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EXHIBIT 7.1 TO SCHEDULE 13D OF INTUIT INC.
AGREEMENT AND PLAN OF MERGER
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Exhibit 7.1
AGREEMENT AND PLAN OF MERGER
AMONG
CHECKFREE CORPORATION
CHECKFREE ACQUISITION CORPORATION II
INTUIT INC.
AND
INTUIT SERVICES CORPORATION
Dated as of September 15, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
SECTION 1.01 The Merger 2
SECTION 1.02 Effect of the Merger 2
SECTION 1.03 Consummation of the Merger 2
SECTION 1.04 Charter; By-Laws; Directors and Officers 2
SECTION 1.05 Acknowledgement Regarding the Company's Assets 2
SECTION 1.06 Further Assurances 3
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company 3
SECTION 2.02 Merger Consideration Adjustment 4
SECTION 2.03 Release of Escrow Shares 7
SECTION 2.04 Conversion of Acquisition Common Stock 7
SECTION 2.05 Surrender and Exchange of Shares 7
SECTION 2.06 Closing of Stock Transfer Books 8
SECTION 2.07 Closing 8
SECTION 2.08 Tax-Free Reorganization 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of Holdings and the Company 9
SECTION 3.02 Representations and Warranties of Holdings 23
SECTION 3.03 Representations and Warranties of Parent 25
SECTION 3.04 Representations and Warranties of Acquisition 30
ARTICLE IV
COVENANTS
SECTION 4.01 Conduct of the Company's Business 31
SECTION 4.02 Registration Statement; Stockholder Approval, Etc. 33
SECTION 4.03 Access to Information 35
SECTION 4.04 Further Assurances 37
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SECTION 4.05 Inquiries and Negotiations 37
SECTION 4.06 Notification of Certain Matters 37
SECTION 4.07 Compliance with the Securities Act 38
SECTION 4.08 Conduct of Parent's Business 38
SECTION 4.09 Employment and Severance Liabilities 39
SECTION 4.10 Contractual Obligations 39
SECTION 4.11 Indemnity 39
SECTION 4.12 Agreements Executed 39
SECTION 4.13 Stockholder Agreements and Proxies 39
SECTION 4.14 Revenue Make-Up 39
SECTION 4.15 Board Visitation Rights 40
SECTION 4.16 Reimbursement for Certain Charges and Costs 41
SECTION 4.17 Debt 41
ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 Conditions to Each Party's Obligation to Effect the Merger 41
SECTION 5.02 Conditions to the Obligation of Holdings and the Company
to Effect the Merger 42
SECTION 5.03 Conditions to the Obligation of Parent and Acquisition
to Effect the Merger 42
ARTICLE VI
TERMINATION AND ABANDONMENT
SECTION 6.01 Termination and Abandonment 43
SECTION 6.02 Effect of Termination 44
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Indemnification by Holdings 44
SECTION 7.02 Claims 45
SECTION 7.03 Notice and Defense of Third-Party Claims 45
SECTION 7.04 Settlement or Compromise 45
SECTION 7.05 Limitations on Indemnification 46
ARTICLE VIII
NONCOMPETITION AGREEMENT
SECTION 8.01 Certain Acknowledgments 46
SECTION 8.02 Noncompetition Agreement 46
SECTION 8.03 Exception 47
SECTION 8.04 No Objection or Defense 47
SECTION 8.05 Enforcement of Noncompetition Agreement 47
SECTION 8.06 Early Termination of Noncompetition Agreement 47
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SECTION 8.07 Effect on Acquiror 47
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties 48
SECTION 9.02 Interpretation of Representations and Warranties 48
SECTION 9.03 Reliance by Parent and Acquisition 48
SECTION 9.04 Expenses, Etc. 48
SECTION 9.05 Publicity 49
SECTION 9.06 Execution in Counterparts 49
SECTION 9.07 Notices 49
SECTION 9.08 Waivers 50
SECTION 9.09 Amendments, Supplements, Etc. 50
SECTION 9.10 Entire Agreement 51
SECTION 9.11 Applicable Law 51
SECTION 9.12 Binding Effect, Benefits 51
SECTION 9.13 Assignability 51
SECTION 9.14 Severability 51
SECTION 9.15 Variation and Amendment 51
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INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
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1.05 Illinois-Located Assets and Properties Owned by Holdings
3.01(c) Capitalization/Stockholders
3.01(e) Certain Conflicts
3.01(f) Consents
3.01(g) Certain Liabilities
3.01(h) Certain Changes or Events
3.01(j) Litigation
3.01(k) Liens and Encumbrances
3.01(l) Real Property Interests
3.01(m) Intellectual Property Rights
3.01(n) Labor Matters
3.01(o) Severance Arrangements
3.01(p) Taxes
3.01(q) Permits
3.01(r) Employee Benefit Plans
3.01(s) Environmental Matters
3.01(u) Material Contracts
3.01(v) Insurance
3.01(x) Claims Against Officers and Directors
3.01(y) Customers; Suppliers, etc.
3.01(z) Improper Payments
3.01(aa) Brokers
3.01(bb) Accounts Receivable
3.02(d) Certain Conflicts
3.02(e) Consents
3.02(g) Brokers
3.03(b) Subsidiaries
3.03(c) Capitalization
3.03(f) Consent
3.03(j) Registration Rights
3.03(k) Brokers
4.09 Employment and Severance Liabilities
4.10 Contractual Obligations of Holdings
4.16 Reimbursement Matters
9.04 Expenses
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Exhibits Description
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Exhibit A Parent Tax Representation Certificate
Exhibit B Services and License Agreement
Exhibit C Assignment and License Agreement
Exhibit D Stock Restriction Agreement
Exhibit E Shareholder Agreement and Proxy
Exhibit F Escrow Agreement
Exhibit G Registration Rights Agreement
Exhibit H Opinions of Porter, Wright, Xxxxxx & Xxxxxx
Exhibit I Opinions of Fenwick & West LLP
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 15, 1996 (the
"Effective Date"), among CHECKFREE CORPORATION, a Delaware corporation
("Parent"), CHECKFREE ACQUISITION CORPORATION II, a Delaware corporation and a
wholly owned subsidiary of Parent ("Acquisition"), INTUIT INC., a Delaware
corporation ("Holdings"), and INTUIT SERVICES CORPORATION, a Delaware
corporation (the "Company"). The Company and Acquisition are hereinafter
sometimes referred to as the "Constituent Corporations" and the Company as the
"Surviving Corporation."
