 and 3, respectively,
and the information disclosed in any numbered or lettered part shall be deemed
to relate to and to qualify only the particular representation or warranty set
forth in the corresponding numbered or lettered section in Section 2 or 3,
respectively, and shall not be deemed to relate to or to qualify any other
representation or warranty unless such relationship or qualification is
reasonably apparent.
9.7 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a
40
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
9.8 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment of this Agreement or any of such rights by the Company without such
consent shall be void and of no effect. Except as set forth in Section 5.8 with
respect to the current directors and officers of the Company, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
9.9 NOTICES. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent: FIRST CONSULTING GROUP, INC.
000 X. Xxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
if to Merger Sub: FOXTROT ACQUISITION SUB, INC.
000 X. Xxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
if to the INTEGRATED SYSTEMS CONSULTING GROUP, INC.
Company: 000 Xxxx Xxxxxxxxxx Xxxx
Xxxxx, XX 00000
Facsimile: (000) 000-0000
9.10 COOPERATION. The Company agrees to cooperate fully with Parent and to
execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the transactions contemplated by this Agreement
and to carry out the intent and purposes of this Agreement.
9.11 CONSTRUCTION.
(A) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include masculine and feminine genders.
(B) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(C) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(D) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
41
IN WITNESS WHEREOF, the parties have caused this AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION to be executed as of the date first above written.
FIRST CONSULTING GROUP, INC.
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------------------
Printed Name: Xxxxxx X. Xxxxxxxx
-------------------------------------------
Title: Executive Vice President
--------------------------------------------
FOXTROT ACQUISITION SUB, INC.
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------------------
Printed Name: Xxxxxx X. Xxxxxxxx
-------------------------------------------
Title: President
--------------------------------------------
INTEGRATED SYSTEMS CONSULTING GROUP, INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------------------
Printed Name: Xxxxx X. Xxxxxx
-------------------------------------------
Title: President
--------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
SIGNATURE PAGE
EXHIBITS INDEX
Exhibit A......................... Certain Definitions
Exhibit B-1....................... Company Shareholders who have executed Voting Agreements
Exhibit B-2....................... Parent Stockholders who have executed a Voting Agreement
Exhibit C-1....................... Form of Voting Agreement for Company Shareholders
Exhibit C-2....................... Form of Voting Agreement for Parent Stockholders
Exhibit D-1....................... Individuals executing Company Affiliate Agreement in
Form of Exhibit E-1
Exhibit D-2....................... Individuals executing Parent Affiliate Agreement in Form
of Exhibit E-2
Exhibit E-1....................... Form of Affiliate Agreement for Company Affiliates
Exhibit E-2....................... Form of Affiliate Agreement for Parent Affiliates
Exhibit F-1....................... Form of Surviving Corporation Articles of Incorporation
Exhibit F-2....................... Form of Surviving Corporation Bylaws
Exhibit G-1....................... Form of Tax Representation Letter to be delivered by
Parent and Merger Sub
Exhibit G-2....................... Form of Tax Representation Letter to be delivered by
Company
Exhibit H......................... Form of Registration Rights Agreement
Exhibit I......................... Individuals to execute Registration Rights Agreement in
Form of Exhibit H
i
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "ACQUIRED CORPORATION CONTRACT" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
ACQUIRED CORPORATION PROPRIETARY ASSET. "ACQUIRED CORPORATION PROPRIETARY
ASSET" shall mean any Proprietary Asset owned by or licensed to any of the
Acquired Corporations or otherwise used by any of the Acquired Corporations.
ACQUISITION PROPOSAL. "ACQUISITION PROPOSAL" shall mean any offer or
proposal (other than an offer or proposal by Parent) contemplating or otherwise
relating to any Acquisition Transaction.
ACQUISITION TRANSACTION. "ACQUISITION TRANSACTION" shall mean any
transaction or series of related transactions involving:
any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which any of the Acquired
Corporations is a constituent corporation, (ii) in which a Person or "group"
(as defined in the Exchange Act and the rules promulgated thereunder) of
Persons directly or indirectly acquires the Company or more than fifty
percent (50%) of the Company's business or directly or indirectly acquires
beneficial or record ownership of securities representing more than twenty
percent (20%) of the outstanding securities of any class of voting
securities of any of the Acquired Corporations, or (iii) in which any of the
Acquired Corporations issues securities representing more than twenty
percent (20%) of the outstanding securities of any class of voting
securities of the Company;
(A) 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 50% of the assets of the Company; or
(B) any liquidation or dissolution of the Company.
