EXHIBIT 99.1
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WEBMETHODS, INC.
WOLF ACQUISITION, INC. AND
ACTIVE SOFTWARE, INC.
DATED AS OF MAY 20, 2000
================================================================================
TABLE OF CONTENTS
-----------------
Page No.
-------
ARTICLE I THE MERGER..................................................... 2
1.1 The Merger..................................................... 2
----------
1.2 Effective Time................................................. 2
--------------
1.3 Effect of the Merger........................................... 2
--------------------
1.4 Certification of Incorporation; Bylaws......................... 2
--------------------------------------
1.5 Directors and Officers......................................... 2
----------------------
1.6 Conversion of Company Common Stock, Etc........................ 3
---------------------------------------
1.7 Stock Options and Warrants..................................... 3
--------------------------
1.8 Adjustments to Exchange Ratio.................................. 4
-----------------------------
1.9 Fractional Shares.............................................. 4
-----------------
1.10 Surrender of Certificates...................................... 4
-------------------------
1.11 Further Ownership Rights in Company Common Stock............... 7
------------------------------------------------
1.12 Closing........................................................ 7
-------
1.13 Lost, Stolen or Destroyed Certificates......................... 7
--------------------------------------
1.14 Tax Consequences............................................... 7
----------------
1.15 Accounting Consequences........................................ 7
-----------------------
1.16 Further Assurances............................................. 7
------------------
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 8
2.1 Organization and Qualification; Subsidiaries................... 8
--------------------------------------------
2.2 Certificate of Incorporation and Bylaws........................ 9
---------------------------------------
2.3 Capitalization................................................. 9
--------------
2.4 Authority; Enforceability...................................... 11
-------------------------
2.5 Required Vote.................................................. 11
-------------
2.6 No Conflict; Required Filings and Consents..................... 12
------------------------------------------
2.7 Material Agreements............................................ 12
-------------------
2.8 Compliance..................................................... 14
----------
2.9 SEC Filings; Financial Statements.............................. 15
---------------------------------
2.10 Absence of Certain Changes or Events........................... 15
------------------------------------
2.11 No Undisclosed Liabilities..................................... 16
--------------------------
2.12 Litigation..................................................... 16
----------
2.13 Employee Benefit Plans......................................... 16
----------------------
2.14 Employment and Labor Matters................................... 18
----------------------------
2.15 Registration Statement; Proxy Statement/Prospectus............. 20
--------------------------------------------------
2.16 Absence of Restrictions on Business Activities................. 20
----------------------------------------------
2.17 Title to Assets; Leases........................................ 21
-----------------------
2.18 Taxes.......................................................... 21
-----
2.19 Environmental Matters.......................................... 23
---------------------
2.20 Intellectual Property.......................................... 24
---------------------
2.21 Insurance...................................................... 28
---------
2.22 No Restrictions on the Merger; Takeover Statutes............... 28
------------------------------------------------
2.23 Pooling; Tax Matters........................................... 29
--------------------
2.24 Brokers........................................................ 29
-------
2.25 Certain Business Practices..................................... 30
--------------------------
2.26 Interested Party Transactions.................................. 30
-----------------------------
2.27 Opinion of Financial Advisor................................... 30
---------------------------
2.28 Disclosure..................................................... 30
----------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ 31
3.1 Organization and Qualification................................. 31
------------------------------
3.2 Capitalization................................................. 32
--------------
3.3 Authority; Enforceability...................................... 33
-------------------------
3.4 Required Vote.................................................. 33
-------------
3.5 No Conflict; Required Filings and Consents..................... 34
------------------------------------------
3.6 Material Agreements............................................ 35
-------------------
3.7 Compliance..................................................... 35
----------
3.8 SEC Filings; Financial Statements.............................. 35
---------------------------------
3.9 Absence of Certain Changes or Events........................... 36
------------------------------------
3.10 Absence of Litigation.......................................... 37
---------------------
3.11 Registration Statement; Proxy Statement/Prospectus............. 37
--------------------------------------------------
3.12 Taxes.......................................................... 37
-----
3.13 Environmental Matters.......................................... 39
---------------------
3.14 Pooling; Tax Matters........................................... 39
--------------------
3.15 Brokers........................................................ 40
-------
3.16 Opinion of Financial Advisor................................... 40
----------------------------
3.17 Absence of Restrictions on Business Activities................. 40
----------------------------------------------
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER......................... 40
4.1 Conduct of Business by the Company Pending the Merger.......... 40
-----------------------------------------------------
4.2 Solicitation of Other Proposals................................ 44
-------------------------------
4.3 Conduct of Business by Parent Pending the Merger............... 45
------------------------------------------------
ARTICLE V ADDITIONAL AGREEMENTS.......................................... 46
5.1 Registration Statement; Proxy Statement/Prospectus............. 46
--------------------------------------------------
5.2 Company Stockholders' Meeting.................................. 47
-----------------------------
5.3 Parent Stockholders Meeting.................................... 49
---------------------------
5.4 Access to Information; Confidentiality......................... 50
--------------------------------------
5.5 Reasonable Best Efforts; Further Assurances.................... 51
-------------------------------------------
5.6 Stock Options and Stock Plan; Options.......................... 52
-------------------------------------
5.7 Form S-8....................................................... 53
--------
5.8 Employee Benefits.............................................. 53
-----------------
5.9 Parent Option Pool............................................. 55
------------------
5.10 Parent Board of Directors...................................... 55
-------------------------
5.11 Pooling; Reorganization........................................ 55
-----------------------
5.12 Notification of Certain Matters................................ 56
-------------------------------
5.13 Listing on the NASDAQ.......................................... 57
---------------------
5.14 Public Announcements........................................... 57
--------------------
5.15 Takeover Laws.................................................. 57
-------------
5.16 Accountant's Letters........................................... 57
--------------------
-ii_
5.17 Indemnification; Directors and Officer Insurance............... 57
------------------------------------------------
5.18 Company Stockholders' Agreement................................ 58
-------------------------------
5.19 Strategic Relationship Agreement............................... 59
--------------------------------
ARTICLE VI CONDITIONS OF MERGER........................................... 59
6.1 Conditions to Obligation of Each Party to Effect the Merger.... 59
-----------------------------------------------------------
6.2 Additional Conditions to Obligations of Parent and Merger Sub.. 60
-------------------------------------------------------------
6.3 Additional Conditions to Obligations of the Company............ 61
---------------------------------------------------
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................. 62
7.1 Termination.................................................... 62
-----------
7.2 Effect of Termination.......................................... 64
---------------------
7.3 Fees and Expenses.............................................. 64
-----------------
7.4 Amendment...................................................... 65
---------
7.5 Waiver......................................................... 65
------
ARTICLE VIII GENERAL PROVISIONS............................................. 66
8.1 Survival of Representations and Warranties..................... 66
------------------------------------------
8.2 Notices........................................................ 66
-------
8.3 Disclosure Schedules........................................... 67
--------------------
8.4 Certain Definitions............................................ 67
-------------------
8.5 Interpretation................................................. 70
--------------
8.6 Severability................................................... 70
------------
8.7 Entire Agreement............................................... 70
----------------
8.8 Assignment..................................................... 70
----------
8.9 Parties in Interest............................................ 71
-------------------
8.10 Failure or Indulgence Not Waiver; Remedies Cumulative.......... 71
-----------------------------------------------------
8.11 Governing Law; Enforcement..................................... 71
--------------------------
8.12 Counterparts................................................... 71
------------
EXHIBITS
--------
Exhibit A Form of Company Stockholders' Agreement
Exhibit B Form of Parent Voting Agreement
Exhibit C Form of Strategic Relationship Agreement
Exhibit D Form of the Surviving Company's Certificate of
Incorporation
Exhibit E Form of Company Affiliate Pooling Agreement
Exhibit F Form of Parent Affiliate Pooling Agreement
-iii-
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 20, 2000 (the
"Agreement"), among WEBMETHODS, INC., a Delaware corporation ("Parent"), WOLF
ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and ACTIVE SOFTWARE, INC., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each approved the merger (the "Merger") of Merger Sub with and into the Company,
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and subject to the conditions set forth herein, which Merger will result
in, among other things, the Company becoming a wholly owned subsidiary of Parent
and have approved and declared this Agreement advisable and in the best
interests of their respective stockholders;
WHEREAS, as a condition to the willingness of, and an inducement to, Parent
and Merger Sub to enter into this Agreement, contemporaneously with the
execution and delivery of this Agreement, certain holders of Company Common
Stock (as defined herein), are entering into a Stockholders' Agreement and
Irrevocable Proxy dated as of the date hereof (the "Company Stockholders'
Agreement") in the form of Exhibit A attached hereto, providing for certain
---------
actions relating to the transactions contemplated by this Agreement;
WHEREAS, as a condition to the willingness of, and an inducement to,
Company to enter into this Agreement, contemporaneously with the execution and
delivery of this Agreement, certain holders of Parent Common Stock (as defined
herein), are entering into a Voting Agreement dated as of the date hereof (the
"Parent Voting Agreement") in the form of Exhibit B attached hereto, providing
---------
for certain actions relating to the transactions contemplated by this Agreement;
WHEREAS, as a condition to the willingness of, and an inducement to, Parent
and the Company to enter into this Agreement, contemporaneously with the
execution and delivery of this Agreement, the Company and Parent are entering
into a Strategic Relationship Agreement dated as of the date hereof (the
"Strategic Relationship Agreement") in the form of Exhibit C attached hereto in
---------
order to initiate a strategic relationship between the Company and Parent in the
event that the Merger could be delayed or not consummated;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
qualify for "pooling of interests" treatment.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
.1 The Merger. At the Effective Time (as defined in Section 1.2) and
----------
subject to and upon the terms and conditions of this Agreement and the DGCL, (a)
Merger Sub shall merge with and into the Company, and the separate corporate
existence of Merger Sub shall thereupon cease, (b) the Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by Delaware law as a
wholly owned subsidiary of Parent and (c) the separate corporate existence of
the Company with all of its assets, property rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger, except as set
forth in this Article I.
.2 Effective Time. As promptly as practicable after the satisfaction or,
--------------
to the extent permitted hereunder, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by (i) executing
and filing on the Closing Date (as hereinafter defined) a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as required by and executed in accordance with the
relevant provisions of the DGCL and (ii) making such other filings and taking
such other actions as may be required by Law to make the Merger effective
hereinafter. The Merger shall become effective at such date and time as the
Certificate of Merger is duly filed with the Delaware Secretary of State or at
such later date and time as may be specified in the Certificate of Merger by
mutual agreement of Parent, Merger Sub and the Company (the date and time the
merger becomes effective being the "Effective Time").
.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and in the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the assets, property, rights, privileges, immunities,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
.4 Certification of Incorporation; Bylaws. At the Effective Time and
--------------------------------------
without any further action on the part of the parties hereto, (a) the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as set forth in Exhibit D attached hereto until thereafter
---------
amended as provided by the DGCL and (b) the Bylaws of Merger Sub shall be the
Bylaws of the Surviving Corporation until thereafter amended as provided by the
DGCL.
.5 Directors and Officers. The directors of Merger Sub immediately prior
----------------------
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and the Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified or until their earlier
-2-
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation.
.6 Conversion of Company Common Stock, Etc. At the Effective Time, by
---------------------------------------
virtue of the Merger and without any action on the part of the parties hereto or
the holders of the following securities:
(a) Subject to the provisions of this Article I, each share of
Common Stock, par value $.001 per share, of the Company (the "Company Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than any shares of the Company Common Stock to be canceled pursuant to Section
1.6(c) and subject to Section 1.8) will be converted automatically into the
right to receive 0.527 fully paid and nonassessable shares (the "Exchange
Ratio") of the Common Stock, par value $0.01 per share (the "Parent Common
Stock"), of Parent (the "Merger Consideration").
(b) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time shall automatically cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Company Common Stock shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 1.10 hereof, without interest.
(c) Each share of Company Common Stock, if any, owned by Parent or
Merger Sub, in each case immediately prior to the Effective Time, shall be
canceled and extinguished without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(d) Each share of Common Stock, par value $0.01 per share, of Merger
Sub (the "Merger Sub Common Stock") issued and outstanding immediately prior to
the Effective Time shall be automatically converted into one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation
and shall thereafter constitute all of the issued and outstanding capital stock
of the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any shares of Merger Sub Common Stock shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
.7 Stock Options and Warrants.
--------------------------
(a) The Company and Parent shall take all requisite action such
that, at the Effective Time, all options to purchase Company Common Stock then
outstanding under the Company's 1996 Stock Plan (the "1996 Plan"), the Company's
1996A Stock Plan (the "1996A Plan"), the Company's 1999 Stock Plan (the "1999
Stock Plan"), the TransLink Stock Option Plan (the "TransLink Plan"), the Alier
1996 Stock Option Plan (the "Alier 1996 Plan"), the Alier 1997 Stock Option Plan
(the "Alier 1997 Plan"), and the Company's 1999 Director's Stock Option Plan
(the "1999 Director's Plan", together with the 1996 Plan, 1996A Plan, the 1999
Plan,
-3-
the TransLink Plan, the Alier 1996 Plan and the Alier 1997 Plan, the "Option
Plans") by virtue of the Merger and, shall be assumed by Parent in accordance
with Section 5.6, without any action on the part of the holder thereof.
(b) The Company and its Board of Directors shall promptly take all
actions necessary to ensure that following the Effective Time no holder of any
options or other rights pursuant to, nor any participant in or party to, the
Option Plans or any other Employee Plan (as defined herein) or other plan,
program, arrangement, agreement or other commitment providing for the issuance
or grant of any interest in respect of the capital stock of the Company or any
Subsidiary of the Company will have any rights thereunder to acquire equity
securities, or any right to payment in respect of the equity securities, of
Parent, the Company, or the Surviving Corporation or any of their Subsidiaries,
except as provided herein.
.8 Adjustments to Exchange Ratio. Without limiting any other provision of
-----------------------------
this Agreement, the Exchange Ratio shall be adjusted to reflect fully the effect
of any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring after the date
hereof and prior to the Effective Time.
.9 Fractional Shares. No certificates or scrip representing fractional
-----------------
shares of Parent Common Stock shall be issued in connection with the Merger, and
such fractional interests will not entitle the owner thereof to any rights of a
stockholder of Parent. In lieu of the issuance of fractional shares, each
holder of shares of Company Common Stock exchanged pursuant to Section 1.6 who
would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to have been
otherwise received by such holder) shall receive from Parent an amount of cash
(rounded down to the nearest whole cent and without interest) equal to the
product of such fractional part of a share of Parent Common Stock multiplied by
the average closing price per share of Parent Common Stock (rounded to the
nearest cent) on the Nasdaq National Market ("NASDAQ") (as reported in The Wall
Street Journal, or, if not reported therein, any other authoritative source
selected by Parent) for the 20 trading days ending on the third trading day
immediately prior to (and excluding the date of) the Effective Time.
.10 Surrender of Certificates.
-------------------------
(a) Exchange Agent. Prior to the Effective Time, Parent shall
--------------
designate a bank or trust company reasonably acceptable to the Company to act as
the Exchange Agent in the Merger.
(b) Parent to Provide Common Stock. When and as needed, Parent shall
------------------------------
make available to the Exchange Agent for exchange in accordance with this
Article I, through such reasonable procedures as Parent may adopt, sufficient
shares of Parent Common Stock to be exchanged pursuant to Section 1.6.
-4-
(c) Exchange Procedures. Promptly after the Effective Time, the
-------------------
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock to be
exchanged pursuant to Section 1.6, a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and instructions for use in effecting the surrender of the Certificates
in exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate to the Exchange Agent, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing the number of whole shares of
Parent Common Stock and payment in lieu of fractional shares which such holder
has the right to receive pursuant to Sections 1.6 and 1.9, after giving effect
to any required Tax (as defined herein) withholdings, and the Certificate so
surrendered shall forthwith be canceled. At any time following the first
anniversary of the Effective Time, all or any number of shares of Parent Common
Stock (and any or all cash payable in lieu of fractional shares of Parent Common
Stock) deposited with or made available to the Exchange Agent pursuant to
Section 1.10(b), which remain undistributed to the holders of the Certificates
representing shares of Company Common Stock, shall be delivered to Parent upon
demand, and thereafter such holders of unexchanged shares of Company Common
Stock shall be entitled to look only to Parent (subject to abandoned property,
escheat or other similar Laws) only as general creditors thereof with respect to
the shares of Parent Common Stock for payment upon due surrender of their
Certificates.
(d) Distributions With Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions declared or made after the Effective Time with respect to
shares of Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the whole
shares of Parent Common Stock represented thereby and no cash payment in lieu of
fractional shares of Parent Common Stock shall be paid to any such holder
pursuant to Section 1.9 until the holder of record of such Certificate shall
surrender such Certificate pursuant to Section 1.10(c). Subject to the effect of
applicable Laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of any cash payable in lieu of fractional shares
of Parent Common Stock to which the holder is entitled pursuant to Section 1.9
and the amount of dividends or other distributions with a record date after the
Effective Time and payable between the Effective Time and the time of such
surrender with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
----------------------
Common Stock is to be issued in a name other than the name in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that (i) the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and accompanied
by all other documents required to evidence and effect such transfer and (ii)
either (x) that the
-5-
Person requesting such exchange will have paid any transfer or other Taxes
required by reason of the issuance of a certificate for shares of Parent Common
Stock in a name other than the name of the registered holder of the Certificate
surrendered or (y) established to the satisfaction of Parent, or any agent
designated by Parent, that such Tax has been paid or is not applicable.
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Agreement, none of the Exchange Agent, Parent, the Merger Sub or the Surviving
Corporation shall be liable to a holder of a Certificate for any Parent Common
Stock (and any cash payable for fractional shares of Parent Common Stock or any
other amount due, if any) that was properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
(g) Withholding of Tax. Parent or the Exchange Agent will be
------------------
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock such amounts as
Parent (or any Affiliate thereof) or the Exchange Agent shall determine in good
faith they are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of federal, state, local or
foreign Tax Law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts will be treated for all purposes of this
Agreement as having been paid to the holder of the Company Common Stock in
respect of whom such deduction and withholding were made by Parent.
(h) Affiliates. Notwithstanding anything to the contrary herein, to
----------
the fullest extent permitted by Law, no certificates representing shares of
Parent Common Stock or cash shall be delivered to a Person who may be deemed an
"affiliate" of the Company in accordance with Section 5.8 hereof for purposes of
Rule 145 under the Securities Act of 1933, as amended (the "Securities Act"), or
for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion No. 16 (Business Combinations) of the Accounting
Principles Board of the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board ("APB 16") and applicable rules and
regulations ("Regulations") of the Securities and Exchange Commission (the
"SEC") until such Person has executed and delivered a Company Affiliate Pooling
Agreement (as defined in Section 5.11) to Parent.
(i) Unvested Shares. 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 shall also be unvested to the same extent and in
accordance with such agreement 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.
-6-
.11 Further Ownership Rights in Company Common Stock. All shares of Parent
------------------------------------------------
Common Stock issued upon the surrender for exchange of Company Common Stock in
accordance with the terms of this Article I (including any cash paid in respect
thereof) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Company Common Stock. At the Effective Time, the stock
transfer books of the Company shall be closed, and thereafter there shall be no
further registration of transfers of shares of Company Common Stock on the
records of the Surviving Corporation. From and after the Effective Time, the
holders of Certificates evidencing ownership of shares of Company Common Stock
outstanding shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided for herein. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
.12 Closing. Unless this Agreement shall have been terminated and the
-------
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article VII, and subject to the provisions of Article VI, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (Eastern time) on a date
(the "Closing Date") to be mutually agreed upon by the parties, which date shall
be not later than the third Business Day after all the conditions set forth in
Article VI shall have been satisfied (or waived in accordance with Section 7.5,
to the extent the same may be waived), unless another time and/or date is agreed
by the parties hereto. The Closing shall take place at the offices of Xxxx
Xxxxxxx, 0000 Xxxxxxxxxxxxx Xxxxx, XxXxxx, Xxxxxxxx 00000 or such other place as
the parties hereto otherwise agree.
.13 Lost, Stolen or Destroyed Certificates. In the event any Certificates
--------------------------------------
evidencing Company Common Stock shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, such shares of Parent Common Stock and cash for fractional shares, if
any, as may be required pursuant to Section 1.9; provided, however, that Parent
-------- -------
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Parent or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
.14 Tax Consequences. For federal income tax purposes, the parties intend
----------------
that the Merger be treated as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code, and that this Agreement shall be, and
is hereby, adopted as a plan of reorganization for purposes of Section 368 of
the Code. Unless otherwise required by Law, the parties shall not take a
position on any Tax Return (as defined herein) or in any proceeding relating to
the Tax consequences of the Merger inconsistent with this Section 1.14.
.15 Accounting Consequences. For financial reporting purposes, the Merger
-----------------------
is intended to be accounted for as a "pooling-of-interests" transaction under
APB 16 and the Regulations of the SEC.