WHEREAS, Parent, Acquisition, Holdings, and the Company desire that
Acquisition merge with and into the Company (the "Merger"), upon the terms and
conditions set forth herein and in accordance with the General Corporation Law
of the State of Delaware (the "Delaware GCL") with the result that the Company
shall continue as the surviving corporation and the separate existence of
Acquisition shall cease; and
WHEREAS, Parent, Acquisition, Holdings, and the Company desire that at the
Effective Time (as hereinafter defined) all outstanding shares of the capital
stock of the Company be converted into the right to receive fully paid and
nonassessable shares of Common Stock, $.01 par value, of Parent ("Parent Common
Stock"), as hereinafter provided; and
WHEREAS, Parent, Acquisition, Holdings, and the Company desire that,
immediately after the Effective Time and solely as a result of the Merger,
Parent will own all the issued and outstanding shares of the capital stock of
the Surviving Corporation; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"); and
WHEREAS, the respective Boards of Directors of Parent, Acquisition,
Holdings, and the Company, have approved the Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement and the
Delaware GCL, Acquisition shall be merged with and into the Company, the
separate existence of Acquisition shall cease, and the Company shall continue as
the Surviving Corporation under the corporate name of "CHECKFREE SERVICES
CORPORATION."
SECTION 1.02 Effect of the Merger. Upon the effectiveness of the Merger,
the Surviving Corporation shall succeed to, and assume all the rights and
obligations of, the Company and Acquisition in accordance with the Delaware GCL
and the Merger shall otherwise have the effects set forth in Section 259 of the
Delaware GCL.
SECTION 1.03 Consummation of the Merger. As soon as practicable after the
satisfaction or waiver of the conditions to the obligations of the parties to
effect the Merger set forth herein, provided that this Agreement has not
previously been terminated in accordance with the provisions of Section 6.01
hereof, the parties hereto will cause the Merger to be consummated by filing
with the Secretary of State of the State of Delaware a properly executed
certificate of merger in accordance with the Delaware GCL (the time of such
filing being referred to herein as the "Effective Time").
SECTION 1.04 Charter; By-Laws; Directors and Officers. The Certificate of
Incorporation of the Surviving Corporation from and after the Effective Time
shall be the Certificate of Incorporation of Acquisition as in effect
immediately prior to the Effective Time, until thereafter amended in accordance
with the provisions thereof and as provided by the Delaware GCL, except that, at
the Effective Time, Article I thereof shall be amended to read as follows: "The
name of the Corporation is "CHECKFREE SERVICES CORPORATION." The By-Laws of the
Surviving Corporation from and after the Effective Time shall be the By-Laws of
Acquisition as in effect immediately prior to the Effective Time, continuing
until thereafter amended in accordance with the provisions thereof and the
provisions of the Certificate of Incorporation of the Surviving Corporation and
as provided by the Delaware GCL. The initial directors and officers of the
Surviving Corporation shall be the directors and officers, respectively, of
Acquisition immediately prior to the Effective Time, in each case until their
removal or until their respective successors are duly elected and qualified.
SECTION 1.05 Acknowledgement Regarding the Company's Assets. For purposes
of clarifying the rights to be acquired upon consummation of the Merger, Parent
and Acquisition hereby acknowledge and agree with Holdings and the Company that
the assets set forth on Schedule 1.05 hereto, located at 0000 Xxxxxxxxxxx Xxxx,
Xxxxx 000, 800 and 000, Xxxxxx'x Xxxxx, Xxxxxxxx and 000 Xxxxx Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxx are as of the Effective Date of this Agreement, owned by
Holdings.
SECTION 1.06 Further Assurances. Subject to the provisions of Section 1.05
hereof, 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
or any other acts or things are necessary,
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desirable or proper (i) to vest, perfect or confirm, of record or 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 of
the Constituent Corporations, or (ii) 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 of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of such
Constituent Corporation, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes of this
Agreement; provided, however, that the Surviving Corporation shall have no
rights under this Section 1.06 in connection with any of Holdings' assets,
properties, services, businesses or properties.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. By virtue of the
Merger and without the need for any action on the part of the holders of the
capital stock of the Company, at the Effective Time, all outstanding shares of
the capital stock of the Company (excluding shares held in the treasury of the
Company, which shall be canceled as provided in paragraph (c) below, and subject
to Section 2.05(c) hereof) shall be converted into the right to receive fully
paid and nonassessable shares of Parent Common Stock on the following basis:
(a) Merger Consideration. The shares of Common Stock, $1.00 par
value, of the Company (the "Company Common Stock") that are issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive 12,600,000 shares of Parent Common Stock, subject to the
potential adjustment set forth in Section 2.02 hereof, as follows (the "Merger
Consideration"):
(i) 11,340,000 shares of Parent Common Stock shall be issued
to the sole stockholder of the Company Common Stock at Closing (as
hereinafter defined); and
(ii) 1,260,000 shares of Parent Common Stock (the "Escrow
Shares") shall be issued to the sole stockholder of the Company Common
Stock subject to Section 2.03 below. Upon any adjustment of the Merger
Consideration pursuant to Section 2.02, the number of shares of Parent
Common Stock that are Escrow Shares shall be reduced in proportion to such
Merger Consideration Adjustment (as hereinafter defined).
If, prior to the Effective Time, Parent recapitalizes through a subdivision of
its outstanding shares into a greater number of shares, or a combination of its
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its outstanding shares into the same or a different number
of shares of other classes or series, or declares a dividend on its outstanding
shares payable in shares of its capital stock or securities convertible into
shares of its capital stock (a "Capital Change"), then the number of shares of
Parent Common Stock constituting the Merger Consideration shall be adjusted
appropriately to reflect each such Capital Change.
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(b) Company Common Stock. At the Effective Time, each share of
Company Common Stock that is issued and outstanding immediately prior to the
Effective Time shall be canceled and converted into the right to receive that
number of shares of Parent Common Stock equal to the quotient obtained by
dividing the Merger Consideration by the number of shares of Company Common
Stock that are issued and outstanding immediately prior to the Effective Time.
(c) Treasury Stock. At the Effective Time, each share of capital
stock of the Company that is then held in the treasury of the Company (if any)
shall be canceled and retired and no capital stock of Parent and no cash or
other consideration shall be paid or delivered in exchange therefor.
SECTION 2.02 Merger Consideration Adjustment. In the event that, after the
date of this Agreement and prior to the Closing, the Company incurs, realizes,
or otherwise experiences a Material Adverse Change (as hereinafter defined) in
its financial condition, properties, assets, liabilities, Business (as defined
herein), operations, or results of operations, then at or prior to the Effective
Time, the Merger Consideration shall be adjusted as follows:
(a) Change Notice. If Parent believes that the Company has incurred,
realized, or otherwise experienced a Material Adverse Change in its financial
condition, properties, assets, liabilities, Business (as defined herein),
operations, or results of operations and Parent desires a Merger Consideration
Adjustment (as defined below), then Parent must prior to Closing give Holdings
and the Company written notice of Parent's claim that such a Material Adverse
Change has occurred (the "Change Notice"), which Change Notice shall state with
specificity the grounds on which Parent contends that such Material Adverse
Change has occurred and Parent's proposal for a Merger Consideration Adjustment.