AGREEMENT. "AGREEMENT" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY COMMON STOCK. "COMPANY COMMON STOCK" shall mean the Common Stock,
$.005 par value per share, of the Company.
CONSENT. "CONSENT" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "CONTRACT" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "ENCUMBRANCE" shall mean 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).
A-1
ENTITY. "ENTITY" shall mean any 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 or entity.
EXCHANGE ACT. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
GOVERNMENTAL AUTHORIZATION. "GOVERNMENTAL AUTHORIZATION" shall mean any: (a)
permit, license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental Body.
GOVERNMENTAL BODY. "GOVERNMENTAL BODY" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
LEGAL PROCEEDING. "LEGAL PROCEEDING" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "LEGAL REQUIREMENT" shall mean 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 Body.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstances or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
would have a material adverse effect on (i) the business, condition,
capitalization, assets, liabilities, operations or financial performance of the
Acquired Corporations taken as a whole, (ii) the ability of the Company to
consummate the Merger or any of the other transactions contemplated by the
Agreement or to perform any of its obligations under the Agreement, or (iii)
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation. An event, violation, inaccuracy, circumstance or other matter will
be deemed to have a "Material Adverse Effect" on Parent if such event,
violation, inaccuracy, circumstance or other matter would have a material
adverse effect on the business, condition, assets, liabilities, operations or
financial performance of Parent and its subsidiaries taken as a whole.
NASDAQ. "NASDAQ" shall mean the Nasdaq National Market.
PARENT COMMON STOCK. "PARENT COMMON STOCK" shall mean the Common Stock,
$.001 par value per share, of Parent.
PERSON. "PERSON" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "PROPRIETARY ASSET" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program (in source and executable form), algorithm,
invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset in any jurisdiction in the world; or (b) right to use or exploit any of
the foregoing in any jurisdiction in the world.
A-2
REPRESENTATIVES. "REPRESENTATIVES" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
SECURITIES ACT. "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
SUBSIDIARY. An entity shall be deemed to be a "Subsidiary" of another Person
if such Person directly or in directly owns, beneficially or of record, an
amount of voting securities of other interests in such Entity that is sufficient
to enable such Person to elect at leased a majority of the members of such
Entity's board of directors or other governing body.
SUPERIOR OFFER. "SUPERIOR OFFER" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of the outstanding
shares of Company Common Stock on terms that the board of directors of the
Company determines, in its reasonable judgment, based upon the written advice of
its financial advisor, to be more favorable to the Company's shareholders than
the terms of the Merger; PROVIDED, HOWEVER, that any such offer shall not be
deemed to be a "Superior Offer" if any financing required to consummate the
transaction contemplated by such offer is not committed and is not likely to be
obtained by such third party on a timely basis.
TAX. "TAX" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, AD
VALOREM tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "TAX RETURN" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TRIGGERING EVENT. A "TRIGGERING EVENT" shall be deemed to have occurred if:
(i) the Board of Directors of the Company shall have failed to recommend, or
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the adoption
and approval of the Agreement or the approval of the Merger; (ii) the Company
shall have failed to include in the Joint Proxy Statement/Prospectus the
unanimous recommendation of the board of directors of the Company in favor of
the adoption and approval of the Agreement and the approval of the Merger; (iii)
the board of directors of the Company fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the Agreement and the
approval of the Merger within five (5) business days after the Parent request in
writing that such recommendation be reaffirmed; (iv) the board of directors of
the Company shall have approved, endorsed or recommended any Acquisition
Proposal; (v) the Company shall have entered into any letter of intent of
similar document or any Contract relating to any Acquisition Proposal; (vi) the
Company shall have failed to hold the Company Shareholders Meeting as promptly
as practicable and in any event within 45 days after the Form S-4 Registration
Statement is declared effective under the Securities Act; (vii) a tender or
exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its securityholders, within ten (10)
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Company recommends rejection of such tender or
exchange offer; (viii) an Acquisition Proposal is publicly announced, and the
Company (A) fails to issue a press release announcing its opposition to such
Acquisition Proposal within five business days after such Acquisition Proposal
is announced or (B) otherwise fails to actively oppose such Acquisition
Proposal; or (ix) the Company breaches or is deemed to have breached any of its
obligations under Section 4.3 of the Agreement.
A-3