.16 Further Assurances. If at any time after the Effective Time the
------------------
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances
-7-
or any other acts or things are necessary, desirable or proper (a) to vest,
perfect or confirm, of record of otherwise, in the Surviving Corporation its
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of either the Company or Merger Sub or (b)
otherwise to carry out the purposes of this Agreement, the Surviving Corporation
and its proper officers and directors or their designees shall be authorized to
execute and deliver, in the name and on behalf of either the Company or Merger
Sub, all such deeds, bills of sale, assignments and assurances and do, in the
name and on behalf of the Company or Merger Sub, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its rights, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of the Company or Merger Sub, as applicable, and otherwise
to carry out the purposes of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to the exceptions specifically set forth in writing in the disclosure
schedule delivered by the Company to Parent concurrently herewith (the "Company
Disclosure Schedule") (each Section of which qualifies the correspondingly
numbered representation, warranty or covenant to the extent specified therein),
as follows:
.1 Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) The Company is a corporation duly organized, validly existing
and in good standing under Delaware law. The Company has all the requisite
corporate power and authority, and is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, waivers, qualifications,
certificates, Orders (as defined herein) and approvals (collectively,
"Approvals") necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
qualified, existing and in good standing or to have such power, authority and
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Section 2.1(b) of the Company Disclosure Schedule sets forth, as
of the date hereof, a true and complete list of all of the Company's directly
and indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary. The Company owns one hundred
percent (100%) of the outstanding capital stock of each of its Subsidiaries.
(c) Each Subsidiary of the Company is a legal entity, duly
organized, validly existing and in good standing under the Laws of its
respective jurisdiction of incorporation or
-8-
organization and has all the requisite power and authority, and is in possession
of all Approvals necessary to own, lease and operate its properties and to carry
on its business as it is now being conducted, except where the failure to
possess such Approvals could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Each Subsidiary is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) Section 2.1(d) of the Company Disclosure Schedule sets forth a
true and complete list of each equity investment or similar investment interest
made by the Company or any of its Subsidiaries in any Person other than the
Company's Subsidiaries ("Other Interests"). Except as described in Section
2.1(d) of the Company Disclosure Schedule, the Other Interests are owned by the
Company, by one or more of the Company's Subsidiaries, or by the Company and one
or more of its Subsidiaries, in each case free and clear of all Liens.
.2 Certificate of Incorporation and Bylaws. The Company has heretofore
---------------------------------------
furnished to Parent a true, accurate and complete copy of each of its and each
of its Subsidiaries' Certificate of Incorporation and Bylaws or equivalent
organizational documents, as amended or restated to the date hereof. Such
Certificate of Incorporation and Bylaws and equivalent organizational documents
of the Company and each of its Subsidiaries are in full force and effect, and no
other organizational documents are applicable to or binding upon the Company or
its Subsidiaries.
.3 Capitalization.
--------------
(a) The authorized capital of the Company consists of 105,000,000
shares, divided into 100,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $.001 per share (the "Company Preferred
Stock"). As of May 16, 2000, (i) 25,937,281 shares of Company Common Stock were
issued and outstanding; (ii) no shares of Company Preferred Stock were issued or
outstanding; (iii) no shares of Company Common Stock were held in the treasury
of the Company; (iv) no shares of Company Common Stock were held by any
Subsidiary of the Company; (v) 4,177,869 shares of Company Common Stock were
duly reserved for future issuance pursuant to employee stock options granted
pursuant to the Option Plans (the "Outstanding Employee Options"); (vi) 641,515
shares of Company Common Stock were duly reserved for future issuance pursuant
to the Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan"); and
(vii) 36,764 shares of Company Common Stock were reserved for issuance upon
exercise of the warrant to purchase the Company Common Stock dated October 28,
1998 held by Intel Corporation. None of the outstanding shares of Company Common
Stock are subject to, nor were they issued in violation of any, purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right created by the Company or to which the Company is or was a party,
nor does the Company have knowledge of any such right. Except as set forth above
and in Section 2.3(a) of the Company Disclosure Schedule, as of the date hereof,
no shares of voting or non-voting capital stock, other equity interests, or
other voting securities of the Company were issued, reserved for issuance or
-9-
outstanding. Except as described in Section 2.3(a) of the Company Disclosure
Schedule, all outstanding options to purchase Company Common Stock were granted
under Company's Option Plans. In connection with the execution of this
Agreement, the Company has provided to Parent a complete list of all outstanding
options and warrants to purchase Company Common Stock as of the date hereof, the
record holder thereof and the exercise prices thereof. All outstanding shares of
capital stock of the Company are, and all shares which may be issued upon the
exercise of stock options and warrants will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to any kind of
preemptive (or similar) rights. There are no bonds, debentures, notes or other
indebtedness of the Company with voting rights (or convertible into, or
exchangeable for, securities with voting rights) on any matters on which
stockholders of the Company may vote.
(b) Section 2.3(b) of the Company Disclosure Schedule sets forth the
number of authorized and outstanding shares of capital stock, and ownership
thereof, of each of the Company's Subsidiaries. All of the outstanding shares of
capital stock of each of the Company's Subsidiaries have been duly authorized,
validly issued, fully paid and nonassessable, are not subject to, and were not
issued in violation of, any preemptive (or similar) rights, and are owned, of
record and beneficially, by the Company or one of its direct or indirect
Subsidiaries, free and clear of all Liens whatsoever. Except as set forth in
Section 2.3(b) of the Company Disclosure Schedule, there are no restrictions of
any kind which prevent the payment of dividends by any of the Company's
Subsidiaries, and neither the Company nor any of its Subsidiaries is subject to
any obligation or requirement to provide funds for or to make any investment (in
the form of a loan or capital contribution) to or in any Person.
(c) Except as described in Section 2.3(c) of the Company Disclosure
Schedule, as of the date hereof, there are no outstanding securities, options,
warrants, calls, rights, convertible or exchangeable securities, commitments,
agreements, arrangements or undertakings of any kind (contingent or otherwise)
to which the Company or any of its Subsidiaries is a party or by which any of
them is bound obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock (or options or warrants
to acquire any such shares) of the Company or its Subsidiaries. Except as
described in Section 2.3(c) of the Company Disclosure Schedule, as of the date
hereof, there are no stock-appreciation rights, stock-based performance units,
"phantom" stock rights or other agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any Person is or may be
entitled to receive any payment or other value based on the revenues, earnings
or financial performance, stock price performance or other attribute of the
Company or any of its Subsidiaries or assets or calculated in accordance
therewith (other than ordinary course payments or commissions to sales
representatives of the Company based upon revenues generated by them without
augmentation as a result of the transactions contemplated hereby) (collectively,
"Stock-Based Rights") or to cause the Company or any of its Subsidiaries to file
a registration statement under the Securities Act, or
-10-
which otherwise relate to the registration of any securities of the Company.
Except as set forth in Section 2.3(c) of the Company Disclosure Schedule or the
Company Stockholders' Agreement, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which the Company
or any of its Subsidiaries is a party or by which any of them is bound or, to
the Knowledge (as defined herein) of the Company, any of the Company's
stockholders is a party or by which any of them is bound, in each case, with
respect to the issuance, holding, acquisition, voting or disposition of any
shares of capital stock of the Company or any of its Subsidiaries.
.4 Authority; Enforceability. The Company has all necessary corporate
-------------------------
power and authority to execute and deliver this Agreement, each Related
Agreement (as defined herein) to which it is a party and each instrument
required to be executed and delivered by it at the Closing, and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and each Related Agreement to which it is a party, the
performance of its obligations hereunder and thereunder, and the consummation by
the Company of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or any Related Agreement to which it is a party or to consummate the
transactions so contemplated (other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of the holders of a majority
of the outstanding Company Common Stock in accordance with Delaware law and the
Company's Certificate of Incorporation and Bylaws) herein or therein. Each of
this Agreement and Related Agreements to which it is a party has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
.5 Required Vote. As of the date hereof and, except as permitted by
-------------
Section 5.2(c), as of the Effective Time, the Board of Directors of the Company
has, at a meeting duly called and held, (i) unanimously approved and declared
advisable this Agreement and each Related Agreement to which the Company is a
party, (ii) determined that the transactions contemplated hereby and thereby are
advisable, fair to and in the best interests of the holders of Company Common
Stock, (iii) resolved to recommend adoption of this Agreement by the
stockholders of the Company and (iv) directed that this Agreement be submitted
to the stockholders of the Company for their adoption. The Board of Directors
has not withdrawn, rescinded or modified and will not, except in accordance with
Section 4.2 hereof, withdraw, rescind or modify such approvals, determination,
and resolutions to recommend. The affirmative vote of a majority of all
outstanding shares of Company Common Stock for the adoption of this Agreement is
the only vote of the holders of any class or series of capital stock of the
Company necessary to adopt this Agreement or to approve or authorize the Merger,
the Related Agreements and the other transactions contemplated hereby and
thereby. As of May 19, 2000, the holders of the Company Common Stock that are
parties to the Company Stockholders' Agreement own (beneficially and of record)
and have the right to vote, in the aggregate, approximately 5,991,884 shares of
Company Common Stock.
-11-
.6 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery by the Company of this Agreement, the
Related Agreements to which it is a party or any instrument required by this
Agreement to be executed and delivered by the Company or any of its Subsidiaries
at the Closing do not, and the performance of this Agreement, the Related
Agreements to which it is a party or any instrument required by this Agreement
to be executed and delivered by the Company or any of its Subsidiaries at the
Closing, shall not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws or equivalent organizational documents of the Company or
any of its Subsidiaries, state securities laws or blue sky laws (ii) conflict
with or violate any Law or Order in each case applicable to the Company or any
of its Subsidiaries or by which its or any of their respective properties or
assets is bound or affected, or (iii) result in any breach or violation of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, Contract, permit, franchise or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or its or any of their respective
properties or assets is bound or affected, except (A) as set forth in Section
2.6(a) of the Company Disclosure Schedule or (B) in the case of clause (ii) or
(iii) above, for any such conflicts, breaches, violations, defaults or other
occurrences that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) The execution and delivery by the Company of this Agreement, the
Related Agreements to which it is a party or any instrument required by this
Agreement to be executed and delivered by the Company or any of its Subsidiaries
at the Closing do not, and the performance of this Agreement, any Related
Agreement to which it is a party and any instrument required by this Agreement
to be executed and delivered by the Company or any of its Subsidiaries at the
Closing, shall not, require the Company or any of its Subsidiaries to, except as
set forth in Section 2.6(b) of the Company Disclosure Schedule, obtain any
Approval of, observe any waiting period imposed by, or make any filing with or
notification to, any Governmental Authority, domestic or foreign, except for (A)
compliance with applicable requirements of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities laws
("Blue Sky Laws"), the pre-Merger notification requirements of the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or
Foreign Competition Laws, (B) the filing of the Certificate of Merger in
accordance with Delaware law or (C) where the failure to obtain such Approvals,
or to make such filings or notifications, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
.7 Material Agreements.
-------------------
(a) Section 2.7(a) of the Company Disclosure Schedule sets forth a
true and complete list, and if oral, an accurate and complete summary, of all
Contracts material to the business, financial condition, prospects or commercial
relationships of the Company and its
-12-
Subsidiaries, taken as a whole, to which the Company or any of its Subsidiaries
is a party or by which any of them or their properties or assets are bound as of
the date hereof and the following types of agreements (collectively, "Material
Agreements"):
(i) employment Contracts with officers of the Company and
other Contracts with current or former officers, directors or stockholders of
the Company, and all severance, change in control (except pursuant to the Option
Plans) or similar Contracts with any current or former stockholders, directors,
officers, employees or agents of the Company that will result in any obligation
(absolute or contingent) of the Company or any of its Subsidiaries to make any
payment to any current or former stockholders, directors, officers, employees or
agents of the Company following either the consummation of the transactions
contemplated hereby, termination of employment (or the relevant relationship),
or both;
(ii) labor Contracts (if any);
(iii) Contracts involving annual revenues, expenditures or
liabilities in excess of $100,000 per annum or $250,000 in the aggregate which
are not cancelable (without material penalty, cost or other liability) within 60
days;
(iv) promissory notes, loans, agreements, indentures,
evidences of indebtedness or other instruments and Contracts providing for the
borrowing or lending of money, whether as borrower, lender or guarantor, in each
case, relating to indebtedness or obligations in excess of $100,000;
(v) Contracts containing a covenant limiting or
purporting to limit the freedom of the Company or any of its Subsidiaries to
engage in any line of business or compete with any Person or operate at any
location in the world;
(vi) joint venture or partnership agreements or joint
development, distribution or similar agreements pursuant to which any third
party is entitled or obligated to develop or distribute any products on behalf
of the Company or any of its Subsidiaries or pursuant to which the Company or
any of its Subsidiaries is entitled or obligated to develop or distribute any
products on behalf of any third party;
(vii) Contracts for the acquisition, directly or indirectly
(by merger or otherwise) of material assets (whether tangible or intangible) or
the capital stock of another Person;
(viii) Contracts involving the issuance or repurchase of any
capital stock of the Company or any of its Subsidiaries (including newly formed
Subsidiaries), other than, with respect to the issuance of Company Common Stock,
the options or warrants listed in Section 2.3(a) of the Company Disclosure
Schedule or agreements for the repurchase of Company Common Stock upon the
termination of status as an employee or consultant governed by a Stock Option
Plan;
-13-
(ix) Contracts under which the Company or any of its
Subsidiaries has granted or received exclusive rights;
(x) any interest rate swaps, caps, floors or option
agreements or any other interest rate risk management arrangement or foreign
exchange Contracts; and
(xi) Contracts for the license or supply of any geographic
or similar data to the Company or any of its Subsidiaries.
True and complete copies of all written Material Agreements have been delivered
or been made available to Parent by the Company. Section 2.7(a) of the Company
Disclosure Schedule sets forth a true and complete list of all Contracts that
would purport to bind Parent or any of its Affiliates (other than the Company or
its Subsidiaries) following the consummation of the Merger.
(b) Other than Material Agreements that have terminated or expired in
accordance with their terms, each Material Agreement is in full force and
effect, is a valid and binding obligation of the Company or such Subsidiary and
of each other party thereto and is enforceable, in accordance with its terms,
against the Company or such Subsidiary and against each other party thereto, and
such Material Agreements will continue to be valid, binding and enforceable in
accordance with their respective terms and in full force and effect immediately
following the consummation of the transactions contemplated hereby, with no
material alteration or acceleration or increase in fees or liabilities. Neither
the Company nor any of its Subsidiaries is or is alleged to be and, to the best
Knowledge of the Company, no other party is or is alleged to be in default
under, or in breach or violation of, any Material Agreement and, to the best
Knowledge of the Company, no event has occurred which, with the giving of notice
or passage of time or both, would constitute such a default, breach or
violation. The designation or definition of Material Agreements for purposes of
this Section 2.7 and the disclosures made pursuant thereto shall not be
construed or utilized to expand, limit or define the terms "material" and
"Material Adverse Effect" as otherwise referenced and used in this Agreement.
.8 Compliance. The Company and each of its Subsidiaries are in compliance
----------
with, and are not in default or violation of, (i) the Certificate of
Incorporation and Bylaws of the Company or the equivalent organizational
documents of such Subsidiary, (ii) any Law or Order or by which any of their
respective assets or properties are bound or affected and (iii) the terms of all
notes, bonds, mortgages, indentures, Contracts, permits, franchises and other
instruments or obligations to which any of them are a party or by which any of
them or any of their respective assets or properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such failures of
compliance, defaults and violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
and its Subsidiaries are in compliance with the terms of all Approvals, except
where the failure to so comply could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 2.8 of the Company Disclosure Schedule or as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect,
neither the Company nor any of its Subsidiaries has received notice of any
revocation or
-14-
modification of any Approval of any federal, state, local or foreign
Governmental Authority that is material to the Company or any of its
Subsidiaries.
.9 SEC Filings; Financial Statements.
---------------------------------
(a) The Company has filed all forms, reports, schedules, statements
and documents required to be filed with the SEC since August 13, 1999
(collectively, as such forms, reports, schedules, statements and documents have
been amended since the time of their filing, the "Company SEC Reports") pursuant
to the federal securities Laws and the Regulations of the SEC promulgated
thereunder, and all Company SEC Reports have been filed in all material respects
on a timely basis. The Company SEC Reports were prepared in accordance, and
complied as of their respective filing dates in all material respects, with the
requirements of the Exchange Act and the Securities Act and the Regulations
promulgated thereunder and did not at the time they were filed (or if amended or
superseded by a filing prior to the date hereof, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of the Company's Subsidiaries has filed, or is
obligated to file, any forms, reports, schedules, statements or other documents
with the SEC.
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports (i) complied in all material respects with applicable
accounting requirements and the published Regulations of the SEC with respect
thereto, (ii) were prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis throughout the periods involved (except as may be expressly
described in the notes thereto) and (iii) fairly present the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
included in the Company's Form 10-Q reports were or are subject to normal and
recurring year-end adjustments that have not been and are not expected to be
material to the Company.
.10 Absence of Certain Changes or Events.
------------------------------------
(a) Except as described in Section 2.10(a) of the Company Disclosure
Schedule, since December 31, 1999, the Company and its Subsidiaries have
conducted their, businesses only in the ordinary and usual course and in a
manner consistent with past practice, and, since such date, there has not been
any change, development, circumstance, condition, event, occurrence, damage,
destruction or loss that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Except as described in Section 2.10(b) of the Company Disclosure
Schedule, during the period from December 31, 1999 to the date hereof, (i) there
has not been any change by the Company in its accounting methods, principles or
practices, any revaluation by the Company of any of its assets, including,
writing down the value of inventory or writing off notes or accounts receivable,
and (ii) there has not been any action or event, and neither the Company
-15-
nor any of its Subsidiaries has agreed in writing or otherwise to take any
action, that would have required the consent of Parent pursuant to Section 4.1
had such action or event occurred or been taken after the date hereof and prior
to the Effective Time.
.11 No Undisclosed Liabilities. Neither the Company nor any of its
--------------------------
Subsidiaries has any liabilities or obligations of any nature (whether absolute,
accrued, fixed, contingent or otherwise), and there is no existing fact,
condition or circumstance which could reasonably be expected to result in such
liabilities or obligations, except liabilities or obligations (i) disclosed in
the Company SEC Reports filed and publicly available prior to the date hereof,
(ii) disclosed in Section 2.11 of the Company Disclosure Schedule, or (iii)
incurred in the ordinary course of business since December 31, 1999 which do not
have, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
.12 Litigation. Except as described in Section 2.12 of the Company
----------
Disclosure Schedule or expressly described in the Company SEC Reports filed and
publicly available prior to the date hereof, there is no Litigation pending on
behalf of or against or, to the Knowledge of the Company, threatened against the
Company, any of its Subsidiaries, or any of their respective properties or
rights before or subsequent to any Court or Governmental Authority where the
amount in controversy could exceed $100,000; provided, that such amount in
controversy shall not be construed or utilized to expand, limit or define the
terms "material" or "Material Adverse Effect" as otherwise referenced and used
in this Agreement. Neither the Company nor any of its Subsidiaries is subject
to any outstanding Litigation or Order which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect.
.13 Employee Benefit Plans.
----------------------
(a) Section 2.13(a) of the Company Disclosure Schedule describes all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), including without limitation
multiemployer plans within the meaning of Section 3(37) of ERISA, and all bonus,
stock option, stock purchase, stock appreciation rights, incentive, deferred
compensation, retirement or supplemental retirement, severance, golden
parachute, vacation, cafeteria, dependent care, medical care, employee
assistance program, education or tuition assistance programs, insurance and
other similar fringe or employee benefit plans, programs or arrangements, and
any employment or executive compensation or severance agreements, written or
otherwise, which is or has been entered into, contributed to, established by,
participated in and/or maintained by the Company, any trade or business (whether
or not incorporated) which is a member of a controlled group or which is under
common control with the Company (an "ERISA Affiliate") within the meaning of
Section 414 of the Code, or any Subsidiary of the Company, whether or not such
plan is terminated, for the benefit of, or relating to, any present or former
employee or director of the Company or any of its ERISA Affiliates (together,
the "Employee Plans"). The Company has provided to Parent correct and complete
copies of (where applicable) (a) all plan documents, summary plan descriptions,
summaries of material modifications, amendments, and resolutions related to such
plans (b) the most recent determination letters received from the IRS, (c) the
three most recent Form 5500 Annual Reports, (d) the most recent audited
financial statement and actuarial
-16-
valuation, and (e) all related agreements, insurance Contracts and other
Contracts which implement each such Employee Plan. Except with regard to
outstanding options, there are no restrictions on the ability of the sponsor of
each Employee Plan (which is currently the Company or a Subsidiary of the
Company) to amend or terminate any Employee Plan, and sponsorship of each
Employee Plan may be transferred by the Company or any of its Subsidiaries to
Parent or the Merger Sub, as the case may be.