Parent may only make one (1) request for a Merger Consideration Adjustment.
(b) Attempt to Agree. Following their receipt of the Change Notice,
Parent, Holdings and the Company will in good faith consider Parent's assertions
set forth in the Change Notice and will use their best efforts to in good faith
reach a mutual agreement, as promptly as practicable, as to the amount by which
the Merger Consideration shall be reduced by reason of the Material Adverse
Change described in the Change Notice (the "Merger Consideration Adjustment").
In attempting to reach an agreement as to the Merger Consideration Adjustment,
the parties will consider, among other things, the extent (if any) to which the
fair market value of the Company has been diminished by the Material Adverse
Change described in the Change Notice. If Parent, Holdings and the Company agree
to a Merger Consideration Adjustment, then they shall execute a written
agreement to such effect (the "Merger Consideration Agreement") setting forth
the amount of the Merger Consideration Adjustment they have agreed to.
(c) Dispute Resolution Procedure.
(i) Agreement on Material Adverse Change. If Parent, Holdings
and the Company agree that a Material Adverse Change in the Company's financial
condition, properties, assets, liabilities, Business, operations, or results of
operations occurred after the Effective Date of this Agreement and prior to the
Closing Date (as hereinafter defined), but are unable to mutually agree in
writing on the amount of a Merger Consideration Adjustment within
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ten (10) days after the date on which Holdings and the Company receive the
Change Notice (the "Receipt Date"), then the amount of the Merger Consideration
Adjustment (if any) shall be determined in accordance with the appraisal
procedure set forth in Section 2.02(c)(iii) below.
(ii) No Agreement on Material Adverse Change. If Holdings and
the Company do not agree with Parent's assertion in the Change Notice that a
Material Adverse Change in the Company's financial condition, properties,
assets, liabilities, Business, operations, or results of operations occurred
after the Effective Date of this Agreement and prior to the Closing Date, and
Parent, Holdings and the Company have not agreed in writing on the amount of a
Merger Consideration Adjustment within ten (10) days after the Receipt Date,
then, within twenty (20) days after the Receipt Date, the parties shall submit
to mandatory binding arbitration the sole issue of whether or not such a
Material Adverse Change occurred. Such arbitration shall be conducted in
Chicago, Illinois in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, and shall be concluded within
thirty (30) days to the extent reasonably practicable. The arbitration will be
conducted by a single arbitrator, mutually selected by the parties, who shall
decide only the issue of whether or not a Material Adverse Change in the
Company's financial condition, properties, assets, liabilities, Business,
operations, or results of operations occurred after the Effective Date of this
Agreement and prior to the Closing Date in the manner set forth in the Change
Notice. The arbitrator's determination as to whether or not such a Material
Adverse Change occurred after the Effective Date of this Agreement and prior to
the Closing Date shall be conclusive, final, non-appealable and binding upon
each of the parties to this Agreement and judgment may be entered upon the
arbitrator's determination in accordance with applicable law in any court having
competent jurisdiction over the matter. In connection with the arbitration
proceedings, the parties will be entitled to conduct discovery in scope, timing,
types, and under such procedures as such parties would otherwise be afforded had
the dispute or controversy hereunder been subject to the Federal Rules of Civil
Procedure. If the arbitrator determines that no Material Adverse Change occurred
after the Effective Date of this Agreement, then no Merger Consideration
Adjustment shall be made; and if the arbitrator determines that a Material
Adverse Change has occurred after the Effective Date of this Agreement, then the
amount of the Merger Consideration Adjustment shall be determined by the
appraisal procedure set forth in Section 2.02(c)(iii) below (unless the parties
otherwise agree in writing). The foregoing agreement to arbitrate shall be
specifically enforceable under the prevailing arbitration law.
(iii) Appraisal Procedure. When the appraisal procedure set
forth in this subparagraph is required to be used by the provisions of
subparagraph 2.02(c)(i) or (ii), then the amount of the Merger Consideration
Adjustment shall be determined as follows. Within twenty (20) days after the
Receipt Date (or within ten (10) days after the completion of the arbitration
referred to in Section 2.02(c)(ii) if such arbitration occurs) (A) Parent, on
the one hand, and Holdings and the Company, on the other hand, shall each select
one Qualified Appraiser (as defined below) (the "Selected Appraiser") to
determine the amount of the Merger Consideration Adjustment (if any) arising
from the Material Adverse Change set forth in the Change Notice; and (B) Parent,
on the one hand, and Holdings and the Company, on the other hand, shall each
give the other written notice (the "Appraiser Notice") of the identity of their
respective Selected Appraiser. Parent's Selected Appraiser is sometimes
hereinafter called the "Parent Appraiser" and the Selected Appraiser of Holdings
and the Company is sometimes hereinafter called the "Holdings Appraiser." The
Company shall provide each side's Selected
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Appraiser with full access during normal business hours to the Company's
facilities, products, personnel, books, records and financial statements
(subject to the execution of reasonable confidentiality agreements by such
Selected Appraisers) solely for purposes of assisting the Selected Appraisers in
determining the amount of the Merger Consideration Adjustment. Each Selected
Appraiser shall attempt to determine the amount of the Merger Consideration
Adjustment, which, for purposes of such appraisal, shall be the number of shares
of the Parent's Common Stock equal to the quotient obtained by dividing (i) the
amount (if any) by which the fair market value of the Company was diminished
from the Effective Date of this Agreement to the Closing Date as a result of the
Material Adverse Change described in the Change Notice, by (ii) the average
closing price per share of the Parent's Common Stock as reported on the Nasdaq
National Market (the "Nasdaq NM") for the five (5) trading days immediately
preceding the Effective Date of this Agreement. Within ten (10) days after a
Selected Appraiser has been selected, the Parent Appraiser and the Holdings
Appraiser shall each deliver to Parent and Holdings a brief written report (the
"Appraisal Report") setting forth such Selected Appraiser's appraisal and
determination of the amount of the Merger Consideration Adjustment and, unless
the parties otherwise agree in writing to the amount of the Merger Consideration
Adjustment, the Parent Appraiser and the Holdings Appraiser shall select a third
appraiser (the "Determining Appraiser") which shall also be a Qualified
Appraiser. The Determining Appraiser will review the Appraisal Reports and the
amount of the Merger Adjustment will be the amount set forth in the Appraisal
Report which is, in the judgment of the Determining Appraiser, the most nearly
correct; provided, however, that notwithstanding the foregoing, if there is only
one Selected Appraiser because Parent, on the one hand, or Holdings or the
Company, on the other hand, fail to select its Selected Appraiser, then unless
the parties otherwise agree in writing to the amount of the Merger Consideration
Adjustment, the amount of the Merger Consideration Adjustment shall conclusively
be deemed to be the amount thereof determined by such Selected Appraiser in its
Appraisal Report. Parent, on the one hand, and Holdings, on the other hand,
shall pay the fees and expenses charged by such party's Selected Appraiser and
shall share equally the fees and expenses charged by the Determining Appraiser.
As used herein, the term "Qualified Appraiser" means an investment banking firm
of national or regional reputation that is substantially experienced in
representing and valuing software companies in underwritten public offerings
and/or merger and acquisition transactions, provided that such investment
banking firm and its affiliates do not have a family relationship, or a
then-currently active significant business relationship with the party who
selected such appraiser, or advised or represented any of the parties in
connection with this Agreement and the transactions contemplated hereunder.
(iv) Efforts to Agree. Nothing in this paragraph shall prevent
the parties from further efforts to reach a mutual agreement on the amount of
the Merger Consideration Adjustment (if any) while the arbitration procedure
and/or the appraisal procedure described in Sections 2.02(c)(ii) and (iii) above
is pending and any mutual written agreement reached by Parent, Holdings and the
Company regarding the amount of the Merger Consideration Adjustment shall be the
conclusive, final, non-appealable and determinative resolution of the amount of
the Merger Consideration Adjustment, binding upon each of the parties hereto.
(d) Material Adverse Change. As used herein, "Material Adverse
Change" means a material adverse change other than a change arising or
resulting, directly or indirectly, from industry conditions or the public
announcement of, or the response or reaction of customers, vendors, licensors,
investors, Company employees or others to, this Agreement, the
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Merger, or any of the agreements or transactions contemplated by this Agreement
or entered into in connection with this Agreement or the Merger.
(e) Meaning of Merger Consideration. From and after the
effectiveness of any Merger Consideration Adjustment in accordance with this
Section 2.02, the term "Merger Consideration" as used in this Agreement, shall
mean the reduced amount of Merger Consideration to be paid to Holdings as the
sole stockholder of the Company pursuant to Section 2 of this Agreement, as
modified by the Merger Consideration Adjustment.
SECTION 2.03 Release of Escrow Shares. The Escrow Shares shall be released
from escrow and delivered to Holdings one (1) year after the Closing Date,
subject to the terms of the Escrow Agreement (as hereinafter defined) and the
provisions of Article VII. The rights of Parent and Acquisition under Article
VII shall not be in any manner limited to the Escrow Shares, but shall be
subject to the limitations set forth in Article VII.
SECTION 2.04 Conversion of Acquisition Common Stock. At the Effective
Time, each share of Common Stock, $.01 par value, of Acquisition that is issued
and outstanding immediately prior to the Effective Time shall remain outstanding
and, by virtue of the Merger, automatically and without the need for any action
on the part of the holder thereof, shall be converted into and become one (1)
validly issued, fully paid and nonassessable share of Common Stock of the
Surviving Corporation.
SECTION 2.05 Surrender and Exchange of Shares.
(a) At the Effective Time, each holder of an outstanding certificate
or certificates that immediately prior thereto represented shares of the capital
stock of the Company shall surrender the same to Parent or its agent, and each
such holder shall be entitled upon such surrender to receive in exchange
therefor, without cost to it, the number of shares of Parent Common Stock into
which the shares theretofore represented by the certificate so surrendered shall
have been converted as provided in Section 2.01 hereof, and the certificate or
certificates so surrendered in exchange for such consideration shall forthwith
be canceled by Parent.
(b) If a certificate representing shares of the capital stock of the
Company has been lost, stolen or destroyed, the holder of such certificate shall
submit an affidavit describing the lost, stolen or destroyed certificate, the
number of shares evidenced thereby and affirming the status of that certificate
in lieu of surrendering such certificate to Parent, which shall deem such
certificate canceled; provided that Parent may require the holder of such
certificate to provide Parent with a bond in such amount as Parent may direct as
a condition to paying any consideration hereunder. Until so surrendered, the
outstanding certificates that, prior to the Effective Time, represented shares
of the capital stock of the Company that shall have been converted as aforesaid
shall be deemed for all corporate purposes, except as hereinafter provided, to
evidence the ownership of the Merger Consideration into which such shares have
been so converted.
(c) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
certificates held by stockholders of the Company, and such fractional share
interests will not entitle the owner thereof to vote or to any
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rights of a stockholder of Parent. Each holder of shares of the capital stock of
the Company who would otherwise have been entitled to receive in the Merger a
fraction of a share of Parent Common Stock (after taking into account all
certificates surrendered by such holder) shall be entitled to receive from
Parent at the Effective Time, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Parent Common Stock
multiplied by the average of the per share closing prices on the Nasdaq NM of
shares of Parent Common Stock during the five (5) consecutive trading days
immediately preceding the Effective Date of this Agreement. It is understood (i)
that the payment of cash in lieu of fractional shares of Parent Common Stock is
solely for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained-for
consideration; and (ii) that no holder of shares of Company capital stock will
receive cash in lieu of fractional shares of Parent Common Stock in an amount
greater than the value of one full share of Parent Common Stock.
SECTION 2.06 Closing of Stock Transfer Books. On and after the Effective
Time, there shall be no transfers on the stock transfer books of the Company or
Parent of shares of capital stock of the Company that were issued and
outstanding immediately prior to the Effective Time.
SECTION 2.07 Closing. The closing (the "Closing") shall be scheduled to
occur at the offices of Porter, Wright, Xxxxxx & Xxxxxx, Columbus, Ohio at 10:00
a.m. local time, on a date as soon as practicable (but in any event not later
than the third business day, unless otherwise agreed) after the satisfaction or
waiver of the conditions to the obligations of the parties to effect the Merger
set forth herein. The Closing, and all transactions to occur at the Closing,
shall be deemed to have taken place at, and shall be effective as of, the close
of business on the date of closing (the "Closing Date").