(b) There has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code which is not exempt
under Section 406 of ERISA and Section 4975 of the Code, with respect to any
Employee Plan; there are no claims pending (other than routine claims for
benefits) or threatened against any Employee Plan or against the assets of any
Employee Plan, nor are there any current or threatened Liens on the assets of
any Employee Plan; all Employee Plans conform to, and in their operation and
administration are in all material respects in compliance with, the terms
thereof and requirements prescribed by any and all statutes (including ERISA and
the Code), orders, and governmental Regulations currently in effect with respect
thereto (including all applicable requirements for notification, reporting and
disclosure to participants of the Department of Labor, Internal Revenue Service
or Secretary of the Treasury); the Company and each of its Subsidiaries and
ERISA Affiliates have performed in all material respects all obligations
required to be performed by them under each Employee Plan and are not in default
under or violation of, and have no Knowledge of any default or violation by any
other Person with respect to, any of the Employee Plans; to the Knowledge of the
Company, each Employee Plan intended to qualify under Section 401(a) of the Code
is so qualified, and each corresponding trust is exempt under Section 501 of the
Code, and nothing has occurred or failed to occur which would cause the loss of
such qualification or exemption; all contributions required to be made to any
Employee Plan pursuant to Section 412 of the Code or otherwise, the terms of the
Employee Plan or any collective bargaining agreement, have been made on or
before their due dates and a reasonable amount has been accrued for
contributions to each Employee Plan for the current plan years; the transactions
contemplated herein will not directly or indirectly result in an increase of
benefits, acceleration of vesting or acceleration of timing for payment of any
benefit to any participant or beneficiary, except as required under Code section
411(d)(3) or disclosed in Section 2.13(b) of the Company Disclosure Schedule;
each Employee Plan, if any, that is a voluntary employee beneficiary association
intended to be exempt under Section 501(c)(9) of the Code has been submitted and
approved or exempted by the Internal Revenue Service and nothing has occurred or
failed to occur which would cause the loss of such exemption; and each Employee
Plan, if any, which is maintained outside of the United States has been operated
in all material respects in conformance with the applicable Laws relating to
such plans in the jurisdictions in which such Employee Plan is present or
operates and, to the extent relevant, the United States.
(c) No Employee Plan is an "employee pension benefit plan" (within
the meaning of Section 3(2) of ERISA) subject to Title IV of ERISA, and neither
the Company nor any Subsidiary or ERISA Affiliate has ever partially or fully
withdrawn from any such plan. No Employee Plan is a "multiemployer plan" (within
the meaning of Section 3(37) of ERISA) or "single-employer plan under multiple
controlled groups" as described in Section 4063 of ERISA, and neither the
Company nor any Subsidiary or ERISA Affiliate has ever contributed to or had
-17-
an obligation to contribute, or incurred any liability in respect of a
contribution, to any multiemployer plan.
(d) Each Employee Plan that is a "group health plan" (within the
meaning of Code Section 5000(b)(1)) has been operated in compliance in all
material respects with the group health plan continuation coverage requirements
of Section 4980B of the Code and Sections 601 through 608 of ERISA ("COBRA
Coverage"), Section 4980D of the Code and Sections 701 through 707 of ERISA,
Title XXII of the Public Health Service Act and the provisions of the Social
Security Act, to the extent such requirements are applicable. Except as
disclosed in Section 2.13(d) of the Company Disclosure Schedule, no Employee
Plan or written or oral agreement exists which obligates the Company to provide
health care coverage, medical, surgical, hospitalization, death or similar
benefits (whether or not insured) to any employee or former employee of the
Company or any of its Subsidiaries following such employee's or former
employee's termination of employment with the Company or any Subsidiary, other
than COBRA Coverage.
(e) In connection with the execution of this Agreement, the Company
has provided to Parent a true and complete list of each current or former
employee, officer, director and investor of the Company or any of its
Subsidiaries who holds, as of the date hereof, any option, warrant or other
right to purchase Company Common Stock or Company Preferred Stock, if any,
together with the number of shares of Company Common Stock or Company Preferred
Stock, if any, subject to such option, warrant or right, the date of grant or
issuance of such option, warrant or right, the extent to which such option,
warrant or right is vested and/or exercisable, the exercise price of such
option, warrant or right, whether such option is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and the
expiration date of each such option, warrant and right. Section 2.13(e) of the
Company Disclosure Schedule sets forth the total number of such options,
warrants and rights. True and complete copies of each agreement (including all
amendments and modifications thereto) between the Company and each holder of
such options, warrants and rights relating to the same have been furnished or
made available to Parent.
(f) Except as set forth in Schedule 2.13(f) of the Company Disclosure
Schedule, (i) no event has occurred and no condition exists that would subject
the Company or any of its Subsidiaries, either directly or by reason of its
affiliation with any ERISA Affiliate, to any Tax, fine, Lien, penalty or other
liability imposed by ERISA; (ii) no "reportable event" (as such term is defined
in Section 4043 of ERISA) has occurred with respect to any Employee Plan; and
(iii) all awards, grants or bonuses made pursuant to any Employee Plan have
been, or will be, fully deductible by the Company or its Subsidiaries
notwithstanding the provisions of Sections 162(m) and 280G of the Code and the
Regulations promulgated thereunder.
.14 Employment and Labor Matters.
----------------------------
(a) Section 2.14(a) of the Company Disclosure Schedule identifies all
employees and consultants employed or engaged by the Company with an annual base
salary or compensation rate of $100,000 or higher and sets forth each such
individual's rate of pay or
-18-
annual compensation, job title and date of hire. Except as set forth in Section
2.14(a) of the Company Disclosure Schedule, there are no employment, consulting,
collective bargaining, severance pay, continuation pay, termination or
indemnification agreements or other similar Contracts of any nature (whether in
writing or not) between the Company or any Subsidiary and any current or former
stockholder, officer, director, employee, consultant, labor organization or
other representative of any of the Company's or Subsidiary's employees, nor is
any such Contract presently being negotiated. Except as set forth in Section
2.14(a) of the Company Disclosure Schedule, no individual will accrue or receive
additional benefits, service or accelerated rights to payments under any
Employee Plan or any of the agreements set forth in Section 2.14(a) of the
Company Disclosure Schedule, including the right to receive any parachute
payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a result of the
transaction contemplated herein that could result in the payment of any such
benefits or payments. Neither the Company nor any Subsidiary is delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses, benefits or other compensation for any services or
otherwise arising under any policy, practice, agreement, plan, program or Law.
Except as set forth in Section 2.14(a) of the Company Disclosure Schedule,
neither the Company nor any Subsidiary is liable for any severance pay or other
payments to any employee or former employee arising from the termination of
employment, nor will the Company or any Subsidiary have any liability under any
benefit or severance policy, practice, agreement, plan, or program which exists
or arises, or may be deemed to exist or arise, under any applicable Law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by the Company or any Subsidiary of
any persons employed by the Company or any Subsidiary on or prior to the
Effective Time (except to the extent such terminations may be aggregated with
terminations following the Effective Time for purposes of the Worker Adjustment
and Retraining Notification Act of 1988, as amended ("WARN")). None of the
Company's or any Subsidiary's employment policies or practices is currently
being audited or investigated by any Governmental Authority or Court. There is
no pending or, to the Knowledge of the Company, threatened Litigation, unfair
labor practice charge, or other charge or inquiry against the Company or any
Subsidiary brought by or on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other representative of the Company's
or Subsidiary's employee, or other individual or any Governmental Authority with
respect to employment practices brought by or before any Court or Governmental
Authority.
(b) Except as set forth in Section 2.14(b) of the Company Disclosure
Schedule, there are no material controversies pending or threatened, between the
Company or any of its Subsidiaries and any of their respective employees;
neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or other labor union Contract applicable to Persons
employed by the Company or its Subsidiaries nor are there any activities or
proceedings of any labor union to organize any such employees of the Company or
any of its Subsidiaries; during the past five years there have been no strikes,
slowdowns, work stoppages, material disputes, lockouts, or threats thereof, by
or with respect to any employees of the Company or any of its Subsidiaries.
Except as set forth in Section 2.14(b) of the Company Disclosure Schedule, there
are no grievances pending or, to the Knowledge of the Company or any Subsidiary,
threatened, which, if adversely decided, could reasonably be expected to have a
-19-
Material Adverse Effect. Neither the Company nor any Subsidiary is a party to,
or otherwise bound by, any consent decree with, or citation or other Order by,
any Governmental Authority relating to employees or employment practices. The
Company and each of its Subsidiaries are in compliance in all material respects
with all applicable Laws, Contracts, and policies relating to employment,
employment practices, wages, hours, and terms and conditions of employment,
including the obligations of WARN, and all other notification and bargaining
obligations arising under any collective bargaining agreement, by Law or
otherwise. Neither the Company nor any Subsidiary of the Company has
effectuated a "plant closing" or "mass layoff" as those terms are defined in
WARN, affecting in whole or in part any site of employment, facility, operating
unit or employee of the Company, without complying with all provisions of WARN
or implemented any early retirement, separation or window program within the
past five years, nor has the Company or any Subsidiary planned or announced any
such action or program for the future.
.15 Registration Statement; Proxy Statement/Prospectus. None of the
--------------------------------------------------
information supplied by the Company for inclusion in the registration statement
on Form S-4, or any amendment or supplement thereto, pursuant to which the
shares of Parent Common Stock to be issued in the Merger will be registered with
the SEC (including any amendments or supplements, the "Registration Statement")
shall, at the time such document is filed, at the time amended or supplemented
and at the time the Registration Statement is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied by the Company for inclusion in
the Joint Proxy Statement/Prospectus shall, on the date the Joint Proxy
Statement/Prospectus is first mailed to the Company stockholders or Parent
stockholders, at the time of the Company Stockholders' Meeting or the Parent
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Company Stockholders' Meeting or the Parent
Stockholders' Meeting which has become false or misleading. The Joint Proxy
Statement/Prospectus shall comply in all material respects as to form and
substance with the requirements of the Exchange Act and the Regulations
promulgated thereunder. The Company makes no representation or warranty with
respect to any information supplied by Parent or Merger Sub which is contained
in the Registration Statement or Joint Proxy Statement/Prospectus.
.16 Absence of Restrictions on Business Activities. Except as set forth
----------------------------------------------
in Section 2.16 of the Company Disclosure Schedule, there is no agreement or
Order binding upon the Company or any of its Subsidiaries or any of their assets
or properties which has had or could reasonably be expected to have the effect
of prohibiting or impairing any business practice of the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted by the
Company or any of its Subsidiaries. Except as set forth in Section 2.16 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
subject to any non-competition, non-solicitation or similar restriction on their
respective businesses.
-20-
.17 Title to Assets; Leases.
-----------------------
(a) Except as described in Section 2.17(a) of the Company Disclosure
Schedule, the Company and each of its Subsidiaries has good and marketable title
to or the legal right to use all of their real or personal properties (whether
owned or leased) and assets, free and clear of all Liens.
(b) Section 2.17(b) of the Company Disclosure Schedule contains a
list of all of the real property and interests in real property owned by the
Company or any of its Subsidiaries and all leases of real property to which the
Company or any Subsidiary is a party or by which any of them holds a leasehold
interest (collectively, "Real Property"). Except as set forth in Section 2.17(b)
of the Company Disclosure Schedule, (i) each Real Property lease to which the
Company or any of its Subsidiaries is a party is in full force and effect in
accordance with its terms, (ii) all rents and additional rents due to date from
the Company or a Subsidiary on each such lease have been paid, (iii) neither the
Company nor any Subsidiary has received written notice that it is in material
default thereunder, and (iv) there exists no default by the Company or any
Subsidiary under such lease. There are no leases, subleases, licenses,
concessions or any other agreements or commitments to which the Company or a
Subsidiary is a party granting to any Person other than the Company or a
Subsidiary any right to possession, use occupancy or enjoyment of any of the
Real Property or any portion thereof. None of the Company nor any of its
Subsidiaries is obligated under or bound by any option, right or first refusal,
purchase Contract, or other Contract to sell or otherwise dispose of any Real
Property or any other interest in any Real Property.
.18 Taxes. For purposes of this Agreement, "Tax" or "Taxes" shall mean
-----
taxes and governmental impositions of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including those on or measured by or referred to as income, franchise, profits,
gross receipts, capital ad valorem, custom duties, alternative or add-on minimum
taxes, estimated, environmental, disability, registration, value added, sales,
use, service, real or personal property, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and interest, penalties
and additions to tax imposed with respect thereto; and "Tax Returns" shall mean
returns, reports and information statements, including any schedule or
attachment thereto, with respect to Taxes required to be filed with the Internal
Revenue Service or any other governmental or taxing authority or agency,
domestic or foreign, including consolidated, combined and unitary tax returns.
Except as set forth in Section 2.18 of the Company Disclosure Schedule:
(a) All material Tax Returns required to be filed by or on behalf of
the Company, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which the Company or any of its Subsidiaries is
a member have been timely filed, and all such Tax Returns are true, complete and
correct in all material respects.
(b) All material Taxes payable by or with respect to the Company and
each of its Subsidiaries (whether or not shown on any Tax Return) have been
timely paid when due, and
-21-
adequate reserves (other than a reserve for deferred Taxes established to
reflect timing differences between book and Tax treatment) in accordance with
GAAP are provided on the respective company's Balance Sheet for any material
Taxes not yet due. All assessments for material Taxes due and owing by or with
respect to the Company and each of its Subsidiaries with respect to completed
and settled examinations or concluded litigation have been paid. Neither the
Company nor any of its Subsidiaries has incurred a Tax liability from the date
of the latest Balance Sheet other than a Tax liability in the ordinary course of
business.
(c) No action, suit, proceeding, investigation, claim or audit has
formally commenced and no written notice has been given that such audit or other
proceeding is pending or threatened with respect to the Company or any of its
Subsidiaries or any group of corporations of which any of the Company and its
Subsidiaries has been a member in respect of any Taxes, and all deficiencies
proposed as a result of such actions, suits, proceedings, investigations, claims
or audits have been paid, reserved against or settled.
(d) Except as set forth in Section 2.18(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has requested, or been
granted any waiver of any federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No extension or waiver of time within which to file any Tax Return of,
or applicable to, the Company or any of its Subsidiaries has been granted or
requested which has not since expired.
(e) Except as set forth in Section 2.18(e) of the Company Disclosure
Schedule, other than with respect to its Subsidiaries, the Company is not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated, consolidated, combined or unitary group,
and neither the Company nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement or is liable for the Taxes of any other person
under Treasury Regulations (S)1.1502-6 (or any similar provision of state, local
or foreign Law), as transferee or successor, by Contract, or otherwise.
(f) Except as disclosed in Section 2.18(f) of the Company Disclosure
Schedule, the Company and its Subsidiaries have not made any payments, are not
obligated to make any payments, and are not a party to any agreements that under
any circumstances could obligate any of them to make any payments, that will not
be deductible under Section 280G of the Code.
(g) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) The Company and each of its Subsidiaries have complied with all
applicable Laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442 and
3406 of the Code or similar provisions under any foreign Laws) and have, within
the time and in the manner required by Law, withheld from employee wages and
paid over to the proper Governmental Authorities all amounts required to be so
withheld and paid over under all applicable Laws.
-22-
(i) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(j) None of the Company and its Subsidiaries will be required to
include any material amount in taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of a change in the method of
accounting for a taxable period ending prior to the Closing Date, any "closing
agreement" as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign Tax Laws) entered into prior to the Closing
Date, any sale reported on the installment method that occurred prior to the
Closing Date, or any taxable income attributable to any amount that is
economically accrued prior to the Closing Date.
.19 Environmental Matters.
---------------------
(a) Except as described on Section 2.19 of the Company Disclosure
Schedule, and except as could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect: (i) the Company and each of its
Subsidiaries complies and have complied, during all applicable statute of
limitations periods, with all applicable Environmental Laws, and possess and
comply, and have possessed and complied during all applicable statute of
limitations periods, with all Environmental Permits; (ii) there are and have
been no Materials of Environmental Concern or other conditions at any property
owned, operated, or otherwise used by the Company now or in the past, or at any
other location (including without limitation any facility to which Materials of
Environmental Concern from the Company or any of its Subsidiaries), that are in
circumstances that could reasonably be expected to give rise to any liability of
the Company or any of its Subsidiaries, or result in costs to the Company or any
of its Subsidiaries arising out of any Environmental Law; (iii) no Litigation
(including any notice of violation or alleged violation), under any
Environmental Law or with respect to any Materials of Environmental Concern to
which the Company or any of its Subsidiaries is, or to the Knowledge of the
Company will be, named as a party, or affecting their business, is pending or,
to the Knowledge of the Company, threatened; nor is the Company or any of its
Subsidiaries the subject of any investigation or the recipient of any request
for information in connection with any such Litigation or potential Litigation;
(iv) there are no Orders or agreements under any Environmental Law or with
respect to any Materials of Environmental Concern to which the Company or any of
its Subsidiaries is a party or affecting their business; (v) to the Knowledge of
the Company, there are no events, conditions, circumstances, practices, plans,
or legal requirements (in effect or reasonably anticipated), that could be
expected to prevent the Company from, or materially increase the burden on the
Company of: (A) complying with applicable Environmental Laws, or (B) obtaining,
renewing, or complying with all Environmental Permits; and (vi) to the Knowledge
of the Company, each of the foregoing representations and warranties is true and
correct with respect to any entity for which the Company or any of its
Subsidiaries has assumed or retained liability, whether by Contract or operation
of Law.
(b) The Company has furnished to Parent true and complete copies of
all Environmental Reports in the possession or control of the Company or any of
its Subsidiaries.
-23-
(c) For purposes of this Agreement, the terms below are defined as
follows:
"Environmental Laws" shall mean any and all Laws, Orders,
guidelines, codes, or other legally enforceable requirement (including, without
limitation, common law) of any foreign government, the United States, or any
state, local, municipal or other Governmental Authority, regulating, relating to
or imposing liability or standards of conduct concerning protection of the
environment or of human health, or employee health and safety.
"Environmental Permits" shall mean, with respect to a
Person, any and all permits, licenses, registrations, notifications, exemptions
and any other Approvals required of a Person under any Environmental Law.
"Environmental Report" shall mean, with respect to a Person,
any report, study, assessment, audit, or other similar document that addresses
any issue of actual or potential noncompliance with, actual or potential
liability under or cost arising out of, or actual or potential impact on
business in connection with, any Environmental Law or any proposed or
anticipated change in or addition to Environmental Law, that may in any way
affect such Person or any entity for which it may be liable or any Subsidiary of
such Person.
"Materials of Environmental Concern" shall mean any gasoline
or petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants, radioactivity, and any other substances of any kind,
whether or not any such substance is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give rise to liability
under any Environmental Law.
.20 Intellectual Property.
---------------------
(a) The Company or its Subsidiaries has sole title to and
ownership of, or possesses legally enforceable rights to use under valid and
subsisting written license agreements, all Intellectual Property used or
proposed to be used in the conduct of the Company's or any of its Subsidiaries'
businesses as currently conducted and proposed to be conducted (the "Company
Intellectual Property"), and neither the Company nor any of its Subsidiaries has
misappropriated, is conflict with or is infringing upon the Intellectual
Property of others. The Company (or, where applicable, its Subsidiaries) is the
sole and exclusive owner of the Company Intellectual Property free and clear of
any Liens or other rights or claims of others, except for Intellectual Property
specifically designated as not owned by the Company or its Subsidiaries ("Third
Party Intellectual Property") in Section 2.20(a)(i) of the Company Disclosure
Schedule. Section 2.20(a) of the Company Disclosure Schedule lists all material
items of Company Intellectual Property, including, without limitation:
(i) all licenses, sublicenses and other agreements to which
the Company or any of its Subsidiaries is a party and pursuant to which the
Company or any of its Subsidiaries is authorized to use any Third Party
Intellectual Property, including, without limitation, Intellectual Property that
is (or is intended to be) incorporated in, embedded in or included with
-24-
any Product or service of the Company or any of its Subsidiaries, or any product
or service currently under development ("Embedded Third-Party Components");
(ii) all applications and registrations relating to the
Company Intellectual Property, including, without limitation, all patents and
patent applications (including provisional applications, continuations and
continuations-in-part) and all trademarks, service marks, trade names,
fictitious names, service marks and copyright registrations owned by, or
licensed exclusively to, the Company or any of its Subsidiaries and which are
currently used in connection with the business of the Company or any of its
Subsidiaries, including the jurisdictions in which each item of such Company
Intellectual Property has been issued or registered or in which any such
application for such issuance or registration has been filed. Each such
registration was properly registered and is in good standing and enforceable
under applicable Laws and regulations, and, except as set forth in Section
2.20(a)(ii) of the Company Disclosure Schedule, no renewal, fee payment or other
actions are required to be taken with respect to any registration within six (6)
months after the date hereof. Section 2.20(a)(ii) of the Company Disclosure
Schedule lists, for each application, the current status of each application and
the next steps required to be taken in connection with such application;
(iii) all agreements or other arrangements under which the
Company or any of its Subsidiaries has provided or agreed to provide or make
available source code to any Product to any third party, including, without
limitation, to end-users; and
(iv) all other material items of Company Intellectual
Property.