SECTION 2.08 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code by virtue of the provisions of Section 368(a)(2)(E) of the Internal Revenue
Code. The parties believe that the value of the Parent Common Stock to be issued
to Holdings as the sole stockholder of the Company in the Merger is equal to the
value of the Company Common Stock to be surrendered in exchange therefor. The
Parent Common Stock issued in the Merger will be issued solely in exchange for
the Company's outstanding Common Stock, and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to, the
consideration paid for the Company's Common Stock. Except for cash paid in lieu
of fractional shares, no consideration that could constitute "other property"
within the meaning of Section 356 of the Internal Revenue Code is being paid by
Parent for the Company Common Stock in the Merger. The parties will not take a
position on any tax returns that is inconsistent with the provisions of this
Section. In addition, Parent represents now, and as of the Effective Time, that
it intends to continue the Company's historic business or use a significant
portion of the Company's business assets in a business. Concurrently herewith,
and again at the Closing, Parent shall execute and deliver to Holdings a
certificate substantially in the form of Exhibit A. The provisions and
representations contained or referred to in this Section 2.08 and in Exhibit A
shall survive until the expiration of the applicable statute of limitations.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of Holdings and the Company.
Holdings and the Company, jointly and severally, represent and warrant to Parent
and Acquisition, except as set forth in the Holdings/Company Disclosure Letter
dated of even date herewith that is being delivered to Parent concurrently
herewith (the "Holdings/Company Disclosure Letter"), as follows:
(a) Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. The Company is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a Company Material Adverse Effect (as hereinafter defined). As
used in this Agreement, the term "Company Material Adverse Effect" shall mean a
material adverse effect on the properties, assets, financial condition,
operating results or business of the Company, taken as a whole; provided,
however, that the term "Company Material Adverse Effect" shall not include any
such material adverse effect arising or resulting, directly or indirectly, from
industry conditions or the public announcement of, or the response or reaction
of customers, vendors, licensors, investors, Company employees or others to,
this Agreement, the Merger, or any of the agreements or transactions
contemplated by this Agreement or entered into in connection with this Agreement
or the Merger.
(b) Subsidiaries. The Company does not have any subsidiaries or
ownership of any equity interest in any corporation, partnership, joint venture,
or other business entity.
For purposes of this Agreement, the term "subsidiary," when
used with respect to Holdings or the Company, shall mean any corporation or
other business entity a majority of whose outstanding equity securities is at
the time owned, directly or indirectly, by either Holdings, the Company, and/or
one or more of their other subsidiaries.
(c) Capitalization. The authorized capital stock of the Company
consists of 1,000,000 shares of Company Common Stock, $1.00 par value per share.
A total of 100 shares of Company Common Stock are issued and outstanding, all of
which were duly authorized and validly issued and are fully paid and
nonassessable. No subscription, warrant, option, call, commitment, convertible
security, stock appreciation or other right (contingent or other) to purchase or
acquire any shares of any class of capital stock of the Company is authorized or
outstanding and there is not any commitment of the Company to issue any shares,
warrants, options, or other such rights or to distribute to holders of any class
of its capital stock any evidences of indebtedness or assets. Except as set
forth on Schedule 3.01(c), the Company does not have any obligation (contingent
or other) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. Schedule 3.01(c) sets forth a complete and
correct list of the holders of record of the Company Common Stock and the
holders of all options or other rights, if any, to purchase
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Company Common Stock, including by name of the holder the number of shares or
the number of shares obtainable on exercise of options or rights held.
(d) Authority Relative to Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Company's Board of
Directors and no other corporate approvals or proceedings on the part of the
Company are necessary to authorize this Agreement and the transactions
contemplated hereby, other than the approval and adoption of this Agreement by
the sole stockholder of the Company as required by the Delaware GCL. This
Agreement has been duly executed and delivered by the Company and, subject to
obtaining such stockholder approval, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the effect, if any, of (a) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (c) the limitations imposed by public policy on the enforceability of
provisions requiring indemnification in connection with the offering, issuance
or sale of securities. The Company's Board of Directors has by the requisite
vote (i) determined that this Agreement and the Merger is advisable and fair and
in the best interests of the Company and its sole stockholder and (ii) resolved
to recommend the approval of this Agreement and the Merger by the Company's sole
stockholder and to submit this Agreement and the Merger to the Company's sole
stockholder for its consideration and approval when the Company is permitted to
do so by applicable law. The affirmative vote of the holders of a majority of
the outstanding Company Common Stock is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement, the Merger and the transactions contemplated hereby and thereby.
(e) Non-Contravention. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) violate or conflict with any provision of the
Certificate of Incorporation or By-Laws of the Company or (ii) except as set
forth on Schedule 3.01(e) hereof, result in any violation of, conflict with, or
default (or an event which with notice or lapse of time or both would constitute
a default) or loss of a benefit under, or permit the termination of or the
acceleration of any obligation under, any material mortgage, indenture, lease,
agreement or other instrument to which the Company is a party or by which its
assets are bound, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
business conducted by the Company (the "Business") or to the Company or their
respective properties, or (iii) result in the creation or imposition of any
liens, claims, charges, restrictions, rights of others, security interests,
prior assignments or other encumbrances (collectively, "Claims") in favor of any
third person or entity upon any of the assets of the Company, other than any
such violation, conflict, default, loss, termination or acceleration that would
not have a Company Material Adverse Effect.
(f) Consents. Except as set forth on Schedule 3.01(f), no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Federal, state, local or foreign governmental or regulatory authority
is required to be made or obtained by the Company in connection with the
execution and delivery of this Agreement by the Company or the
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consummation by the Company of the transactions contemplated hereby, except for
(i) compliance by the Company with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx"), (xx) the filing of a certificate of merger with the
Secretary of State of the State of Delaware in accordance with the Delaware GCL
and (iii) such consents, approvals, orders or authorizations which if not
obtained, or registrations, declarations or filings which if not made, would not
have a Company Material Adverse Effect or materially adversely affect the
ability of the Company to consummate the transactions contemplated hereby or the
ability of the Surviving Corporation or any of its subsidiaries to conduct the
Business after the Effective Time.
(g) Financial Statements, Etc. The Company has furnished to Parent
the unaudited balance sheet of the Company of July 31, 1996 and the related
statements of operations for each of the two years ended July 31, 1996 and 1995,
certified by the principal financial officer of the Company. The foregoing
unaudited financial statements of the Company shall be collectively referred to
as the "Financial Statements." All such Financial Statements (including any
related schedules and/or notes, if any) have been prepared in a manner
consistent with the manner with which Holdings has prepared financial statements
for the Company and Holdings' other subsidiaries under accounting principles
consistently applied and consistent with prior periods, except that such
statements are subject to year end adjustments (which consist of normal
recurring accruals) and do not contain footnote disclosures. Such balance sheet
fairly presents in all material respects the financial position of the Company
as of its respective date, and such statements of operations fairly present in
all material respects the results of operations of the Company for the
respective periods then ended, subject to normal year-end adjustments and the
absence of footnote disclosures.
Except as and to the extent (i) reflected on the unaudited
balance sheet of the Company as of July 31, 1996 referred to above, (ii)
incurred since July 31, 1996 in the ordinary course of business consistent with
past practice, or (iii) set forth on Schedule 3.01(g) hereto, the Company does
not have any liabilities or obligations of any kind or nature, whether known or
unknown or secured or unsecured (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) that would be required to be
reflected on a balance sheet, or the notes thereto, prepared in accordance with
generally accepted accounting principles. Between July 31, 1996 and the
Effective Date of this Agreement, the Company has not suffered any Company
Material Adverse Effect.
(h) Absence of Certain Changes or Events. Except as set forth on
Schedule 3.01(h) hereto, or as otherwise disclosed in the Financial Statements
of the Company, since July 31, 1996, the Company has not (i) issued any stock,
bonds or other corporate securities, (ii) borrowed or refinanced any amount or
incurred any liabilities (absolute or contingent) in excess of $50,000, other
than trade payables incurred in the ordinary course of business consistent with
past practice, (iii) discharged or satisfied any claim in excess of $100,000 or
incurred or paid any obligation or liability (absolute or contingent) other than
current liabilities shown on the balance sheet of the Company as of July 31,
1996 and current liabilities incurred since the date of such balance sheet in
the ordinary course of business consistent with past practice, (iv) declared or
made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other securities, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens
for current real property taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets, or canceled any debts or claims, except
in
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the ordinary course of business consistent with past practice or as otherwise
contemplated hereby, (vii) sold, assigned or transferred any Intellectual
Property Rights (as hereinafter defined) or other intangible assets, (viii)
waived any rights of substantial value, whether or not in the ordinary course of
business, (ix) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit plan, agreement, trust, fund or
other arrangement for the benefit of any director, officer or employee of the
Company, or increased in any manner the compensation or fringe benefits of any
director or officer of the Company, or increased the compensation or fringe
benefits of any executive officer of the Company other than in the ordinary
course of business consistent with past practices, or made any payment of a cash
bonus to any director or officer or to any employee of, or consultant or agent
to, the Company or made any other material change in the terms or conditions of
employment, (x) announced any plan or legally binding commitment to create any
employee benefit plan, program or arrangement or to amend or modify in any
material respect any existing employee benefit plan, program or arrangement,
(xi) eliminated the vesting conditions or otherwise accelerated the payment of
any compensation, (xii) suffered any damage, destruction or loss to any of its
assets or properties, (xiii) made any change in its accounting systems,
policies, principles or practices, (xiv) made any loans to any person, (xv)
incurred damage, destruction, or loss, whether or not covered by insurance,
affecting the properties, assets, or Business of the Company, (xvi) made any
change with respect to management, supervisory, or other key personnel of the
Company, (xvii) paid or discharged a lien or liability not appearing on the
Financial Statements, or (xviii) to the extent not otherwise set forth herein,
taken any action described in Section 4.01 hereof. Between July 31, 1996 and the
Effective Date of this Agreement, there has not been a Material Adverse Change
(as defined in Section 2.02(d)) in the financial condition, properties, assets,
liabilities, Business, operations, results of operations of the Company.
(i) Certain Information. Provided that Parent allows Holdings and
the Company to modify any information regarding Holdings or the Company
contained therein, none of the information supplied by the Company for inclusion
in the Registration Statement or the Proxy Statement/Prospectus (as hereinafter
defined) will, at the respective times such documents or any amendments or
supplements thereto are filed with the SEC, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that no representation is made by the Company with
respect to information supplied by Parent which relates to the Parent,
Acquisition, or any affiliate or associate of Parent for inclusion in the
Registration Statement or the Proxy Statement/Prospectus. Provided that Parent
allows Holdings and the Company to modify any information regarding Holdings or
the Company contained therein, none of the information relating to the Company
included in the Registration Statement or the Proxy Statement/Prospectus that
has been supplied by the Company and/or Holdings will, at the time the Proxy
Statement/Prospectus is distributed to the Company's and/or Parent's
stockholders, be false or misleading with respect to any material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(j) Actions Pending. Except as set forth on Schedule 3.01(j) hereto,
(i) there is no action, suit, dispute, investigation, proceeding or claim
pending or, to the knowledge of
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Holdings and the Company, threatened against or affecting the Company, or its
properties or rights, or the Business, before any court, administrative agency,
governmental body, arbitrator, mediator or other dispute resolution body, and
the Company is not aware of any facts or circumstances which are reasonably
likely to give rise to any such action, suit, dispute, investigation, proceeding
or claim, (ii) the Company is not subject to any order, judgment, decree,
injunction, stipulation, or consent order of or with any court or other
governmental agency, and (iii) the Company has not entered into any agreement to
settle or compromise any proceeding pending or threatened against it which has
involved any obligation other than the payment of money or for which the Company
has any continuing obligation, which (in the case of each of clauses (i), (ii)
and (iii) of this Section 3.01(j)) is reasonably likely to have a Company
Material Adverse Effect or which might materially and adversely affect the
ability of the Company to consummate the transactions contemplated hereby, or
materially and adversely affect the ability of Parent to conduct the Business
after the Effective Time.
(k) Title to Properties. The Company has good and valid title to the
properties and assets reflected on the unaudited balance sheet of the Company as
of July 31, 1996 other than nonmaterial properties and assets disposed of in the
ordinary course of business consistent with past practice since the date of such
balance sheet, and all such properties and assets are free and clear of Claims,
except (i) as described on Schedule 3.01(k) hereto, (ii) liens for current taxes
not yet due, and (iii) minor imperfections of title, if any, not material in
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company (collectively, "Permitted Liens"). Such properties and assets
constitute all of the assets necessary to conduct the Business substantially in
the same manner as it has been conducted prior to the date hereof.
(l) Real Property Interests. Schedule 3.01(l) hereto sets forth a
complete and accurate list of (i) the real properties owned by the Company (the
"Fee Properties") and (ii) the real properties leased by the Company (the
"Leased Properties"). The Company has good and marketable fee simple title to
the Fee Properties and good and marketable leasehold title to the Leased
Properties, listed on Schedule 3.01(l), free and clear of all Claims, tenants
and occupants except for Permitted Liens. Complete and accurate copies of all
leases or other agreements relating to the Leased Properties have been delivered
to Parent and there have been no material changes or amendments to such leases
or agreements since such delivery. The Company is the lawful owner of all
improvements and fixtures located on the Fee Properties and all moveable
fixtures located at the Leased Properties, free and clear of all Claims except
for Permitted Liens. Each lease or other agreement relating to the Leased
Properties is a valid and subsisting agreement, without any material default of
the Company thereunder and without any material default thereunder of the other
party thereto, and such leases and agreements give the Company the right to use
or occupy, as the case may be, all real properties as are sufficient and
adequate to operate the Business as it is currently being conducted. Except as
set forth on Schedule 3.01(l), the Company's possession of such property has not
been disturbed nor has any claim relating to the Company's title to or
possession of such property been asserted against the Company that would have a
Company Material Adverse Effect.