The Company has made available to Parent correct and complete copies of all
registrations and applications and all licenses, sublicenses and agreements
relating to the Company Intellectual Property, each as amended to date. Neither
the Company nor any of its Subsidiaries is a party to any oral license,
sublicense or other agreement which, if reduced to written form, would be
required to be listed in Section 2.20(a) of the Company Disclosure Schedule
under the terms of this Section 2.20(a).
(b) Except as set forth in Section 2.20(b) of the Company Disclosure
Schedule, with respect to each item of Third Party Intellectual Property: (i)
the license, sublicense or other agreement covering such item is legal, valid,
binding, enforceable and in full force and effect with respect to the Company
and its Subsidiaries, and, to the Company's Knowledge, is legal, valid, binding,
enforceable and in full force and effect with respect to each other party
thereto; (ii) neither the Company nor any of its Subsidiaries is in breach or
default thereunder, and, to the Company's Knowledge, no other party to such
license, sublicense or other agreement is in material breach or default
thereunder, and, to the Company's Knowledge, no event has occurred which with
notice or lapse of time would constitute a material breach or default by the
Company or any of its Subsidiaries or permit termination, modification or
acceleration thereunder by the other party thereto; (iii) to the Company's
Knowledge, the underlying item of Third Party Intellectual Property is not
subject to any Lien that materially interferes with or may reasonably be
expected to materially interfere with the rights granted to the Company or any
of its
-25-
Subsidiaries with respect to such item; and (iv) there are no royalty,
commission or other executory payment agreements, arrangements or understandings
relating to such item.
(c) Except as set forth in Section 2.20(c) of the Company Disclosure
Schedule, no action, suit, proceeding or investigation with respect to the
Company Intellectual Property has ever been instituted, is pending or, to the
Company's Knowledge, threatened. The Company has made available to Parent
correct and complete copies of all such suits, actions or proceedings or written
notices. To the Knowledge of the Company, neither the development,
manufacturing, marketing, licensing or sale of the Products, the performance of
the services offered by the Company nor the conduct of the business of the
Company or any of its Subsidiaries infringe, conflict with or misappropriate,
and have not infringed, conflicted with or misappropriated, any Intellectual
Property right of any third party. To the Knowledge of the Company, none of the
Company Intellectual Property is being infringed by activities, products or
services of, or is being misappropriated by, any third party.
(d) Except as set forth in Section 2.20(d) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will not cause the Company
or any of its Subsidiaries to be in violation or default under any license,
sublicense or other agreement relating to Intellectual Property, nor terminate
nor modify nor entitle any other party to any such license, sublicense or
agreement to terminate or modify such license, sublicense or agreement, nor
limit in any way the Company's or any Subsidiary's ability to conduct its
business or use or provide the use of Company Intellectual Property or any
Intellectual Property of others, which violation, default, termination,
modification or limitation would reasonably be expected, individually or in the
aggregate, to result in a material loss of benefits or material loss to the
Company.
(e) Except for Embedded Third-Party Components for which the Company
(or, as applicable, any of its Subsidiaries) has valid non-exclusive licenses
which are disclosed in Section 2.20(e) of the Company Disclosure Schedule, the
Company (or, as applicable, its Subsidiaries) is the sole and exclusive owner
of, with all right, title and interest in and to all Company Intellectual
Property (free and clear of any Liens), and has sole and exclusive rights (and
is not contractually obligated to pay any compensation to any third party in
respect thereof) to the use and distribution thereof or the material covered
thereby in connection with the services or products in respect of which Company
Intellectual Property is being used.
(f) The Company has made available to Parent copies of the Company's
and its Subsidiaries' standard forms of end-user license agreements ("End-User
Licenses"). Except as disclosed in Section 2.20(f) of the Company Disclosure
Schedule (which describes the material variations from the standard form of End-
User License), as of the date hereof, neither the Company nor any of its
Subsidiaries has entered into any End-User Licenses which contain terms
materially different than as set forth in the standard forms of such agreements
made available to Parent.
(g) The Company has in effect a comprehensive trade secrets and
confidential information protection program ("Trade Secrets Program"), a
description of which has been
-26-
supplied to Parent. The Company has used reasonable efforts to enforce its Trade
Secrets Program and otherwise to safeguard and maintain the secrecy and
confidentiality of all Company Intellectual Property. All officers, employees
and consultants of the Company and its Subsidiaries who have had access to
proprietary information or Company Intellectual Property have executed and
delivered to the Company agreements (copies of which have been provided to
Parent) to maintain the confidentiality of the Company Intellectual Property and
to assign to the Company all Intellectual Property arising from the services
performed for the Company by such persons. No current or prior officers,
employees or consultants of the Company or any of its Subsidiaries have claimed
any ownership interest in any Company Intellectual Property as a result of
having been involved in the development of such property while employed by or
consulting to the Company or any of its Subsidiaries, or otherwise. To the
Knowledge of the Company, there has been no violation of the Trade Secrets
Program or any confidentiality or nondisclosure agreement relating to the
Company Intellectual Property. Except as set forth in Section 2.20(g) of the
Company Disclosure Schedule and except for the Embedded Third-Party Components,
all Company Intellectual Property have been developed by employees of the
Company and its Subsidiaries, within the course and scope of their employment.
(h) No third party has claimed or, to the best of the Company's
Knowledge, has reason to claim, that any person employed by or affiliated with
the Company or any of its Subsidiaries has (i) violated or, may be violating any
of the terms or conditions of his employment, noncompetition or nondisclosure
agreement with such third party, (ii) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party, or (iii) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company, which
suggests that such a claim might be contemplated. To the best of the Company's
Knowledge, no person employed by or affiliated with the Company or any of its
Subsidiaries has employed or proposes to employ any trade secret or any
information or documentation proprietary to any former employer and, to the best
of the Company's knowledge, no other person employed by or affiliated with the
Company or any of its Subsidiaries has violated any confidential relationship
which such person may have had with any third party, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or violation.
None of the execution or delivery of this Agreement, or the carrying on of the
business of the Company or its Subsidiaries as officers, employees or agents by
any officer, director or key employee of the Company or its Subsidiaries, or the
conduct or proposed conduct of the business of the Company and its Subsidiaries,
will, to the Company's Knowledge, conflict with or result in a breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such person is obligated, except where
such conflict, breach or default would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(i) Except as set forth in Section 2.20(i) of the Company Disclosure
Schedule (i) to the Knowledge of the Company, there are no material errors,
omissions, issues or defects in the Products, (ii) the occurrence in or use by
Products of dates on or after January 1, 2000 (the
-27-
"Millennial Dates") will not adversely affect the performance of the software
with respect to date dependent data, computations, output or other functions
(including without limitation, calculating, computing and sequencing) and the
Products create, process output data related to or including Millennial Dates
without errors, omissions or ambiguities, and (iii) none of the Products
contains or includes Malicious Code.
(j) No Federal, state, local or other government funding or
university or college facilities were used in the development of the Products
and such software was not developed pursuant to any contract or other agreement
with any person or entity except pursuant to contracts or agreements listed in
Section 2.20(j) of the Company Disclosure Schedule.
(k) Section 2.20(k) of the Company Disclosure Schedule lists all
unresolved warranty and support claims (including any pending claims) related to
the products of the Company and its Subsidiaries and the nature of such claims,
except for claims arising in the ordinary course of business pursuant to
customary product support and maintenance obligations of Company. Except as set
forth in Section 2.20(k) of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries has made any material oral or written
representations or warranties with respect to its products or services.
(l) Except as set forth in Section 2.20(l) of the Company Disclosure
Schedule (i) the Company has been and is in compliance with the U.S. Export
Administration Act of 1979, as amended, and all regulations promulgated
thereunder, and (ii) neither the Products nor any other Company Intellectual
Property were conceived or developed outside of the United States.
(m) The Company and its Subsidiaries have taken reasonable actions to
maintain, protect and police the integrity and security of their Software,
including the protection and policing against all unauthorized use of, access
to, or "hacking" into the Software or the introduction into the Software of
viruses or other unauthorized, damaging or corrupting elements.
.21 Insurance. Section 2.21 of the Company Disclosure Schedule sets
---------
forth a true and complete list of all material insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company and its Subsidiaries. There is
no claim by the Company or any of its Subsidiaries pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). Such policies of insurance and bonds are of the
type and in amounts customarily carried by Persons conducting businesses similar
to those of the Company and its Subsidiaries and reasonable in light of the
assets of the Company and its Subsidiaries. To the Knowledge of the Company,
there is not any threatened termination of or material premium increase with
respect to any of such policies or bonds.
.22 No Restrictions on the Merger; Takeover Statutes. The Board of
------------------------------------------------
Directors of the Company has, unanimously approved this Agreement and the Merger
and the other transactions contemplated hereby and such approval is sufficient
to render inapplicable to this Agreement, the
-28-
Merger and any other transactions contemplated hereby, the restrictions on
business combinations of Section 203 of the DGCL. No Delaware law or other
takeover statute or similar Law and no provision of the Certificate of
Incorporation or Bylaws, or other organizational documents or governing
instruments of the Company or any of its Subsidiaries or any Material Agreement
to which any of them is a party (a) would or would purport to impose
restrictions which might adversely affect or delay the consummation of the
transactions contemplated by this Agreement, the Company Stockholders' Agreement
or the Strategic Relationship Agreement, or (b) as a result of the consummation
of the transactions contemplated by this Agreement, the Company Stockholders'
Agreement or the Strategic Relationship Agreement or the acquisition of
securities of the Company or the Surviving Corporation by Parent or Merger Sub
(i) would or would purport to restrict or impair the ability of Parent to vote
or otherwise exercise the rights of a stockholder with respect to securities of
the Company or any of its Subsidiaries that may be acquired or controlled by
Parent or (ii) would or would purport to entitle any Person to acquire
securities of the Company.
.23 Pooling; Tax Matters.
--------------------
(a) The Company intends that the Merger be accounted for under the
"pooling of interests" method under the requirements of APB 16 and the
Regulations of the SEC.
(b) To the Company's Knowledge, neither the Company nor any of its
Affiliates has taken or agreed to take any action, failed to take any action or
is aware of any fact or circumstance that could reasonably be expected to
prevent (i) the Merger from being treated for financial accounting purposes as a
"pooling of interests" in accordance with GAAP and the Regulations of the SEC or
(ii) the Merger from constituting a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
(c) The Company has no Knowledge of any reason why it may not receive
a letter from Deloitte and Touche LLP (the "Company's Accountants") dated as of
the Closing Date and addressed to the Company in which the Company's Accountants
will concur with the Company management's conclusion that no conditions exist
related to the Company that would preclude Parent from accounting for the Merger
as a "pooling of interests."
(d) Section 2.24(d) of the Company Disclosure Schedule contains a
true and complete list of all Persons who may be deemed to be Affiliates of the
Company, excluding all of its Subsidiaries but including all directors and
executive officers of the Company.
.24 Brokers. No broker, financial advisor, finder or investment banker or
-------
other Person is entitled to any broker's, financial advisor's, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company, except
for Xxxxxxx Xxxxx & Co. and Xxxxxx Xxxxxx Partners (the "Company Financial
Advisors"). The Company has heretofore furnished to Parent a true and complete
copy of, all agreements between the Company and the Company Financial Advisors
pursuant to which such Person would be entitled to any payment relating to the
transactions contemplated hereunder.
-29-
.25 Certain Business Practices. As of the date hereof, neither the
--------------------------
Company nor any of its Subsidiaries nor any director, officer, employee or agent
of the Company or any of its Subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful payments relating to
political activity, (ii) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic political party or
campaign or violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended, (iii) consummated any transaction, made any payment, entered into
any agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended, or (iv) made any other unlawful
payment.
.26 Interested Party Transactions. Except as disclosed in the Company's
-----------------------------
filings with the SEC under the Exchange Act filed prior to the date hereof or in
Section 2.26 of the Company Disclosure Schedule, (i) there are no existing, and
since December 31, 1999 there has been no Contract, transaction, indebtedness or
other arrangement, or any related series thereof, between the Company and any of
its Subsidiaries, on the one hand, and any of the directors, officers,
stockholders or other Affiliates of the Company and its Subsidiaries, or any of
their respective Affiliates or family members, on the other (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses),
and (ii) except for the Outstanding Employee Options, at the Closing or as
indicated in Section 2.26 of the Company Disclosure Schedule, all such
Contracts, transactions, indebtedness and other arrangements shall be terminated
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses).
.27 Opinion of Financial Advisor. The Board of Directors of the Company
----------------------------
has received the oral opinion of Xxxxxxx, Sachs & Co. to the effect that as of
the date hereof the Exchange Ratio pursuant to this Agreement is fair from a
financial point of view to the holders of shares of the Company Common Stock and
will receive their written opinion promptly after the date hereof. The Company
shall provide copies of such written opinion to Parent promptly after receipt.
The Board of Directors of the Company has received the oral opinion of Xxxxxx
Xxxxxx Partners LLP to the effect that as of the date hereof the Exchange Ratio
pursuant to this Agreement is fair from a financial point of view to the holders
of shares of the Company Common Stock and will receive their written opinion
promptly after the date hereof. The Company shall provide copies of such written
opinion to Parent promptly after receipt.
.28 Disclosure. The representations and warranties by the Company in this
----------
Agreement and the documents referred to herein (including the Schedules and
Exhibits hereto), taken together with all the other information provided to
Parent or its representatives in connection with the transactions contemplated
hereby, do not contain any statements of a material fact or omit to state any
material fact necessary, in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading.
-30-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company, subject to the exceptions specifically set forth in writing in
the disclosure schedule delivered by Parent to the Company concurrently herewith
(the "Parent Disclosure Schedule") (each Section of which qualifies the
correspondingly numbered representation, warranty or covenant to the extent
specified therein), as follows:
.1 Organization and Qualification.
------------------------------
(a) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Delaware law. Parent
has all the requisite corporate power and authority, and is in possession of all
Approvals necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
qualified, existing and in good standing or to have such power, authority and
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each of Parent and Merger Sub is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that could not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Merger Sub
is a newly-formed single purpose entity which has been formed solely for the
purposes of the Merger and has not carried on any business or engaged in any
activities other than those reasonably related to the Merger.
(b) Section 3.1(b) of the Parent Disclosure Schedule sets forth,
as of the date hereof, a true and complete list of all of Parent's directly and
indirectly owned Subsidiaries, together with the jurisdiction of incorporation
or organization of each Subsidiary and the percentage of each Subsidiary's
outstanding capital stock or other equity or other interest owned by Parent or
another Subsidiary of Parent.
(c) Each Subsidiary of Parent is a legal entity, duly organized,
validly existing and in good standing under the Laws of its respective
jurisdiction of incorporation or organization and has all the requisite power
and authority, and is in possession of all Approvals necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to possess such Approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where the
failure to be so qualified could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
-31-
(d) Section 3.1(d) of the Parent Disclosure Schedule sets forth a
true and complete list of each equity investment in an amount of $300,000 or
more or that represents a 5% or greater ownership interest in the subject of
such investment made by Parent or any of its Subsidiaries in any person other
than the Parent's Subsidiaries (the "Parent Other Interests"). Except as
described in Section 3.1(d) of the Parent Disclosure Schedule, the Parent Other
Interests are owned by Parent, by one or more of the Parent's Subsidiaries, or
by Parent and one or more of its Subsidiaries, in each case free and clear of
all Liens.
(e) Parent has heretofore furnished to the Company a true,
accurate and complete copy of each of its and each of its Subsidiaries'
Certificate of Incorporation and Bylaws or equivalent organizational documents,
as amended or restated to the date hereof. Such Certificate of Incorporation and
Bylaws and equivalent organizational documents of Parent and each of its
Subsidiaries are in full force and effect, and no other organizational documents
are applicable to or binding upon Parent or its Subsidiaries.
.2 Capitalization.
--------------
(a) As of the date hereof, the authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock and 50,000,000 shares of
preferred stock, par value $.01 per share. As of May 15, 2000, (i) 32,482,297
shares of Parent Common Stock were issued and outstanding; (ii) no shares of
Parent Preferred Stock were issued or outstanding; (iii) no shares of Parent
Common Stock were held in the treasury of the Company; (iv) no shares of Parent
Common Stock were held by any Subsidiary of Parent; (v) 6,595,138 shares of
Parent Common Stock were duly reserved for future issuance pursuant to employee
stock options granted pursuant to the option plans; (vi) 1,500,000 shares of
Parent Common Stock were duly reserved for future issuance pursuant to Parent's
Employee Stock Purchase Plan; and (vii) no shares of Company Common Stock were
reserved for issuance upon exercise of outstanding warrants. All of the
outstanding shares of Parent Common Stock are, and all shares to be issued as
part of the Merger Consideration will be, when issued in accordance with the
terms hereof, duly authorized, validly issued, fully paid and nonassessable.
None of the outstanding shares of Parent Common Stock are subject to, nor were
they issued in violation of any, purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right created by
Parent or to which Parent is or was a party, nor does Parent have Knowledge of
any such right. Except as set forth above and in Section 3.2(a) of the Parent
Disclosure Schedule, as of the date hereof, no shares of voting or non-voting
capital stock, other equity interests, or other voting securities of the Company
were issued, reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are, and all shares which may be issued upon the
exercise of stock options and warrants will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to any kind of
preemptive (or similar) rights. There are no bonds, debentures, notes or other
indebtedness of Parent with voting rights (or convertible into, or exchangeable
for, securities with voting rights) on any matters on which stockholders of
Parent may vote.
(b) Except as described in this Section 3.2(b) or in Section
3.2(b) of the Parent Disclosure Schedule, as of the date hereof, there are no
outstanding securities, options, warrants,
-32-
calls, rights, convertible or exchangeable securities, commitments, agreements,
arrangements or undertakings of any kind (contingent or otherwise) to which
Parent or any of its Subsidiaries is a party or by which any of them is bound
obligating Parent or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or other
voting securities of Parent or of any of its Subsidiaries or obligating Parent
or any of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding contractual obligations of Parent or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock (or options or warrants to acquire any such shares) of Parent or
its Subsidiaries. Except as set forth in Section 3.2(b) of the Parent Disclosure
Schedule and the Parent Voting Agreement, there are no voting trusts, proxies or
other agreements, commitments or understandings of any character to which Parent
or any of its Subsidiaries or, to the Knowledge (as defined herein) of Parent,
any of Parent's stockholders is a party or by which any of them is bound with
respect to the issuance, holding, acquisition, voting or disposition of any
shares of capital stock of Parent or any of its Subsidiaries.
(c) As of the date hereof, the authorized capital stock of Merger Sub
consists of 100 shares of Merger Sub Common Stock, of which 100 shares of Merger
Sub Common Stock are outstanding. All of the outstanding shares of Merger Sub
Common Stock are owned by Parent.
.3 Authority; Enforceability. Each of Parent and Merger Sub has all
-------------------------
requisite corporate power and authority to execute and deliver this Agreement,
each Related Agreement to which it is a party, and each instrument required
hereby to be executed and delivered by it at the Closing, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each of Parent
and Merger Sub of this Agreement, each Related Agreement to which it is a party,
and each instrument required hereby to be executed and delivered by Parent and
Merger Sub at the Closing and the performance of their respective obligations
hereunder and thereunder have been duly and validly authorized by the Board of
Directors of each of Parent and Merger Sub and by Parent as the sole stockholder
of Merger Sub. Except for filing of the Certificate of Merger and obtaining the
approval and authorization of this Agreement and the transactions contemplated
hereby by votes of the holders of a majority of the then outstanding Parent
Common Stock, no other corporate proceedings on the part of Parent or Merger Sub
are necessary to authorize the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Merger Sub and, assuming due authorization, execution and delivery hereof by
the Company, constitutes a legal, valid and binding obligation of each of Parent
and Merger Sub, enforceable against each of Parent and Merger Sub in accordance
with its terms.
.4 Required Vote. As of the date hereof and as of the Effective Time, the
-------------
Board of Directors of Parent has, at a meeting duly called and held, (i) by a
unanimous vote of the members present, approved and declared advisable this
Agreement and each Related Agreement to which Parent is a party, (ii) determined
that the transactions contemplated hereby and thereby are advisable, fair to and
in the best interests of the holders of Parent Common Stock, (iii) resolved to
recommend approval of the issuance of shares of Parent Common Stock in
-33-
connection with the Merger pursuant to the terms of this Agreement. The Board
of Directors has not withdrawn, rescinded or modified such approvals,
determination, and resolutions to recommend. The affirmative vote of a majority
of all outstanding shares of Parent Common Stock is the only vote of the holders
of any class or series of capital stock of Parent necessary to approve and
authorize such issuance of Parent Common Stock. As of May 20, 2000, the holders
of the Parent Common Stock that are parties to the Parent Voting Agreement own
(beneficially and of record) and have the right to vote, in the aggregate,
approximately 14,996,724 shares of Parent Common Stock.