(m) Intellectual Property Rights. The patents, trademarks and trade
names, trademark and trade name registrations, service xxxx, brand xxxx and
brand name registrations, copyrights, inventions, know-how, trade secrets,
proprietary processes and information, software
21
source and object code, the applications therefor and the licenses with respect
thereto (collectively, "Intellectual Property Rights") listed on Schedule
3.01(m) hereto constitute all material proprietary rights owned or held by the
Company that are necessary to the conduct of the Business. Except as set forth
on Schedule 3.01(m), (i) the Company conducts the Business without any known
infringement or claim of infringement of any Intellectual Property Right of
others and the conduct by the Surviving Corporation after the Effective Time of
the Business, in substantially the same manner as it is currently conducted,
will not constitute a breach or violation of any agreement relating to the
Intellectual Property Rights listed on Schedule 3.01(m) (other than as a result
of agreements to which Parent or any of its affiliates is a party); (ii) the
Company is, and after the consummation of the Merger will be, the sole and
exclusive owner of each Intellectual Property Right listed on Schedule 3.01(m),
free and clear of any Claims (other than Permitted Liens), and, to the knowledge
of Holdings and the Company, no person is challenging, infringing,
misappropriating or otherwise violating any such Intellectual Property Rights or
claiming that the conduct of the Business, infringes, misappropriates or
otherwise violates the Intellectual Property Rights of any third party; (iii)
the Company is not aware of any impediment to the registration of any trademark
that is the subject of any application for registration listed on Schedule
3.01(m) that would have a Company Material Adverse Effect; (iv) none of the
Intellectual Property Rights listed on Schedule 3.01(m) is the subject of any
outstanding order, ruling, decree, judgment or stipulation specifically binding
on the Company; (v) to the knowledge of Holdings and the Company, none of the
activities of any employee of the Company on behalf thereof violates any
obligations of such employee to third parties, including, without limitation,
confidentiality or noncompetition obligations under agreements with a former
employer; (vi) the Company is not aware of any unauthorized use by a third party
of any computer software programs or applications that the Company considers to
be a trade secret belonging to the Company; (vii) the Company has taken and is
taking reasonable precautions to protect all material trade secrets and other
confidential information relating to its proprietary computer software programs
and applications or included in the Intellectual Property Rights that are
material to the conduct of the Business; and (viii) the execution, delivery, and
performance of this Agreement and the consummation of the Merger will not
constitute a breach or default of any Intellectual Property Rights that are
material to the conduct of the Business.
(n) Labor Matters. The Company is not a party to any collective
bargaining or union agreement, and no such agreement is applicable to any
employees of the Company. There are not any controversies between the Company
and any of such employees that might reasonably be expected to result in a
Company Material Adverse Effect, or any unresolved labor union grievances or
unfair labor practice or labor arbitration proceedings pending, or threatened
relating to the Business. There are no labor unions or other organizations
representing or purporting to represent any employees of the Company and there
are not any organizational efforts currently being made or threatened involving
any of such employees. Except as set forth on Schedule 3.01(n) hereto, the
Company is in compliance in all material respects with all laws and regulations
or other legal or contractual requirements regarding the terms and conditions of
employment of employees, former employees or prospective employees or other
labor related matters, including, without limitation, laws, rules, regulations,
orders, rulings, conciliation agreements, decrees, judgments and awards relating
to wages, hours, the payment of social security and similar taxes, equal
employment opportunity, employment discrimination, fair labor standards and
occupational health and safety, wrongful discharge or violation of the personal
rights of employees, former employees or prospective employees. The Company is
not liable for
22
any material amount of arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(o) Severance Arrangements. Except as set forth on Schedule 3.01(o)
hereto, the Company is not party to any agreement with any employee (i) the
benefits of which (including, without limitation, severance benefits) are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature of any of the transactions
contemplated by this Agreement or (ii) providing severance benefits in excess of
those generally available under the Company's severance policies (which are
described on Schedule 3.01(o)), or which are conditioned upon a change of
control, after the termination of employment of such employees regardless of the
reason for such termination of employment, and the Company is not a party to any
employment agreement or compensation guarantee extending for a period longer
than one year. Schedule 3.01(o) sets forth all employment agreements and
compensation guarantees, regardless of duration, to which the Company is a
party. Except as a result of actions taken by Parent or the Surviving
Corporation, no amounts will be due or payable to any employee of the Company
under any such severance arrangement or otherwise by virtue of the refusal of
such employee to accept the offer of employment of the Surviving Corporation.
(p) Taxes.
(i) Except as set forth on Schedule 3.01(p) hereto, the
Company or an affiliate on behalf of the Company has (A) timely filed all
Federal and all material state, local and foreign returns, declarations,
reports, estimates, information returns and statements relating to the
Company's operations ("Returns") required to be filed by it in respect of
any Taxes (as hereinafter defined), (B) timely paid all Taxes that are due
and payable with respect to the periods covered by the Tax Returns
referred to in clause (A) without regard to whether such Taxes have been
assessed (except for audit adjustments not material in the aggregate or to
the extent that liability therefor is reserved for in the Company's most
recent unaudited financial statements), (C) established reserves that are
adequate for the payment of all Taxes not yet due and payable with respect
to the results of operations of the Company, and (D) complied in all
material respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes and has in all material respects
timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over.
(ii) The Company has no liability for the Taxes of any Person
or entity other than the Company under Regulation 1.1502-6 of the Internal
Revenue Code.
(iii) Schedule 3.01(p) sets forth the last taxable period
through which the Federal income Tax Returns of the Company have been
examined by the Internal Revenue Service or otherwise closed. All
deficiencies asserted as a result of such examinations and any examination
by any applicable state, local or foreign taxing authority which have not
been or will not be appealed or contested in a timely manner have been
paid, fully settled or adequately provided for in the Company's most
recent audited financial statements. Except as set forth on Schedule
3.01(p), no Federal, state, local or foreign Tax audits or other
administrative proceedings or court proceedings are currently pending with
regard to any Federal or material state, local or foreign Taxes for
23
which the Company would be liable, and no deficiency for any such Taxes
has been proposed, asserted or assessed or threatened pursuant to such
examination of the Company by such Federal, state, local or foreign taxing
authority with respect to any period.
(iv) Except as set forth on Schedule 3.01(p), the Company has
not executed or entered into (or prior to the Effective Time will execute
or enter into) with the Internal Revenue Service or any taxing authority
(A) any agreement or other document extending or having the effect of
extending the period for assessments or collection of any Federal, state,
local or foreign Taxes for which the Company would be liable or (B) a
closing agreement pursuant to Section 7121 of the Internal Revenue Code,
or any predecessor provision thereof or any similar provision of state,
local or foreign income tax law that relates to the assets or operations
of the Company.