.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery by Parent and Merger Sub of this
Agreement, the Related Agreements to which it is a party or any instrument
required by this Agreement to be executed and delivered by Parent or any of its
Subsidiaries at the Closing do not, and the performance of this Agreement and
any such Related Agreement or instrument by Parent or Merger Sub shall not, (i)
conflict with or violate the Certificate of Incorporation or Bylaws of Parent or
the Certificate of Incorporation or Bylaws of Merger Sub, or (ii) conflict with
or violate any Law or Order in each case applicable to Parent or its
Subsidiaries or by which its or any of their respective properties or assets is
bound or affected, or (iii) result in any breach or violation of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair Parent's or any of its Subsidiaries' rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Parent or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, Contract, permit,
franchise or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which Parent or any of its Subsidiaries or its or
any of their respective properties or assets is bound or affected, except (A) as
set forth in Section 3.5(a) of the Parent Disclosure Schedule or (B) in the case
of clause (ii) or (iii) above, for any such conflicts, breaches, violations,
defaults or other occurrences that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery by Parent and Merger Sub of this
Agreement the Related Agreements to which it is a party or any instrument
required by this Agreement to be executed and delivered by Parent or Merger Sub
at the Closing do not, and the performance by Parent and Merger Sub of this
Agreement and any such Related Agreement or instrument shall not, require Parent
or Merger Sub to obtain the Approval of, observe any waiting period imposed by,
or make any filing with or notification to, any Governmental Authority, domestic
or foreign, except for (A) compliance with applicable requirements of the
Securities Act, the Exchange Act, Blue Sky Laws, or the pre-Merger notification
requirements of the HSR Act or Foreign Competition Laws, (B) the filing of the
Certificate of Merger in accordance with the DGCL, (C) the filing of a listing
application or other documents as required by NASDAQ or (D) where the failure to
obtain such Approvals, or to make such filings or notifications, would not
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
-34-
.6 Material Agreements. Except as set forth in Section 3.6 of the Parent
-------------------
Disclosure Schedule, Parent is not party to or bound by (a) Contracts containing
a covenant limiting or purporting to limit the freedom of Parent or any of its
Subsidiaries to engage in any line of business or compete with any Person or
operate at any location in the world; (b) Contracts for the acquisition,
directly or indirectly (by merger or otherwise) of material assets (whether
tangible or intangible) or the capital stock of another Person; (c) promissory
notes, loans, agreements, indentures, evidences of indebtedness or other
instruments and Contracts providing for the borrowing or lending of money,
whether as borrower, lender or guarantor, in each case, relating to indebtedness
or obligations in excess of $100,000; or (d) Contracts involving the issuance or
repurchase of any capital stock of Parent or any of its Subsidiaries (including
newly formed Subsidiaries), other than, with respect to the issuance of Parent
Common Stock, the options or warrants described in Section 3.2. The Contracts
required to be disclosed in the Parent Disclosure Schedule pursuant to the
foregoing clauses (a) through (d) or required to be filed with any Parent SEC
Report ("Parent Contracts") are in full force and effect and are valid and
binding obligations of Parent and are enforceable, in accordance with its terms,
against Parent, in each case except that the enforcement thereof may be limited
by (A) the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws affecting creditors' rights
generally, and (B) general principles of equity (whether in a proceeding in
equity or at law). Parent is not and is not alleged to be and, to the best
Knowledge of Parent, no other party is or is alleged to be in default under, or
in breach or violation of, any Parent Contract and, to the best Knowledge of the
Company, no event has occurred which, with the giving of notice or passage of
time or both, would constitute such a default, breach or violation.
.7 Compliance. Parent and each of its Subsidiaries are in compliance
----------
with, and are not in default or violation of, (i) the Certificate of
Incorporation and Bylaws of Parent or the equivalent organizational documents of
such Subsidiary, (ii) any Law or Order or by which any of their respective
assets or properties are bound or affected and (iii) the terms of all notes,
bonds, mortgages, indentures, Contracts, permits, franchises and other
instruments or obligations to which any of them are a party or by which any of
them or any of their respective assets or properties are bound or affected,
except, in the case of clauses (ii) and (iii), for any such failures of
compliance, defaults and violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Parent and
its Subsidiaries are in compliance with the terms of all Approvals, except where
the failure to so comply could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Except as set forth in Section
3.7 of the Parent Disclosure Schedule or as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, neither
Parent nor any of its Subsidiaries has received notice of any revocation or
modification of any Approval of any federal, state, local or foreign
Governmental Authority that is material Parent or any of its Subsidiaries.
.8 SEC Filings; Financial Statements.
---------------------------------
(a) Parent has filed all forms reports, schedules, statements and
documents required to be filed with the SEC since February 10, 2000
(collectively, as such forms, reports, schedules, statements and documents have
been amended since the time of their filing, the
-35-
"Parent SEC Reports") pursuant to the federal securities Laws and Regulations of
the SEC promulgated thereunder, and all Parent SEC Reports have been filed in
all material respects on a timely basis. The Parent SEC Reports were prepared in
accordance, and complied as of their respective filing dates in all material
respects, with the requirements of the Exchange Act, the Securities Act and the
Regulations promulgated thereunder and did not at the time they were filed (or
if amended or superseded by a filing prior to the date hereof, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Parent's Subsidiaries has filed, or is obligated
to file, any forms, reports, schedules, statements or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in Parent SEC Reports (i)
complied in all material respects with applicable accounting requirements and
the published Regulations of the SEC with respect thereto, (ii) were prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis throughout the periods
involved (except as may be expressly described in the notes thereto) and (iii)
fairly presents the consolidated financial position of Parent as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements included in the Company's Form 10-Q reports were or are subject to
normal and recurring year-end adjustments that have not been and are not
expected to be material to Parent.
.9 Absence of Certain Changes or Events.
------------------------------------
(a) Except as described in Section 3.9(a) of the Parent
Disclosure Schedule, since March 31, 2000 Parent has conducted its, businesses
only in the ordinary and usual course and in a manner consistent with past
practice, and, since such date, there has not been any change, development,
circumstance, condition, event, occurrence, damage, destruction or loss that has
had or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) Except as described in Section 3.9(b) of the Parent
Disclosure Schedule, during the period from March 31, 2000 to the date hereof
there has not been any change by Parent in its accounting methods, principles or
practices, any revaluation by Parent of any of its assets, including, writing
down the value of inventory or writing off notes or accounts receivable.
(c) Neither Parent nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether absolute, accrued, fixed,
contingent or otherwise), and there is no existing fact, condition or
circumstance which could reasonably be expected to result in such liabilities or
obligations, except liabilities or obligations (i) disclosed in the Parent SEC
Reports filed and publicly available prior to the date hereof or in Parent's
March 31, 2000 financial statements, (ii) disclosed in Section 3.9(c) of the
Parent Disclosure Schedule, (iii) incurred in the ordinary
-36-
course of business since March 31, 2000, or (iv) which do not have, and could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
.10 Absence of Litigation. Except as described in Section 3.10 of the
---------------------
Parent Disclosure Schedule or expressly described in the Parent SEC Reports
filed and publicly available prior to the date hereof, there is no Litigation
pending on behalf of or against or, to the Knowledge of Parent, threatened
against Parent, any of its Subsidiaries, or any of their respective properties
or rights, before or subject to any Court or Governmental Authority where the
amount in controversy could exceed $100,000; provided, that such amount in
controversy shall not be construed or utilized to expand, limit or define the
terms "material" or "Material Adverse Effect" as otherwise referenced and used
in this Agreement. Neither Parent nor any of its Subsidiaries is subject to any
outstanding Litigation or Order which, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect.
.11 Registration Statement; Proxy Statement/Prospectus. None of the
--------------------------------------------------
information supplied by Parent for inclusion in the Registration Statement
shall, at the time such document is filed, at the time amended or supplemented,
or at the time the Registration Statement is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied by Parent for inclusion in the
Joint Proxy Statement/Prospectus shall, on the date the Joint Proxy
Statement/Prospectus is first mailed to the Company's stockholders or Parent's
stockholders, at the time of the Company Stockholders' Meeting or the Parent
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Company Stockholders' Meeting or the Parent
Stockholders' Meeting which has become false or misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act. Notwithstanding the foregoing, Parent makes no
representation, warranty or covenant with respect to any information supplied by
the Company which is contained in the Registration Statement or Joint Proxy
Statement/Prospectus.
.12 Taxes. Except as set forth in Section 3.12 of the Parent Disclosure
-----
Schedule:
(a) All material Tax Returns required to be filed by or on behalf
of Parent, each of its Subsidiaries, and each affiliated, combined, consolidated
or unitary group of which Parent or any of its Subsidiaries is a member have
been timely filed, and all such Tax Returns are true, complete and correct in
all material respects.
(b) All material Taxes payable by or with respect to Parent and
each of its Subsidiaries (whether or not shown on any Tax Return) have been
timely paid when due, and adequate reserves (other than a reserve for deferred
Taxes established to reflect timing differences between book and Tax treatment)
in accordance with GAAP are provided on the
-37-
respective company's Balance Sheet for any material Taxes not yet due. All
assessments for material Taxes due and owing by or with respect to Parent and
each of its Subsidiaries with respect to completed and settled examinations or
concluded litigation have been paid. Neither Parent nor any of its Subsidiaries
has incurred a Tax liability from the date of the latest Balance Sheet other
than a Tax liability in the ordinary course of business.
(c) No action, suit, proceeding, investigation, claim or audit
has formally commenced and no written notice has been given that such audit or
other proceeding is pending or threatened with respect to Parent or any of its
Subsidiaries or any group of corporations of which any of Parent and its
Subsidiaries has been a member in respect of any Taxes, and all deficiencies
proposed as a result of such actions, suits, proceedings, investigations, claims
or audits have been paid, reserved against or settled.
(d) Neither Parent nor any of its Subsidiaries has requested, or
been granted any waiver of any federal, state, local or foreign statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax. No extension or waiver of time within which to file any Tax Return of,
or applicable to, Parent or any of its Subsidiaries has been granted or
requested which has not since expired.
(e) Other than with respect to its Subsidiaries, Parent is not
and has never been (nor does Parent have any liability for unpaid Taxes because
it once was) a member of an affiliated, consolidated, combined or unitary group,
and neither Parent nor any of its Subsidiaries is a party to any Tax allocation
or sharing agreement or is liable for the Taxes of any other person under
Treasury Regulations (S)1.1502-6 (or any similar provision of state, local or
foreign Law), as transferee or successor, by Contract, or otherwise.
(f) Parent and its Subsidiaries have not made any payments, are
not obligated to make any payments, and are not a party to any agreements that
under any circumstances could obligate any of them to make any payments as a
result of the transactions contemplated by this Agreement, that will not be
deductible under Section 280G of the Code.
(g) Parent has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(h) Parent and each of its Subsidiaries have complied with all
applicable Laws relating to the payment and withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441, 1442 and
3406 of the Code or similar provisions under any foreign Laws) and have, within
the time and in the manner required by Law, withheld from employee wages and
paid over to the proper Governmental Authorities all amounts required to be so
withheld and paid over under all applicable Laws.
(i) Neither Parent nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
-38-
(j) None of Parent and its Subsidiaries will be required to
include any material amount in taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of a change in the method of
accounting for a taxable period ending prior to the Closing Date, any "closing
agreement" as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign Tax Laws) entered into prior to the Closing
Date, any sale reported on the installment method that occurred prior to the
Closing Date, or any taxable income attributable to any amount that is
economically accrued prior to the Closing Date.
.13 Environmental Matters. Except as described on Section 3.13 of the
---------------------
Parent Disclosure Schedule, and except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect: (i) Parent
and each of its Subsidiaries complies and have complied, during all applicable
statute of limitations periods, with all applicable Environmental Laws, and
possess and comply, and have possessed and complied during all applicable
statute of limitations periods, with all Environmental Permits; (ii) there are
and have been no Materials of Environmental Concern or other conditions at any
property owned, operated, or otherwise used by Parent now or in the past, or at
any other location (including without limitation any facility to which Materials
of Environmental Concern from Parent or any of its Subsidiaries), that are in
circumstances that could reasonably be expected to give rise to any liability of
Parent or any of its Subsidiaries, or result in costs to Parent or any of its
Subsidiaries arising out of any Environmental Law; (iii) no Litigation
(including any notice of violation or alleged violation), under any
Environmental Law or with respect to any Materials of Environmental Concern to
which Parent or any of its Subsidiaries is, or to the Knowledge of Parent will
be, named as a party, or affecting their business, is pending or, to the
Knowledge of Parent, threatened; nor is Parent or any of its Subsidiaries the
subject of any investigation or the recipient of any request for information in
connection with any such Litigation or potential Litigation; (iv) there are no
Orders or agreements under any Environmental Law or with respect to any
Materials of Environmental Concern to which Parent or any of its Subsidiaries is
a party or affecting their business; (v) to the Knowledge of Parent, there are
no events, conditions, circumstances, practices, plans, or legal requirements
(in effect or reasonably anticipated), that could be expected to prevent Parent
from, or materially increase the burden on Parent of: (A) complying with
applicable Environmental Laws, or (B) obtaining, renewing, or complying with all
Environmental Permits; and (vi) to the Knowledge of Parent, each of the
foregoing representations and warranties is true and correct with respect to any
entity for which Parent or any of its Subsidiaries has assumed or retained
liability, whether by Contract or operation of Law.
.14 Pooling; Tax Matters.
--------------------
(a) Parent intends that the Merger be accounted for under the
"pooling of interests" method under the requirements of APB 16 and the
Regulations of the SEC.
(b) To Parent's Knowledge, neither Parent and Merger Sub nor any
of their Affiliates has taken or agreed to take any action or failed to take any
action that could reasonably be expected to prevent (a) the Merger from being
treated for financial accounting purposes as a "pooling of interests" in
accordance with APB 16 and the Regulations of the SEC or (b) the
-39-
Merger from constituting a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
(c) Parent has no Knowledge of any reason why it may not receive
a letter from PricewaterhouseCoopers, LLP (the "Parent's Accountants") dated as
of the Closing Date and addressed to Parent in which the Parent's Accountants
will concur with Parent's management's conclusion that no conditions exist
related to Parent that would preclude Parent from accounting for the Merger as a
"pooling of interests."
(d) Section 3.14(d) of the Parent Disclosure Schedule contains a
true and complete list of all Persons who may be deemed to be Affiliates of
Parent, excluding all of its Subsidiaries but including all directors and
executive officers of Parent.
.15 Brokers. No broker, financial advisor, finder or investment banker or
-------
other Person is entitled to any broker's, financial advisor's, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Merger Sub,
except for Xxxxxx Xxxxxxx & Co. Incorporated (the "Parent's Financial
Advisors").
.16 Opinion of Financial Advisor. The Board of Directors of Parent has
----------------------------
received the oral opinion of the Parent's Financial Advisors. to the effect that
as of the date hereof the Exchange Ratio pursuant to this Agreement is fair from
a financial point of view to the holders of shares of the Parent Common Stock
and will receive their written opinion promptly after the date hereof. Parent
shall provide copies of such written opinion to the Company promptly after
receipt.
.17 Absence of Restrictions on Business Activities. Except as set forth
----------------------------------------------
in Section 3.17 of the Parent Disclosure Schedule, there is no agreement or
Order binding upon Parent or any of its Subsidiaries or any of their assets or
properties which has had or could reasonably be expected to have the effect of
prohibiting or impairing any business practice of Parent or any of its
Subsidiaries or the conduct of business by Parent or any of its Subsidiaries as
currently conducted or as proposed to be conducted by Parent or any of its
Subsidiaries. Except as set forth in Section 3.17 of the Parent Disclosure
Schedule, neither Parent nor any of its Subsidiaries is subject to any non-
competition, non-solicitation or similar restriction on their respective
businesses.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
.1 Conduct of Business by the Company Pending the Merger. The Company
-----------------------------------------------------
covenants and agrees that, between the date hereof and the Effective Time,
except as expressly required or permitted by this Agreement or unless Parent
shall otherwise agree in writing in advance, the Company shall conduct and shall
cause the businesses of each of its Subsidiaries to be conducted only in, and
the Company and its Subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice and in
compliance with applicable Laws. The Company shall use its reasonable best
efforts to preserve intact the business organization and assets of the Company
and each of its Subsidiaries, and to keep
-40-
available the services of the present officers, employees and consultants of the
Company and each of its Subsidiaries, to maintain in effect its Contracts and to
preserve the present relationships of the Company and each of its Subsidiaries
with advertisers, sponsors, customers, licensees, suppliers and other Persons
with which the Company or any of its Subsidiaries has business relations. By way
of amplification and not limitation, neither the Company nor any of its
Subsidiaries shall, between the date hereof and the Effective Time, directly or
indirectly do, or propose to do, any of the following without the prior written
consent of Parent:
(a) amend or otherwise change the Certificate of Incorporation or
Bylaws or equivalent organizational document of the Company or any of its
Subsidiaries or alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of the Company or
any of its Subsidiaries;
(b) issue, grant, sell, transfer, deliver, pledge, promise,
dispose of or encumber, or authorize the issuance, grant, sale, transfer,
deliverance, pledge, promise, disposition or encumbrance of, any shares of
capital stock of any class (common or preferred), or any options (other than
stock options under the 1999 Stock Option Plan granted to new employees
consistent with past practice in order to continue the employee recruitment
efforts of the Company as mutually and reasonably determined by Parent and the
Company) warrants, convertible or exchangeable securities or other rights of any
kind to acquire any shares of capital stock or any other ownership interest or
Stock-Based Rights of the Company or any of its Subsidiaries (except for the
issuance of Company Common Stock issuable pursuant to the Outstanding Employee
Options); adopt, ratify or effectuate a stockholders' rights plan or agreement;
or redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of the Company or interest in or securities of any Subsidiary
(except for the repurchase of a stockholder's Company Common Stock upon
termination of such stockholder's status as an employee or consultant pursuant
to existing repurchase agreements and the Option Plans);
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock (except that a wholly owned Subsidiary of the Company
may declare and pay a dividend to its parent); split, combine or reclassify any
of its capital stock, or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for, shares of its capital stock;
or amend the terms of, repurchase, redeem or otherwise acquire, or permit any
Subsidiary to repurchase, redeem or otherwise acquire, any of its securities or
any securities of its Subsidiaries; or propose to do any of the foregoing;
(d) sell, transfer, deliver, lease, license, sublicense,
mortgage, pledge, encumber or otherwise dispose of (in whole or in part), or
create, incur, assume or subject any Lien on, any of the assets of the Company
or any of its Subsidiaries (including any Intellectual Property), except for the
sale of goods, licenses of Intellectual Property involving annual revenue,
payments or liabilities of less than $100,000 or having a term of less than one
year, and dispositions of other immaterial assets, in any case, in the ordinary
course of business and in a manner consistent with past practice;
-41-
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company of any of its Subsidiaries (other than the Merger);
(f) acquire (by merger, consolidation, acquisition of stock or
assets or otherwise) or organize any corporation, limited liability company,
partnership, joint venture, trust or other entity or any business organization
or division thereof; incur any indebtedness for borrowed money or issue any debt
securities or any warrants or rights to acquire any debt security or assume,
guarantee or endorse or otherwise as an accommodation become responsible for,
the obligations of any Person, or make any loans, advances or enter into any
financial commitments; or authorize or make any capital expenditures which are,
in the aggregate, in excess of $1,000,000 for the Company and its Subsidiaries
taken as a whole;
(g) hire or terminate any employee or consultant, except in the
ordinary course of business consistent with past practice; increase the
compensation or fringe benefits (including, without limitation, bonus) payable
or to become payable to its officers or employees, except for increases in
salary or wages of employees of the Company or its Subsidiaries who are not
officers of the Company in the ordinary course of business consistent with past
practice, or loan or advance any money or other asset or property to, or grant
any bonus, severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the Company
or any of its Subsidiaries, or establish, adopt, enter into, terminate or amend
any Employee Plan or any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, stock purchase, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees, provided that nothing in
this Section 4.1(g) shall restrict the ability of the Company's Board of
Directors to adopt appropriate resolutions, with respect to persons who are
officers or directors of the Company, to cause the transactions relating to the
Merger that may be considered dispositions under Section 16 of the Exchange Act
for such persons to be exempt from such Section;
(h) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition, payments of accounts
payable and collection of accounts receivable) unless required by a change in
Law or GAAP used by it;
(i) revalue in any material respect any of its assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable, other than in the ordinary course of business;
(j) (v) other than in the ordinary course consistent with past
practice, enter into any agreement that if entered into prior to the date hereof
would be a Material Agreement set forth in Section 2.7(a) of the Company
Disclosure Schedule (excluding any confidentiality agreements permitted pursuant
to Section 4.2); (w) modify, amend in any material respect, transfer or
terminate any Material Agreement or waive, release or assign any rights or
claims thereto or thereunder; (x) enter into or extend any lease with respect to
Real Property with any third party; (y) modify, amend or transfer in any way or
terminate any Material Agreement,
-42-
standstill or confidentiality agreement with any third party, or waive, release
or assign any rights or claims thereto or thereunder; or (z) enter into, modify
or amend any Contract to provide exclusive rights or obligations;
(k) make any material Tax election other than an election in the
ordinary course of business consistent with the past practices of the Company or
settle or compromise any federal, state, local or foreign income tax liability
or agree to an extension of a statute of limitations;
(l) fail to file any Tax Returns when due (or, alternatively,
fail to file for available extensions) or fail to cause Tax Returns when filed
to be complete and accurate in all material respects;
(m) fail to pay any Taxes or other material debts when due;
(n) pay, discharge, satisfy or settle any Litigation or waive,
assign or release any material rights or claims. The Company and its
Subsidiaries shall not pay, discharge or satisfy any liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except in
the ordinary course of business consistent with past practice in an amount or
value not exceeding $100,000 in any instance or series of related instances or
$500,000 in the aggregate or in accordance with their terms as in effect as of
the date hereof;
(o) engage in, enter into or amend any Contract, transaction,
indebtedness or other arrangement with, directly or indirectly, any of the
directors, officers, stockholders or other Affiliates of the Company and its
Subsidiaries, or any of their respective Affiliates or family members, except
for (i) amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses and (ii) those items existing as of the date hereof and listed
in Section 4.1(o) of the Company Disclosure Schedule;
(p) fail to maintain in full force and effect all self-insurance
and insurance, as the case may be, currently in effect;
(q) take any action that (without regard to any action taken, or
agreed to be taken, by Parent or any of its Affiliates) could reasonably be
expected to prevent (i) Parent from accounting for the business combination to
be effected by the Merger as a "pooling of interests" or (ii) the Merger from
qualifying as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code;
(r) fail to make in a timely manner any filings with the SEC
required under the Securities Act or the Exchange Act or the rules or
regulations promulgated thereunder; or
(s) authorize, recommend, propose or announce an intention to do
any of the foregoing, or agree or enter into or amend any Contract or
arrangement to do any of the foregoing.
-43-
.2 Solicitation of Other Proposals.
-------------------------------
(a) From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to Article VII, the Company and
its Subsidiaries shall not, nor shall they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly, (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as hereinafter defined),
(ii) participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any 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, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal; provided,
--------
however, that notwithstanding the foregoing, prior to the adoption of this
-------
Agreement by the Company's stockholders, this Section 4.2(a) shall not prohibit
the Company from furnishing nonpublic information regarding the Company and its
subsidiaries to, or entering into discussions or negotiations with, any person
or group who has submitted (and not withdrawn) to the Company an unsolicited,
written, bona fide Acquisition Proposal that the Board of Directors of the
Company reasonably concludes (based on the written advice of a financial advisor
of national standing) may constitute a Superior Offer (as hereinafter defined)
if (1) neither the Company nor any representative of the Company and its
Subsidiaries shall have materially violated any of the restrictions set forth in
this Section 4.2, (2) the Board of Directors of Company concludes in good faith,
after consultation with 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 stockholders under applicable Law, (3) prior to
furnishing any such nonpublic information to, or entering into any such
discussions with, such person or group, the Company gives Parent written notice
of the identity of such person or group and all of the material terms and
conditions of such Acquisition Proposal and of the Company's intention to
furnish nonpublic information to, or enter into discussions with, such person or
group, and the Company receives from such person or group an executed
confidentiality agreement containing terms at least as restrictive with regard
to the Company's confidential information as the Confidentiality Agreement (as
defined in Section 5.4), (4) the Company gives Parent at least two business days
advance notice of its intent to furnish such nonpublic information or enter into
such discussions, and (5) contemporaneously with furnishing any such nonpublic
information to such person or group, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). The Company and its
subsidiaries will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer, director, employee, agent or consultant of the Company or any of its
Subsidiaries or any investment banker, attorney, agent or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to be a
breach of this Section 4.2 by the Company.
-44-
(b) In addition to the obligations of the Company set forth in
paragraph (a) of this Section 4.2, the Company as promptly as reasonably
practicable shall advise Parent orally and in writing of any request for non-
public information which the Company reasonably believes could lead to an
Acquisition Proposal or of any Acquisition Proposal, or any inquiry with respect
to or which the Company reasonably should believe could lead to any Acquisition
Proposal, the material terms and conditions of such request, Acquisition
Proposal or inquiry, and the identity of the person or group making any such
request, Acquisition Proposal or inquiry. The Company will keep Parent informed
as promptly as reasonably practicable in all material respects of the status and
details (including material amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
(c) For the purposes of this Agreement, "Acquisition Proposal"
means any offer or proposal by a third party (other than the Merger) relating
to: (A) any acquisition or purchase from the Company by any person or "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 30% interest in the total outstanding
voting securities of the Company or any of its subsidiaries or any tender offer
or exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 30% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 67% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition, or disposition of more than 50% of
the assets of the Company; or (C) any liquidation or dissolution of the Company.
.3 Conduct of Business by Parent Pending the Merger. Parent covenants
------------------------------------------------
and agrees that, between the date hereof and the Effective Time, Parent shall
use its reasonable best efforts to preserve intact the business organization and
assets of Parent and each of its Subsidiaries, and to operate, and cause each of
its Subsidiaries to operate, according to plans and budgets, to keep available
the services of the present officers, employees and consultants of Parent and
each of its Subsidiaries, to maintain in effect its contracts and to preserve
the present relationships of Parent and each of its Subsidiaries with
advertisers, sponsors, customers, licensees, suppliers and other Persons with
which Parent or any of its Subsidiaries has business relations. Neither Parent
nor any of its Subsidiaries shall, between the date hereof and the Effective
Time, directly or indirectly do, or propose to do, any of the following without
the prior written consent of the Company:
(a) amend or otherwise change the Certificate of Incorporation or
Bylaws or equivalent organizational document of Parent or any of its
Subsidiaries;
(b) declare, set aside or pay any cash dividend or cash
distribution in respect of its capital stock (except that a wholly owned
Subsidiary of the Company may declare and pay a dividend to its parent);
-45-
(c) take any action that (without regard to any action taken, or
agreed to be taken, by Parent or any of its Affiliates) could reasonably be
expected to prevent (i) Parent from accounting for the business combination to
be effected by the Merger as a "pooling of interests" or (ii) the Merger from
qualifying as a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code; or
(d) fail to make in a timely manner any filings with the SEC
required under the Securities Act or the Exchange Act or the rules or
regulations promulgated thereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
.1 Registration Statement; Proxy Statement/Prospectus.
--------------------------------------------------
(a) As promptly as reasonably practicable following the date
hereof, the Company and Parent shall prepare and file with the SEC mutually
acceptable proxy materials which shall constitute the Joint Proxy
Statement/Prospectus (such proxy statement/prospectus, and any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") and Parent shall
prepare and file the Registration Statement. The Joint Proxy
Statement/Prospectus will be included in and will constitute a part of the
Registration Statement as Parent's prospectus. The Registration Statement and
the Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder. Each of Parent and the Company
shall use reasonable best efforts to have the Registration Statement declared
effective by the SEC and to keep the Registration Statement effective as long as
is necessary to consummate the Merger and the transactions contemplated thereby.
(b) Parent and the Company shall, as promptly as practicable
after receipt thereof, provide the other party copies of any written comments
and advise the other party of any oral comments, with respect to the Joint Proxy
Statement/Prospectus received from the SEC. Parent will provide the Company with
a reasonable opportunity to review and comment on any amendment or supplement to
the Registration Statement prior to filing such with the SEC, and will provide
the Company with a copy of all such filings made with the SEC. Notwithstanding
any other provision herein to the contrary, no amendment or supplement
(including by incorporation by reference) to the Joint Proxy
Statement/Prospectus or the Registration Statement shall be made without the
approval of both parties, which approval shall not be unreasonably withheld or
delayed; provided, that with respect to documents filed by a party which are
--------
incorporated by reference in the Registration Statement or the Joint Proxy
Statement/Prospectus, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations.
(c) Parent will use reasonable best efforts to cause the Joint
Proxy Statements/Prospectus to be mailed to Parent's stockholders, and the
Company will use reasonable best efforts to cause the Joint Proxy
Statement/Prospectus to be mailed to the
-46-
Company's stockholders, in each case after the Registration Statement is
declared effective under the Securities Act.
(d) Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective, the issuance of any stop order, the suspension of the qualification
of the Parent Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or any request by the SEC for amendment of the
Joint Proxy Statement/Prospectus or the Registration Statement. If at any time
prior to the Effective Time any information relating to Parent or the Company,
or any of their respective affiliates, officers or directors, should be
discovered by Parent or the Company which should be set forth in an amendment or
supplement to any of the Registration Statement or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and, to the extent required by Law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of
Parent and the Company.
.2 Company Stockholders' Meeting.
-----------------------------
(a) Promptly after the date hereof, the Company shall take all
action necessary in accordance with the applicable Law and its Certificate of
Incorporation and Bylaws and the rules of NASDAQ to call, give notice of,
convene and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") to be held as promptly as practicable, and in any event (to the extent
permissible under applicable Law) within 60 days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon
adoption of this Agreement. Subject to Section 5.2(c), the Company shall use its
reasonable best efforts to solicit from its stockholders proxies in favor of the
adoption of this Agreement and will take all other action necessary to secure
the vote or consent of its stockholders required by the rules of NASDAQ and
applicable Law to obtain such approvals. Notwithstanding anything to the
contrary contained in this Agreement, the Company (i) may adjourn or postpone
the Company Stockholders' 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 stockholders in advance of a vote on this Agreement or
(ii) shall (unless Parent otherwise consents in writing) adjourn or postpone the
Company Stockholders' Meeting, if as of the time for which the Company
Stockholders' Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus) or subsequently rescheduled or reconvened, 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
Stockholders' Meeting. The Company shall ensure that the Company Stockholders'
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by the Company in connection with the Company Stockholders' Meeting
are solicited, in compliance with applicable Law, the Company's Certificate of
Incorporation and Bylaws, the rules of NASDAQ and all other applicable legal
requirements. The Company's obligation to call, give notice of, convene and hold
the Company Stockholders' Meeting in accordance with this Section
-47-
5.2(a) shall not be limited or affected by the commencement, disclosure,
announcement or submission to Company of any Acquisition Proposal or Superior
Offer (as defined below), or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of the Company with respect to this
Agreement or the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the
Company shall recommend that the Company's stockholders vote in favor of and
adopt and approve this Agreement and approve the Merger at the Company
Stockholders' 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 Company's stockholders vote in favor of and
adoption of this Agreement at the Company Stockholders' 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 withdraw, amend or modify in
a manner adverse to Parent, the recommendation of the Board of Directors of the
Company that the Company's stockholders vote in favor of adoption of this
Agreement.
(c) Nothing in this Agreement shall prevent the Board of
Directors of the Company from withholding, withdrawing, amending or modifying
its recommendation in favor of the Merger if (i) a Superior Offer (as defined
below) is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "Notice of Superior Offer") advising Parent
that the Company has received a Superior Offer, specifying all of the material
terms and conditions of such Superior Offer and identifying the person or entity
making such Superior Offer, (iii) Parent shall not have, within three business
days of Parent's receipt of the Notice of Superior Offer, made an offer that the
Company's Board of Directors by a majority vote determines in its good faith
judgment (after having received the written advice of a financial advisor of
national standing) to be at least as favorable to the Company's stockholders as
such Superior Offer (it being agreed that the Board of Directors of the Company
shall convene a meeting to consider any such offer by Parent promptly following
the receipt thereof), (iv) the Board of Directors of the Company concludes in
good faith, after consultation with its outside counsel, that, in light of such
Superior Offer, the withholding, withdrawal, amendment or modification of such
recommendation is required in order for the Board of Directors of Company to
comply with its fiduciary duties to the Company's stockholders under applicable
Law and (v) the Company shall not have violated any of the restrictions set
forth in Section 4.2 or this Section 5.2. The Company shall provide Parent with
at least two business days prior notice of any meeting of the Company's Board of
Directors at which the Company's Board of Directors is to consider any
Acquisition Proposal to determine whether such Acquisition Proposal is a
Superior Offer. Nothing contained in this Section 5.2(c) shall limit the
Company's obligation to hold and convene the Company Stockholders' Meeting
(regardless of whether the recommendation of the Board of Directors of Company
shall have been withdrawn, amended or modified).
(d) For the purposes of this Agreement, "Superior Offer" shall
mean an unsolicited, bona fide written offer made by a third party to consummate
any of the following transactions: (i) a merger or consolidation involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the
-48-
equity interest in the surviving or resulting entity of such transaction; (ii) a
sale or other disposition by the Company of assets representing in excess of 50%
of the fair market value of the Company's business immediately prior to such
sale; or (iii) the acquisition by any person or group (including, without
limitation, by way of a tender offer or an exchange offer or a two step
transaction involving a tender offer followed with reasonable promptness by a
merger involving the Company), directly or indirectly, of ownership of 51% or
more of the then outstanding shares of capital stock of the Company, on terms
that the Board of Directors of the Company determines, in its reasonable
judgment (based on the written advice of a financial advisor of national
standing) to be more favorable to the Company stockholders than the terms of the
Merger; provided, however, that any such offer shall not be deemed to be a
-------- -------
"Superior Offer" unless the Company or such third party has obtained bona fide
firm commitment letters for any financing required to consummate the transaction
contemplated by such offer.
(e) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and disclosing to its stockholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
.3 Parent Stockholders Meeting.
---------------------------
(a) Promptly after the date hereof, Parent will take all action
necessary in accordance with the applicable Law and its Certificate of
Incorporation and Bylaws to call, give notice of, convene and hold a meeting of
its stockholders (the "Parent Stockholders' Meeting") to be held as promptly as
practicable, and in any event (to the extent permissible under applicable Law)
within 60 days after the declaration of effectiveness of the Registration
Statement, for the purpose of approving the issuance of shares of Parent Common
Stock in connection with the Merger. Parent will use its reasonable best efforts
to solicit from its stockholders proxies in favor of approving the issuance of
Parent Common Stock in connection with the Merger and will take all other action
necessary to secure the vote or consent of its stockholders required by the
rules of NASDAQ and applicable Law to obtain such approvals. 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 approval of the
issuance of shares of Parent Common Stock in connection with the Merger or, if
as of the time for which 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
Stockholders' Meeting. Parent shall ensure that the Parent Stockholders' Meeting
is called, noticed, convened, held and conducted, and that all proxies solicited
by Parent in connection with the Parent Stockholders' Meeting are solicited, in
compliance with applicable Law, its Certificate of Incorporation and Bylaws and
the rules of NASDAQ.
(b) (i) The Board of Directors of Parent shall recommend that
Parent's stockholders approve the issuance of shares of Parent Common Stock in
connection with the Merger at the Parent Stockholders' Meeting; (ii) the Joint
Proxy Statement/Prospectus shall
-49-
include a statement to the effect that the Board of Directors of Parent has
recommended that Parent's stockholders approve such issuance of shares at the
Parent Stockholders' Meeting; 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 Company, the recommendation
of the Board of Directors of Parent that Parent's stockholders approve such
issuance of shares.
(c) Nothing contained in this Agreement shall prohibit Parent or
its Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
.4 Access to Information; Confidentiality.
--------------------------------------
(a) Upon reasonable notice, the Company shall (and shall cause
each of its Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives and agents of Parent (collectively "Parent
Representatives"), reasonable access, during the period prior to the Effective
Time, to all its properties, books, Contracts, commitments and records and,
during such period, the Company shall (and shall cause each of its Subsidiaries
to) furnish promptly to the other all information concerning its business,
properties, books, Contracts, commitments, record and personnel as Parent may
reasonably request. The Company shall (and shall cause each of its Subsidiaries
to) make available to the other party the appropriate individuals for discussion
of such entity's business, properties and personnel as Parent or the Parent
Representatives may reasonably request. No investigation pursuant to this
Section 5.4(a) shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereto.
(b) Upon reasonable notice, Parent shall (and shall cause each of
its Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives and agents of the Company (collectively "Company
Representatives"), reasonable access, during the period prior to the Effective
Time, to all its properties, books, Contracts, commitments and records and,
during such period, Parent shall (and shall cause each of its Subsidiaries to)
furnish promptly to the other all information concerning its business,
properties, books, Contracts, commitments, record and personnel as the Company
may reasonably request. Parent shall (and shall cause each of its Subsidiaries
to) make available to the other party the appropriate individuals for discussion
of such entity's business, properties and personnel as the Company or the
Company Representatives may reasonably request. No investigation pursuant to
this Section 5.4(b) shall affect any representations or warranties of the
parties herein or the conditions to the obligations of the parties hereto.
(c) The parties hereto shall keep all information obtained
pursuant to Section 5.4(a) and (b) confidential in accordance with the terms of
the Confidential Non-Disclosure Agreement (the "Confidentiality Agreement"),
between Parent and the Company. Anything contained in the Confidentiality
Agreement to the contrary notwithstanding, the Company and Parent hereby agree
that each such party may issue press release(s) or make other public
announcements in accordance with Section 5.14.
-50-
.5 Reasonable Best Efforts; Further Assurances.
-------------------------------------------
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each party hereto shall use its reasonable best efforts to take,
or cause to be taken, all actions, and do, or cause to be done, and to assist
and cooperate with the other party or parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated hereby,
and by the Related Agreements. The Company and Parent shall use its reasonable
best efforts to (i) as promptly as practicable, obtain all Approvals (including
those referred to in Sections 2.6(a) and 2.6(b) and Sections 2.6(a) and 2.6(b)
of the Company Disclosure Schedule), and the Company and Parent shall make all
filings under applicable Law required in connection with the authorization,
execution and delivery of this Agreement by the Company and Parent and the
consummation by them of the transactions contemplated hereby and thereby,
including the Merger (in connection with which Parent and the Company will
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filings and, if requested, will accept all reasonable
additions, deletions or changes suggested in connection therewith); (ii) furnish
all information required for any application or other filing to be made pursuant
to the DGCL or any other Law or any applicable Regulations of any Governmental
Authority (including all information required to be included in the Joint Proxy
Statement/Prospectus or the Registration Statement) in connection with the
transactions contemplated by this Agreement and the Related Agreements; and
(iii) lift, rescind or mitigate the effects of any injunction or other Order
adversely affecting the ability of any party hereto to consummate the
transactions contemplated hereby and thereby and to prevent, with respect to any
threatened or such injunction or other Order, the issuance or entry thereof,
provided, however, that neither Parent nor any of its Affiliates shall be under
any obligation to (x) make proposals, execute or carry out agreements or submit
to Orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of Parent, any of its Affiliates, including its Subsidiaries, the
Company or the holding separate of the Company Common Stock or imposing or
seeking to impose any limitation on the ability of Parent or any of its
Affiliates, including its Subsidiaries, to conduct their business or own such
assets or to acquire, hold or exercise full rights of ownership of Company
Common Stock, or (y) otherwise take any step to avoid or eliminate any
impediment which may be asserted under any Law governing competition, monopolies
or restrictive trade practices which, in the reasonable judgment of Parent,
might result in a limitation of the benefit expected to be derived by Parent as
a result of the transactions contemplated hereby or might adversely affect the
Company or Parent or any of Parent's Affiliates, including its Subsidiaries.
Neither party hereto will take any action which could reasonably be expected to
result in any of the representations or warranties made by such party pursuant
to Articles II or III, as the case may be, becoming untrue or inaccurate in any
material respect.
(b) The parties hereto shall use their reasonable best efforts to
satisfy or cause to be satisfied all of the conditions precedent that are set
forth in Article VI, as applicable to each of them, and to cause the
transactions contemplated by this Agreement to be consummated. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such
-51-
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
(c) The Company and Parent shall cooperate with one another:
(i) in connection with the preparation of the Registration
Statement and the Joint Proxy Statement/Prospectus;
(ii) in connection with the preparation of any filing
required by the HSR Act or any Foreign Competition Laws;
(iii) in determining whether any action by or in respect of,
or filing with, any Governmental Authority or other third party, is required, or
any Approvals are required to be obtained from parties in connection with the
consummation of the transactions contemplated hereby;
(iv) in seeking any Approvals or making any filings,
including furnishing information required in connection therewith or with the
Registration Statement or the Joint Proxy Statement/Prospectus, and seeking
timely to obtain any such Approvals, or making any filings;
(v) in connection with the admission to NASDAQ of the
Parent Common Stock to be issued in the Merger; and
(vi) in order to facilitate the achievement of the benefits
reasonably anticipated from the Merger.
(d) The Company shall use its reasonable best efforts to cause
its Affiliates and other Persons to transfer and assign all rights necessary for
the Company to continue to conduct its business consistent with historical
operations and as currently conducted, pursuant to documentation and in a manner
reasonably acceptable to Parent.
.6 Stock Options and Stock Plan; Options.
-------------------------------------
(a) At the Effective Time, each Outstanding Employee Option,
whether vested or unvested, shall be assumed by Parent. Each such Outstanding
Employee Option so assumed by Parent under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the Option
Plans, option agreements thereunder and other relevant documentation immediately
prior to the Effective Time (including, without limitation, any restrictions on
transfer, vesting provisions and restrictive covenants), except that such
Outstanding Employee Option shall be exercisable solely for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were purchasable under such Outstanding Employee
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
the per-share exercise price for the shares of Parent
-52-
Common Stock issuable upon exercise of such assumed Outstanding Employee Option
shall be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such Outstanding Employee Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio, and
rounding the resulting exercise price up to the nearest whole cent; provided,
further, that in the case of any Outstanding Employee Option to which Section
421 of the Code applies by reason of its qualification under Section 422 of the
Code ("ISOs"), the option price, the number of shares purchasable pursuant to
such option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The parties
intend that the assumption of options provided for under this Section 5.6 shall
meet the requirements of Section 424(a) of the Code, and this Section 5.6 shall
be interpreted in a manner consistent with such intent.
(b) Parent shall reserve for issuance a sufficient number of
shares of Parent Common Stock for delivery upon exercise of Outstanding Employee
Options assumed by Parent under this Agreement.
(c) The vesting of each Outstanding Employee Option shall not
accelerate as a result of, or in connection with, the transactions contemplated
hereby, except to the extent required by the existing terms of the Option Plan
or option agreement pursuant to which it was granted. The Company shall take no
action, and shall ensure that no discretion is exercised by the Board of
Directors or any committee thereof or any other body or Person so as to cause
the vesting of any Outstanding Employee Option or any other warrant or right to
acquire shares of Company Common Stock to accelerate.
(d) The parties shall use their reasonable best efforts to
mutually agree with respect to the treatment of the Purchase Plan in the Merger
on terms not inconsistent with the Purchase Plan or the terms of this Agreement;
provided, however, that in no event may Company Common Stock be purchased under
the Purchase Plan after the Effective Time.
.7 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
Outstanding Employee Options as soon as is reasonably practicable after the
Effective Time (and in any event within 30 days thereof).
.8 Employee Benefits.
-----------------
(a) The Company agrees to provide Parent with, and to cause each
of its Subsidiaries to provide Parent with, reasonable access to its employees
during normal working hours following the date of this Agreement, to among other
things, provide information about Parent to such employees. All communications
by Parent with Company employees shall be conducted in a manner that does not
disrupt or interfere with the Company's efficient and orderly operation of its
business.
(b) All employees of the Company shall be eligible to participate
in the health, vacation and other employee benefit plans of Parent or a
Subsidiary of the Parent to substantially the same extent as such benefits are
provided to employees of Parent in similar positions and at similar grade levels
(it being understood that such employees shall be eligible to begin to
-53-
participate (i) in Parent's employee stock purchase plan upon the commencement
of the first new offering period after the Effective Time and in accordance with
the eligibility provisions of such plan, and (ii) in the other Parent Employee
Benefit Plans in accordance with the terms of such plans; provided, however,
-------- -------
that in the case of plans for which the Company maintains a plan offering the
same type of benefit, such eligibility need not be offered by Parent or its
Subsidiary until the corresponding plan of the Company ceases to be available
after the Effective Time). A Parent Employee Benefit Plan may, if so continued
by Parent or its Subsidiaries, include continuation of a Benefit Plan of the
Company. As soon as administratively feasible following the Effective Time,
Parent agrees to take all reasonable actions necessary to transition the
Company's employees into Parent's or its Subsidiaries' employee benefit plans as
contemplated by the first sentence of this Section 5.8(b). Further, until such
time that the Company's employees are covered under an employee benefit plan of
Parent, they shall continue to be covered under the corresponding Company plan
that offers the same type of benefit. Parent also agrees to provide each Company
employee with full credit under any Parent Plan which is an Employee Benefit
Plan for services as an employee of the Company prior to the Effective Time for
purposes of eligibility, vesting and the determination of the level of benefits
under any Parent plan which is an Employee Benefit Plan (including vacation, but
excluding benefit accruals under a defined benefit pension plan) and shall
receive credit under any Parent health plan for any deductible, copayment or
out-of-pocket limits applicable to such employee to the extent such amounts have
been paid by such employee during the calendar year in which such employee first
becomes eligible for coverage under a Parent plan.
(c) The Company agrees to take all actions necessary to amend,
merge, freeze or terminate any or all compensation and benefit plans, effective
at and contingent upon the Closing Date, as requested in writing by Parent.
Without limiting the generality of the foregoing, if requested by Parent in
writing at least 10 days prior to the Effective Time, the Company shall cause to
be adopted prior to the Effective Time resolutions of the Company's Board of
Directors to cease all contributions to the Company 401(k) Plan (the "401(k)
Plan"), and to terminate the 401(k) Plan at least one day prior to the Effective
Time. Such resolutions shall provide (to the extent required under Section 411
of the Code) that all participants shall be fully vested in their account
balances under the 401(k) Plan. Such resolutions shall also authorize
distributions of 401(k) Plan balances to participants (to the extent permitted
under Section 401(k)(10) of the Code) as soon as practicable following the
Effective Time and following the Company's receipt from the Internal Revenue
Service of a favorable determination letter regarding the tax-qualified status
of the 401(k) Plan following its termination.
(d) The Company shall deliver to Parent an executed copy of such
resolutions as soon as practicable following their adoption by Company's Board
of Directors and shall fully comply with such resolutions. To the extent
permitted by Parent's 401(k) plan, Parent shall (i) cause a tax-qualified
defined contribution plan maintained by Parent or a subsidiary of Parent (the
"Parent 401(k) Plan") to accept rollovers (including direct rollovers) from the
401(k) plan maintained for the benefit of employees of the Company and its
Affiliates in respect of distributions made on account of the transactions
contemplated by this Agreement and (ii) allow loan balances of participants who
have borrowed from the Parent 401(k) Plan, if any, to be rolled over without
requiring that the participant first repay the loan. In the event that the
Parent 401(k)
-54-
Plan does not permit such loans, Parent shall use commercially reasonable
efforts to amend such plan to permit rollovers of such loans in a direct
transfer from the 401(k) Plan.
(e) The Board of Directors of Parent shall, to the extent
permitted by applicable Law, take or cause to be taken all actions necessary to
obtain approval in the form required by Rule 16b-3 of the Exchange Act so that,
with respect to persons who will or may become officers or directors of Parent,
the transactions relating to the Merger that may be considered acquisitions
under such Rule for such persons will be exempt from Section 16 of the Exchange
Act.
.9 Parent Option Pool. As is reasonably practicable after the Effective
------------------
Time, subject to the approval of its Board of Directors, Parent will grant such
number of stock options to purchase shares of Parent Common Stock to the
employees of the Company (the "Company Option Grant") as mutually agreed by the
Company and Parent prior to the Effective Time in order to reasonably provide
incentives for, and to retain, such employees after the Effective Time, and as
described in a letter to be delivered to Parent prior to the Closing Date and
approved by Parent promptly after the Effective Time and consistent with
standard Parent practices.
.10 Parent Board of Directors. The Board of Directors of Parent will take
-------------------------
all actions reasonably necessary, such that, effective upon the Effective Time,
R. Xxxxx Xxxxx ("Xx. Xxxxx") and one other person, as determined by Parent's
Board of Directors and the Company, shall be appointed to Parent's Board of
Directors.
.11 Pooling; Reorganization.
-----------------------
(a) The Company shall not take, or permit any controlled
Affiliate of the Company to take, any action that could reasonably be expected
to prevent the Merger from being treated (i) for financial accounting purposes
as a "pooling of interests" under GAAP; it being understood and agreed that if
the Company's Accountants advise the Company in writing that such an action
would not prevent the Merger from being so treated, such action will be
conclusively deemed not to constitute a breach of this Section 5.11 or (ii) as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
(b) The Company shall use its reasonable best efforts to obtain
an executed affiliate pooling agreement substantially in the form attached
hereto as Exhibit E (each, a "Company Affiliate Pooling Agreement") from each of
---------
the Persons identified in Section 2.24(d) of the Company Disclosure Schedule
concurrently with the execution of this Agreement and thereafter from any other
person who may be deemed an affiliate of the Company regarding compliance with
Rule 145 under the Securities Act and the requirements for accounting treatment
of the Merger as a "pooling of interests" under APB 16, and the Regulations of
the SEC.
(c) Parent shall not take or permit any controlled Affiliate of
Parent to take, any action that could reasonably be expected to prevent the
Merger from being treated (i) for financial accounting purposes as a "pooling of
interests" under GAAP; it being understood and agreed that if Parent's
Accountants, advises Parent in writing that such an action would not prevent the
Merger from being so treated, such action will be conclusively deemed not to
-55-
constitute a breach of this Section 5.11; or (ii) as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
(d) Parent shall use its reasonable efforts to obtain an executed
affiliate pooling agreement substantially in the form attached hereto as Exhibit
-------
F (each, a "Parent Affiliate Pooling Agreement") from each of the Persons
-
identified in Section 5.11(d) of the Parent Disclosure Schedule regarding
compliance with the requirements for accounting treatment of the Merger as a
"pooling of interests."
.12 Notification of Certain Matters.
-------------------------------
(a) The Company shall give prompt notice to Parent, and Parent
shall give prompt notice to the Company, of the occurrence, or non-occurrence,
of any event the occurrence, or non-occurrence, of which results in any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect (or, in the case of any representation or
warranty qualified by its terms by materiality or Material Adverse Effect, then
untrue or inaccurate in any respect) and any failure of the Company, Parent or
Merger Sub, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
-------- -------
this Section 5.12 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
(b) Each of the Company and Parent shall give prompt notice to
the other of (i) any notice or other communication from any Person alleging that
the Approval of such Person is or may be required in connection with the Merger
or the Related Agreements, (ii) any notice or other communication from any
Governmental Authority in connection with the Merger or the Related Agreements,
(iii) any Litigation, relating to or involving or otherwise affecting the
Company or its Subsidiaries or Parent that relates to the Merger or the Related
Agreements; (iv) the occurrence of a default or event that, with notice or lapse
of time or both, will become a default under any Material Agreement of the
Company; and (v) any change that could reasonably be expected to have a Material
Adverse Effect on the Company or Parent or is likely to delay or impede the
ability of either Parent or the Company to consummate the transactions
contemplated by this Agreement or the Related Agreements or to fulfill their
respective obligations set forth herein or therein.
(c) Each of the Company and Parent shall give (or shall cause
their respective Subsidiaries to give) any notices to third Persons, and use,
and cause their respective Subsidiaries to use, its reasonable best efforts to
obtain any consents from third Persons (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (ii) otherwise
required under any Contracts in connection with the consummation of the
transactions contemplated hereby or (iii) required to prevent a Material Adverse
Effect on the Company or Parent from occurring. If any party shall fail to
obtain any such consent from a third Person, such party shall use its reasonable
best efforts, and will take any such actions reasonably requested by the other
parties, to limit the adverse effect upon the Company and Parent, their
-56-
respective Subsidiaries, and their respective businesses resulting, or which
would result after the Effective Time, from the failure to obtain such consent.
.13 Listing on NASDAQ. Parent shall use its reasonable best efforts to
-----------------
cause the Parent Common Stock to be issued in the Merger to be admitted for
trading on NASDAQ, subject to official notice of issuance.
.14 Public Announcements. Parent and the Company shall consult with and
--------------------
obtain the approval of the other party before issuing any press release or other
public announcement with respect to the Merger or this Agreement and shall not
issue any such press release prior to such consultation and approval, except as
may be required by Law or any listing agreement related to the trading of the
shares of either party on any national securities exchange or national automated
quotation system, in which case the party proposing to issue such press release
or make such public announcement shall use its reasonable best efforts to
consult in good faith with the other party before issuing any such press release
or making any such public announcement. The parties have agreed on the form of
a joint press release announcing the execution of this Agreement.
.15 Takeover Laws. If any form of anti-takeover statute, Regulation or
-------------
charter provision or Contract is or shall become applicable to the Merger or the
transactions contemplated hereby or by the Related Agreements, the Company,
Merger Sub and Parent and their respective Boards of Directors shall grant such
Approvals and take such actions as are necessary under such Laws and provisions
so that the transactions contemplated hereby and thereby may be consummated as
promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of such Law, provision or
Contract on the transactions contemplated hereby or thereby.
.16 Accountant's Letters.
--------------------
(a) The Company shall use its reasonable best efforts to cause to
be delivered to Parent a "comfort" letter of the Company's Accountants, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Parent and the Company, in
form and substance reasonably satisfactory and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a "comfort" letter of Parent's Accountants dated a date
within two business days before the date on which the Registration Statement
shall become effective and addressed to Parent and the Company, in form and
substance reasonably satisfactory and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
.17 Indemnification; Directors and Officer Insurance.
------------------------------------------------
-57-
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of the Effective Time (the "Indemnified Parties")
and any indemnification or expense advancement provisions under the Company's
Certificate of Incorporation or Bylaws as in effect on the date hereof. The
Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification and expense
advancement that are at least as favorable to the Indemnified Parties as those
contained in the Certificate of Incorporation and Bylaws of Company as in effect
on the date hereof, which provisions will not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors, officers, employees or agents of
the Company, unless such modification is required by Law.
(b) Parent shall cause to be maintained for a period of six (6)
years from the Effective Time the Company's current directors and officers
insurance policy (the "Company's D&O Insurance") to the extent that it provides
coverage for events occurring prior to the Effective Time for all Persons who
are directors and officers of the Company on the date of this Agreement, so long
as the annual premium therefor would not be in excess of 150% of the last annual
premium paid prior to the date of this Agreement (such amount, the "Maximum
Premium"). Upon request by Parent, the Company shall use its reasonable best
efforts to extend coverage under the Company's D&O Insurance by obtaining a six-
year "tail" policy (provided, that the lump sum payment to purchase such
coverage does not exceed three times the Maximum Premium) and such "tail" policy
shall satisfy Parent's obligations under this Section 5.14(a). Parent's
obligations under this Section 5.14(a) shall also be satisfied if Parent's
directors and officers insurance provides (or is amended to provide)
substantially similar coverage and coverage levels for events occurring prior to
the Effective Time for Persons who are directors and officers of the Company on
the date of this Agreement. If the Company's existing directors and officers
insurance expires, is terminated or canceled during such six-year period or a
"tail" policy cannot be purchased on the terms set forth above and Parent cannot
or determines not to satisfy its obligations under this Section 5.14(a) pursuant
to the preceding sentence, Parent shall use its reasonable best efforts to cause
to be obtained as much directors and officers insurance as can be obtained for
the remainder of such period for an annualized premium not in excess of the
Maximum Premium, on terms and conditions no less advantageous than the Company's
D&O Insurance.
(c) The provisions of this Section 5.17 are intended to be for
the benefit of, and shall be enforceable by, each Person entitled to the
benefits hereof and the heirs and representatives of such Person.
.18 Company Stockholders' Agreement. The Company shall use its reasonable
-------------------------------
best efforts, on behalf of Parent and pursuant to the request of Parent, to
cause each stockholder of the Company named on the signature pages to the
Company Stockholders' Agreement to execute and deliver to Parent, concurrently
with the execution of this Agreement, and to comply with, the Company
Stockholders' Agreement. The Company acknowledges and agrees to be bound by and
-58-
comply with the provisions of Section 3.1(a) and (b) of the Company
Stockholders' Agreement as if a party thereto with respect to transfers of
record of ownership of shares of the Company Common Stock, and agrees to notify
the transfer agent for any Company Common Stock and provide such documentation
and do such other things as may be necessary to effectuate the provisions of
such Company Stockholders' Agreement.
.19 Strategic Relationship Agreement. Contemporaneously with the
--------------------------------
execution and delivery of this Agreement, the Company shall deliver to Parent an
executed version of the Strategic Relationship Agreement. The Company agrees to
fully perform to the fullest extent permitted under applicable Law its
obligations under the Strategic Relationship Agreement.
ARTICLE VI
CONDITIONS OF MERGER
.1 Conditions to Obligation of Each Party to Effect the Merger. The
-----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Effectiveness of the Registration Statement. The
-------------------------------------------
Registration Statement shall have been declared effective; no stop order
suspending the effectiveness of the Registration Statement or the use of the
Joint Proxy Statement/Prospectus shall have been issued by the SEC, and no
proceedings for that purpose shall have been initiated or, to the Knowledge of
Parent or the Company, threatened by the SEC.
(b) Stockholder Approval. (i) This Agreement shall have been
--------------------
adopted by the requisite vote of the stockholders of the Company, in accordance
with the DGCL and the Certificate of Incorporation and Bylaws of the Company;
and (ii) the issuance of shares of Parent Common Stock pursuant to this
Agreement shall have been approved by the requisite vote of the stockholders of
Parent in accordance with the DGCL, the Certificate of Incorporation and Bylaws
of Parent and the rules of NASDAQ.
(c) NASDAQ Listing. The shares of Parent Common Stock issuable
--------------
to the stockholders of the Company pursuant to this Agreement shall have been
admitted for trading on NASDAQ subject to official notice of issuance.
(d) HSR Act and Foreign Competition Laws. All applicable waiting
------------------------------------
periods or approvals under the HSR Act and Foreign Competition Laws shall have
expired or been terminated or received.
(e) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other Order (whether
temporary, preliminary or permanent) issued by any Court of competent
jurisdiction or other legal restraint or prohibition shall be in effect which
prevents the consummation of the Merger on substantially the same terms and
conferring on Parent substantially all the rights and benefits as contemplated
herein, nor shall any proceeding brought by any Governmental Authority, domestic
or foreign, seeking
-59-
any of the foregoing be pending, and there shall not be any action taken, or any
Law or Order enacted, entered, enforced or deemed applicable to the Merger,
which makes the consummation of the Merger on substantially the same terms and
conferring on Parent substantially all the rights and benefits as contemplated
herein illegal.
(f) Tax Opinions. Parent and the Company shall have received written
------------
opinions of, respectively, Xxxx Xxxxxxx and Venture Law Group, in form and
substance reasonably satisfactory to them to the effect that the Merger will
constitute a reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code. The issuance of each of such opinions shall be
conditioned on the receipt by such tax counsel of representation letters from
each of Parent, Merger Sub and the Company. The specific provisions of each
such representation letter shall be in form and substance reasonably
satisfactory to such tax counsel, and each such representation letter shall be
dated on or before the date of such opinion and shall not have been withdrawn or
modified in any material respect.
.2 Additional Conditions to Obligations of Parent and Merger Sub. The
-------------------------------------------------------------
obligations of Parent and Merger Sub to effect the Merger are also subject to
the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement and the Related
Agreements, shall be true and correct on and as of the Effective Time, with the
same force and effect as if made on and as of the Effective Time (other than
representations and warranties which address matters only as of a particular
date, in which case such representations and warranties shall be true and
correct, on and as of such particular date), except for any failure of such
representations and warranties to be true and correct which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; provided, however, for purposes of this Section 6.2(a), the
-------- -------
representations and warranties of the Company shall be construed as if they did
not contain any qualification that refers to a Material Adverse Effect or
materiality; and Parent and Merger Sub shall have received a certificate to such
effect signed by the Chief Executive Officer and Chief Financial Officer of the
Company.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied with all agreements and covenants required by this Agreement and the
Related Agreements to be performed or complied with by it in all material
respects on or prior to the Effective Time and Parent and Merger Sub shall have
received a certificate to such effect signed by the Chief Executive Officer and
Chief Financial Officer of the Company.
(c) Third Party Consents. Parent shall have received evidence, in
--------------------
form and substance reasonably satisfactory to it, that those Approvals of
Governmental Authorities and other third parties set forth in Section 2.6(a) or
(b) of the Company Disclosure Schedule (or not described in Section 2.6(a) or
(b) of the Company Disclosure Schedule but required to be so described) have
been obtained, except where failure to have been so obtained, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(d) Letter from Parent's Accountants; Pooling of Interests. Parent
------------------------------------------------------
shall have received a letter from Parent's Accountants in form and substance
reasonably satisfactory to
-60-
Parent, dated the Closing Date, concurring with management's conclusions that
the transactions contemplated by this Agreement, including the Merger, will
qualify as a "pooling of interests" business combination in accordance with GAAP
and the criteria of APB 16 and the Regulations of the SEC.
(e) Company Affiliate Pooling Agreements. Each of the Persons
------------------------------------
identified in Section 2.24(d) of the Company Disclosure Schedule shall have
executed and delivered Company Affiliate Pooling Agreement with Parent which
shall be in full force and effect.
(f) Related Agreements. Each of the Company Stockholders'
------------------
Agreement, the Strategic Relationship Agreement, and the Company Affiliate
Pooling Agreements (collectively, the "Related Agreements") shall be in full
force and effect as of the Effective Time and become effective in accordance
with the respective terms thereof and the actions required to be taken
thereunder by the parties thereto prior to the Effective Time shall have been
taken, and each Person who or which is required or contemplated by the parties
hereto to be a party to any Related Agreement who or which did not theretofore
enter into such Related Agreement shall execute and deliver such Related
Agreement, except actions required under the Company Stockholders' Agreement
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on or materially impede the ability of the
parties to consummate the Merger as contemplated herein.
(g) Employment Agreements. The option agreements and employment
---------------------
offer letters between Parent and Xx. Xxxxx shall be in full force and effect and
shall not have been anticipatorially breached or repudiated by the individuals
party thereto.
(h) Material Adverse Effect. There shall have been no events,
-----------------------
changes or effects, individually or in the aggregate, with respect to the
Company or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect on the Company or its Subsidiaries.
.3 Additional Conditions to Obligations of the Company. The obligation
---------------------------------------------------
of the Company to effect the Merger is also subject to the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct on and as of the Effective Time (other than representations and
warranties which address matters only as of a particular date, in which case
such representations and warranties shall be true and correct on and as of such
particular date), except for any failure of such representations and warranties
to be true and correct which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of
Parent or Merger Sub to consummate the Merger; provided, however, for purposes
-------- -------
of this Section 6.3(a), the representations and warranties of Parent and Merger
Sub shall be construed as if they did not contain any qualification that refers
to a Material Adverse Effect or materiality; and the Company shall have received
a certificate to such effect signed by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied with all agreements and covenants required by this
Agreement to be performed or
-61-
complied with by them in all material respects on or prior to the Effective
Time, and the Company shall have received a certificate to such effect signed by
the Chief Executive Officer and the Chief Financial Officer of Parent.
(c) Material Adverse Effect. There shall have been no events,
-----------------------
changes or effects, individually or in the aggregate, with respect to Parent or
any of its Subsidiaries that could reasonably be expected to have a Material
Adverse Effect on Parent or its Subsidiaries.
(d) Board of Directors. The Board of Directors of Parent shall
------------------
have taken all such actions, such that, effective upon the Effective Time,
Xx. Xxxxx and one other person designated by the Company, who shall be
reasonably satisfactory to Parent's Board of Directors, shall have been
appointed to Parent's Board of Directors.
(e) Parent Affiliate Pooling Agreements. Each of the Parent
-----------------------------------
Affiliate Pooling Agreements shall be in full force and effect as of the
Effective Time.
(f) Employment Agreements. The option agreements and employment
---------------------
offer letters between Parent and Xx. Xxxxx shall be in full force and effect and
shall not have been anticipatorially breached or repudiated by Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
.1 Termination. This Agreement may be terminated and the Merger
-----------
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) By either Parent or the Company if the Merger shall not have been
consummated on or before November 30, 2000; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose willful failure to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have been consummated on or before such date;
(c) By either Parent or the Company, if a Court or Governmental
Authority shall have issued an Order or taken any other action, in each case
which has become final and non-appealable and which restrains, enjoins or
otherwise prohibits the Merger;
(d) By either Parent or the Company, if, (i) at the Company
Stockholders' Meeting (including any adjournment or postponement thereof), the
requisite vote of the stockholders of the Company to adopt this Agreement shall
not have been obtained; or (ii) at the Parent Stockholders' Meeting (including
any adjournment or postponement thereof), the requisite
-62-
vote of the stockholders of Parent to approve the issuance of shares of Parent
Common Stock in connection with the Merger shall not have been obtained;
(e) By Parent, if the Company or Board of Directors of the Company or
any committee thereof shall have (i) approved or recommended, or proposed to
approve or recommend, any Acquisition Proposal other than the Merger, (ii)
breached its obligation to present and recommend the adoption of this Agreement
by the stockholders of the Company, or withdrawn or modified, or proposed to
withdraw or modify, in a manner adverse to Parent or Merger Sub, its
recommendation or approval of the Merger, this Agreement or the transactions
contemplated hereby, (iii) failed to mail the Joint Proxy Statement/Prospectus
to the stockholders of the Company when the Joint Proxy Statement/Prospectus was
available for mailing or failed to include therein such approval and
recommendation (including the recommendation that the stockholders of the
Company vote in favor of the adoption of the Merger Agreement), (iv) upon a
request by Parent to publicly reaffirm the approval and recommendation of the
Merger, this Agreement and the transactions contemplated hereby, failed to do so
within ten days after such request is made, (v) entered, or caused the Company
or any Subsidiary to enter, into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Acquisition
Proposal, (vi) materially breached any provision of Section 4.2 or Section 5.2,
(vii) materially breached the Strategic Relationship Agreement or (viii)
resolved or announced its intention to do any of the foregoing;
(f) By Parent, if (i) any Person (other than Parent or an Affiliate
of Parent) acquires beneficial ownership of or the right to acquire 20% or more
of the outstanding shares of capital stock or other equity interests of the
Company or any Subsidiary in a transaction or series of transactions that has
been approved by the Board of Directors of the Company; or (ii) a tender or
exchange offer relating to securities of the Company shall have been commenced
by a Person unaffiliated with Parent, and the Company shall not have sent to its
security holders pursuant to Rule 14e-2 promulgated under the Securities Act,
within ten Business Days after such tender or exchange offer is first published,
sent or given, a statement that the Company recommends rejection of such tender
or exchange offer.
(g) By Parent, if neither Parent nor Merger Sub is in material breach
of its obligations under this Agreement, and if (i) at any time that any of the
representations and warranties of the Company herein become untrue or inaccurate
such that Section 6.2(a) would not be satisfied (treating such time as if it
were the Effective Time for purposes of this Section 7.1(g)) or (ii) there has
been a breach on the part of the Company of any of its covenants or agreements
contained in this Agreement such that Section 6.2(b) would not be satisfied
(treating such time as if it were the Effective Time for purposes of this
Section 7.1(g)), and, in both case (i) and case (ii), such breach (if curable)
has not been cured within 30 days after notice to the Company;
(h) By the Company, if it is not in material breach of its
obligations under this Agreement, and if (i) at any time that any of the
representations and warranties of Parent or Merger Sub herein become untrue or
inaccurate such that Section 6.3(a) would not be satisfied (treating such time
as if it were the Effective Time for purposes of this Section 7.1(h)) or
-63-
(ii) there has been a breach on the part of Parent or Merger Sub of any of their
respective covenants or agreements contained in this Agreement such that Section
6.3(b) would not be satisfied (treating such time as if it were the Effective
Time for purposes of this Section 7.1(g)), and such breach (if curable) has not
been cured within 30 days after notice to Parent; or
(i) By Parent, if any of the stockholders of the Company that is a
party to the Company Stockholders' Agreement shall have breached or failed to
perform in any material respect any representation, warranty, covenant or
agreement contained therein, that, individually or in the aggregate, would
reasonably be expected to materially impede the ability of the parties to
consummate the Merger as contemplated herein.
.2 Effect of Termination. Except as provided in this Section 7.2 and
---------------------
Section 7.3, in the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement (other than this Section 7.2, Sections 5.4(c), 5.14,
and 7.3 and Article VIII, which shall survive such termination) shall forthwith
become void, and there will be no liability on the part of Parent, Merger Sub or
the Company or any of their respective officers or directors to the other and
all rights and obligations of any party hereto will cease, except that nothing
herein will relieve any party from liability for any breach, prior to
termination of this Agreement in accordance with its terms, of any
representation, warranty, covenant or agreement contained in this Agreement.
.3 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby 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
relation to the printing and filing of the Joint Proxy Statement/Prospectus
(including any preliminary materials related thereto), the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto and all filing fees payable in connection with filings made
under the HSR Act or Foreign Competition Laws.
(b) In the event that Parent terminates this Agreement pursuant to
(x) Section 7.1(e), Section 7.1(f), or Section 7.1(i), then the Company shall
pay to Parent, no later than the second Business Day after such termination of
this Agreement, a fee in cash equal to $50,000,000 plus the amount of Parent
Expenses (as defined below), or (y) Section 7.1(d)(i), then (A) the Company
shall pay to Parent no later than the second Business Day after such termination
of this Agreement, a fee in cash equal to $10,000,000 plus the amount of Parent
Expenses and (B) if, and only if, within twelve months following termination of
this Agreement, the Company or any of its Subsidiaries enters into a definitive
agreement with a third party with respect to a Business Combination, then the
Company shall pay to Parent, not later than two Business Days after the date of
consummation of the transaction pursuant to such definitive agreement or a
successor agreement, $40,000,000 (such amounts in either (x) or (y), the
"Termination Fee") which Termination Fee and Parent Expenses shall be payable by
wire transfer of immediately available funds to an account specified by Parent.
As used in this Agreement, the term "Parent Expenses" shall mean those fees and
expenses actually incurred by
-64-
Parent in connection with this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby, including fees and expenses of
counsel, investment bankers, accountants, experts, consultants and other Parent
Representatives. As used in this Section 7.2, "Business Combination" mean any of
the following transactions (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of assets representing in excess of 50% of the
aggregate fair market value of the Company's business immediately prior to such
sale, or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of the Company.
(c) The Company acknowledges that the agreements contained in Section
7.3(b) is an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Parent would not enter into this Agreement.
Accordingly, if the Company fails to pay in a timely manner the amounts due
pursuant to Section 7.3(b) and, in order to obtain such payment, Parent makes a
claim that results in a judgment against the Company for the amounts set forth
in Section 7.3(b), the Company shall pay to Parent its reasonable costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit, together with interest on the amounts set forth in Section 7.3(b) at
the prime rate of Citibank, N.A. in effect on the date such payment was required
to be made. Payment of the fees described in Section 7.3(b) shall not be in
lieu of damages incurred in the event of breach of this Agreement. Nothing in
this Section 7.3 shall be deemed to be exclusive of any other rights or remedies
any party may have hereunder or under any Related Agreement or at law or in
equity for any breach of this Agreement or any of the Related Agreements.
.4 Amendment. This Agreement may be amended by the parties hereto by
---------
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after adoption of this
-------- -------
Agreement by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Company Common Stock shall be converted upon consummation of the Merger
or as otherwise prohibited by the DGCL. This Agreement may not be amended except
by an instrument in writing signed by all of the parties hereto.
.5 Waiver. At any time prior to the Effective Time, any party hereto may
------
extend the time for the performance of any of the obligations or other acts
required hereunder, waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
-65-
ARTICLE VIII
GENERAL PROVISIONS
.1 Survival of Representations and Warranties. The representations,
------------------------------------------
warranties and agreements of each party hereto will remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
other party hereto, any Person controlling any such party or any of their
officers, directors, representatives or agents whether prior to or after the
execution of this Agreement. The representations and warranties in this
Agreement will terminate at the Effective Time.
.2 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested, or by electronic mail, with a
copy thereof to be delivered or sent as provided above or by facsimile or
telecopier, as follows:
(a) If to Parent or Merger Sub:
webMethods, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
President and CEO
With a copy to:
Xxxx Xxxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxxxx
(b) If to the Company:
Active Software, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: R. Xxxxx Xxxxx,
Chairman, CEO, and Founder
With a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Xxxxxx X. Xxxxxxxxx
-66-
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (i) in the case of
personal delivery, nationally recognized overnight courier or registered or
certified mail, on the date of such delivery and (ii) in the case of facsimile
or telecopier or electronic mail, upon confirmed receipt.
.3 Disclosure Schedules. The Company Disclosure Schedule and the Parent
--------------------
Disclosure Schedule each shall be divided into sections corresponding to the
sections and subsections of this Agreement. Disclosure of any fact or item in
any section of a party's Disclosure Schedule shall not, should the existence of
the fact or item or its contents be relevant to any other Section of the
Disclosure Schedule, be deemed to be disclosed with respect to such other
section.
.4 Certain Definitions. For purposes of this Agreement, the term:
-------------------
"Affiliate" means any Person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person, including, with respect to the Company, any
corporation, partnership, limited liability company or joint venture in which
the Company (either alone, or through or together with any other Subsidiary)
has, directly or indirectly, an interest of 10% or more.
"Balance Sheet" means the balance sheet of the Company contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000.
"beneficial owner" (including the terms "beneficial ownership" and "to
beneficially own") with respect to a Person's ownership of any securities means
such Person or any of such Person's Affiliates or associates (as defined in Rule
12b-2 under the Exchange Act) is deemed to beneficially own, directly or
indirectly, within the meaning of Rule 13d-3 under the Exchange Act.
"Business Day" means any day other than a Saturday, Sunday or day on
which banks are permitted to close in the State of New York or the State of
California.
"Contract" means any contract, plan, undertaking, understanding,
agreement, license, lease, note, mortgage or other binding commitment, whether
written or oral.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of stock, as trustee or executor, by Contract or credit
arrangement or otherwise.
"Court" means any court or arbitration tribunal of the United States,
any domestic state, or any foreign country, and any political subdivision or
agency thereof.
"Exchange Agent" means any bank or trust company organized under the
Laws of the United States or any of the states thereof and having a net worth in
excess of $100 million designated and appointed to act as the exchange agent in
the Merger.
-67-
"Foreign Competition Laws" means any foreign statutes, rules,
Regulations, Orders, administrative and judicial directives, and other foreign
Laws, that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization, lessening of competition or
restraint of trade.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means any governmental agency or authority of
the United States, any domestic state, or any foreign country, and any political
subdivision or agency thereof, and includes any authority having governmental or
quasi-governmental powers, including any administrative agency or commission.
"Intellectual Property" means all (i) patents, patent applications,
patent disclosures, (ii) trademarks, service marks, trade dress, trade names,
logos and corporate names and registrations and applications for registration
thereof together with all of the goodwill associated therewith, (iii) copyrights
(registered or unregistered) and copyrightable works and registrations and
applications for registration thereof, together with all authors' and moral
rights, (iv) mask works and registrations and applications for registration
thereof, (v) computer software (including, without limitation, source code,
object code, macros, scripts, objects, routines, modules and other components),
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, products, processes, techniques, methods,
research and development information and results, drawings, specifications,
designs, plans, proposals, technical data, marketing plans and customer,
prospect and supplier lists and information), (vii) other intellectual property
rights, (viii) "technical data" as defined in 48 Code of Federal Regulations,
Chapter 1, and (ix) copies and tangible embodiments thereof (in whatever form or
medium).
"Knowledge" means (i) in the case an individual, knowledge of a
particular fact or other matter if (A) such individual is actually aware of such
fact or other matter, or (B) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such fact or
other matter, and (ii) in the case of an entity (other than an individual) such
entity will be deemed to have "Knowledge" of a particular fact or other matter
if any individual who is serving, or has at any time served, as a director,
officer, partner, executor, or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge (as contemplated by clause (A)
above) of such fact or other matter.
"Law" means all laws, statutes, ordinances and Regulations of any
Governmental Agency including all decisions of Courts having the effect of law
in each such jurisdiction.
"Lien" means any mortgage, pledge, security interest, attachment,
encumbrance, lien (statutory or otherwise), license, claim, option, conditional
sale agreement, right of first refusal, first offer, termination, participation
or purchase or charge of any kind (including any agreement to give any of the
foregoing); provided, however, that the term "Lien" shall not
-------- -------
-68-
include (i) statutory liens for Taxes, which are not yet due and payable or are
being contested in good faith by appropriate proceedings, (ii) statutory or
common law liens to secure landlords, lessors or renters under leases or rental
agreements confined to the premises rented, (iii) deposits or pledges made in
connection with, or to secure payment of, workers' compensation, unemployment
insurance, old age pension or other social security programs mandated under
applicable Laws, (iv) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, to secure claims for labor, materials
or supplies and other like liens, and (v) restrictions on transfer of securities
imposed by applicable state and federal securities Laws.
"Litigation" means any claim, suit, action, arbitration, cause of
action, claim, complaint, criminal prosecution, investigation, demand letter, or
proceeding, whether at law or at equity, before or by any Court or Governmental
Authority, any arbitrator or other tribunal.
"Malicious Code" means (i) any virus, Trojan horse, worm, or other
software or data designed to permit unauthorized access, or to disable, erase,
modify, deactivate or otherwise harm software, hardware, or data and (ii) any
back door, time bomb, drop dead device, protect code, data destruct key, or
other software or data designed to disable a computer program automatically with
the passage of time or under the control of any person or entity other than the
licensee.
"Material Adverse Effect" means, with respect to a Person, any fact,
event, change, development, circumstance or effect that (i) is materially
adverse to the business, condition (financial or otherwise), results of
operations, assets, liabilities, properties or prospects of such Person and its
Subsidiaries, taken as a whole, or (ii) in the event such Person is a party to
this Agreement, would materially impair or delay the ability of the Company to
perform its obligations hereunder or under the Related Agreements, including the
consummation of the Merger; provided that, a Material Adverse Effect shall not
include (x) changes in general economic conditions, (y) changes affecting the
industry generally in which such Person operates (provided that such changes do
not affect such Person in a substantially disproportionate manner), or (z)
changes in the trading prices or volume of such Person's capital stock.
"Order" means any judgment, order, writ, injunction, ruling or decree
of, or any settlement under the jurisdiction of, any Court or Governmental
Authority.
"Person" means an individual, corporation, partnership, association,
trust, unincorporated organization, limited liability company, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act).
"Products" means the software, hardware or firmware now or within the
past three (3) years offered for sale or license by the Company, together with
all user documentation, data, scripts, macros, modules and other files and
information supplied, sold or licensed with such software, hardware and
firmware.
"Regulation" means any rule or regulation of any Governmental
Authority having the effect of Law.
-69-
"Software" means any and all (i) computer programs, including any and
all software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable, on paper or
otherwise, (iii) descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, (iv) the technology
supporting, and the contents and audiovisual displays of any Internet site(s)
operated by or on behalf of Company or any of its Subsidiaries, and (v) all
documentation and other works of authorship, including user manuals and training
materials, relating to any of the foregoing.
"Subsidiary" or "Subsidiaries" of the Company, the Surviving
Corporation, Parent or any other Person means any corporation, partnership,
joint venture, limited liability company or other legal entity of which the
Company, the Surviving Corporation, Parent or such other Person, as the case may
be, owns, directly or indirectly, greater than 50% of the stock or other equity
interests the holder of which is generally entitled to vote as a general partner
or for the election of the board of directors or other governing body of a
corporation, partnership, joint venture, limited liability company or other
legal entity.
.5 Interpretation. When a reference is made in this Agreement to
--------------
Sections, subsections, Schedules or Exhibits, such reference shall be to a
Section, subsection, Schedule or Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The word "herein" and similar references mean, except where a specific Section
or Article reference is expressly indicated, the entire Agreement rather than
any specific Section or Article. The table of contents and the headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
.6 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
.7 Entire Agreement. This Agreement and the Related Agreements
----------------
(including all exhibits and schedules hereto and thereto) and other documents
and instruments delivered in connection herewith constitute the entire agreement
and supersedes all prior agreements and undertakings (other than the
Confidentiality Agreement), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and thereof.
.8 Assignment. This Agreement shall not be assigned by operation of
----------
Law or otherwise, except that Parent and Merger Sub may assign all or any of the
rights of Merger Sub hereunder to
-70-
another wholly owned subsidiary of the Parent, provided that no such assignment
shall relieve the assigning party of its obligations hereunder.
.9 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and, except as set forth in Section
5.17, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
-----------------------------------------------------
delay on the part of any party hereto in the exercise of any right hereunder
will impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor will any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any
rights or remedies otherwise available.
.11 Governing Law; Enforcement. This Agreement and the rights and duties
--------------------------
of the parties hereunder shall be governed by, and construed in accordance with,
the Law of the State of Delaware. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or any
Related Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or any Related Agreement and to enforce specifically the terms and provisions of
this Agreement or any Related Agreement in the Court of Chancery of the State of
Delaware or the Federal District Court for the District of Delaware, this being
in addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto, (a) consents to submit itself to the
personal jurisdiction of the Court of Chancery of the State of Delaware and
Federal District Court for the District of Delaware in the event any dispute
arises out of this Agreement or any Related Agreement or any transaction
contemplated hereby or thereby, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that it will not bring any action relating to this
Agreement or any Related Agreement or any transaction contemplated hereby or
thereby in any court other than the Court of Chancery of the State of Delaware
or the Federal District Court for the District of Delaware and (d) waives any
right to trial by jury with respect to any action related to or arising out of
this Agreement or Related Agreement or any transaction contemplated hereby or
thereby.
.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[Signatures Next Page]
-71-
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
WEBMETHODS, INC.
By: /s/ XXXXXXX XXXXXXX
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and CEO
WOLF ACQUISITION, INC.
By: /s/ XXXXXXX XXXXXXX
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President and CEO
ACTIVE SOFTWARE, INC.
By: /s/ R. XXXXX XXXXX
-------------------------------
Name: R. Xxxxx Xxxxx
Title: Chairman, CEO and Founder