(v) Except as set forth on Schedule 3.01(p), the Company is
not a party to any agreement providing for the allocation or sharing of
liability for any Taxes.
(vi) The Company has made available to Parent complete and
accurate copies of all income and franchise Tax Returns pertaining solely
to the Company and all material other Tax Returns pertaining solely to the
Company filed by or on behalf of the Company for the taxable years ending
on or prior to July 31, 1996.
(vii) The Company is not a "U.S. real property holding
corporation" (as defined in Section 897(c)(2) of the Internal Revenue
Code), and neither the Company nor any stockholder of the Company is a
non-resident alien individual, foreign corporation, foreign partnership,
or foreign trust.
For purposes of this Agreement, "Taxes" shall mean all
Federal, state, local, foreign or other taxing authority income, franchise,
sales, use, ad valorem, property, payroll, social security, unemployment,
assets, value added, withholding, excise, severance, transfer, employment,
alternative or add-on minimum and other taxes, charges, fees, levies, imposts,
duties or other assessments, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
(q) Compliance with Law; Permits. The Company is not in default in
any material respect under any order or decree of any court, governmental
authority, arbitrator or arbitration board or tribunal that is specifically
binding on the Company or under any laws, ordinances, governmental rules or
regulations to which the Company or any of its respective properties or assets
is subject. Schedule 3.01(q) hereto sets forth a list of all material permits,
authorizations, approvals, registrations, variances and licenses ("Permits")
issued to or used by the Company in connection with the conduct of the Business;
such Permits constitute all Permits necessary for the Company to own, use and
maintain its properties and assets or required for the conduct of the Business
in substantially the same manner as it is currently conducted. Each Permit
listed on Schedule 3.01(q) is in full force and effect and no proceeding is
pending or threatened to modify, suspend, revoke or otherwise limit any of such
Permits and no administrative or governmental actions have been taken or
threatened in connection with the expiration or renewal of any of such Permits.
Except as set forth on Schedule 3.01(q), neither the
24
Company nor Parent or Acquisition will be required, as a result of the
consummation of the transactions contemplated hereby, to obtain or renew any
Permits.
(r) Employee Benefit Plans.
(i) Schedule 3.01(r) hereto sets forth a complete and accurate
list of each plan, program, arrangement, agreement or commitment that is
an employment, consulting or deferred compensation agreement, or an
executive compensation, incentive bonus or other bonus, employee pension,
profit-sharing, savings, retirement, stock option, stock purchase,
severance pay, life, health, disability or accident insurance plan, or
vacation or other employee benefit plan, program, arrangement, agreement
or commitment, including, without limitation, each employee benefit plan
(as defined under Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") in which employees of the Company
participate that is (i) maintained by the Company or any trade or business
(whether or not incorporated) which, together with the Company, would be
treated as a single employer under Title IV of ERISA or Section 414 of the
Internal Revenue Code (collectively, the "ERISA Affiliates") or (ii) to
which any ERISA Affiliate contributes or has any obligation to contribute
to, or has or may have any liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold harmless or
similar agreement) (collectively, the "Plans"). Each Plan is identified on
Schedule 3.01(r), to the extent applicable, as one or more of the
following: an "employee pension plan" (as defined in Section 3(2)(A) of
ERISA), an "employee welfare plan" (as defined in Section 3(1) of ERISA),
or as a plan intended to be qualified under Section 401 of the Internal
Revenue Code.
(ii) The Plans have been, and currently are in compliance, in
all material respects, with all laws and regulations applicable to the
Plans under which noncompliance would have a Company Material Adverse
Effect, including, without limitation, ERISA and the Internal Revenue
Code.
(iii) Except as set forth on Schedule 3.01(r), no ERISA
Affiliate has maintained, adopted or established, contributed to or been
required to contribute to, or otherwise participated in or been required
to participate in, any employee benefit plan or other program or
arrangement subject to Title IV of ERISA (including, without limitation, a
"multi-employer plan" (as defined in Section 3(37) of ERISA), a multiple
employer plan (as defined in Section 210 of ERISA) and a defined benefit
plan (as defined in Section 3(35) of ERISA)).
(iv) Except as set forth on Schedule 3.01(r), the Company
neither provides nor may be required to provide and no Plan, other than a
Plan that is an employee pension benefit plan (within the meaning of
Section 3(2)(A) of ERISA), provides or may be required to provide
benefits, including, without limitation, death, health or medical benefits
(whether or not insured), with respect to current or former employees of
the Company beyond their retirement or other termination of service with
the Company (other than (A) coverage mandated by applicable law, (B)
deferred compensation benefits accrued as liabilities on the books of the
Company, or (C) benefits the full cost of which is borne by the current or
former employee (or his or her beneficiary)). No ERISA Affiliate maintains
any Plan under which any employee or
25
former employee of the Company may receive medical benefits which cannot
be modified or terminated by the ERISA Affiliates at any time without the
consent of any person, and no employees or former employees of the Company
will have any claim in respect of such benefits as of the Effective Time.
(v) The transactions contemplated hereby will not result in
(i) any portion of any amount paid or payable by the Company to a
"disqualified individual" (within the meaning of Section 280G(c) of the
Internal Revenue Code and the regulations promulgated thereunder), whether
paid or payable in cash, securities of the Company or otherwise and
whether considered alone or in conjunction with any other amount paid or
payable to such a "disqualified individual," being an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Internal Revenue
Code and the regulations promulgated thereunder, (ii) any employee of the
Company being entitled to severance pay, unemployment compensation (other
than payments by state unemployment compensation program), or any other
payment, (iii) an acceleration of the time of payment (other than
eligibility for a distribution from a defined contribution plan) or
vesting or an increase in the amount of compensation due to any such
employee or former employee of the Company or (iv) any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code for which an exemption is not available.
(vi) No ERISA Affiliates has incurred any material liability
with respect to any Plan under ERISA (including, without limitation, Title
I or Title IV thereof, other than liability for premiums due to the
Pension Benefit Guaranty Corporation which are current if applicable), the
Internal Revenue Code or other applicable law for which the Company may be
held liable, which has not been satisfied in full or been accrued on the
balance sheet of the Company as of July 31, 1996 pending full
satisfaction, and no event has occurred, and there exists no condition or
set of circumstances, which could result in the imposition of any material
liability on the Company not set forth in or reserved in the Company's
unaudited balance sheet at July 31, 1996 under ERISA, the Internal Revenue
Code or other applicable law with respect to any Plan.
(vii) With respect to each Plan subject to Section 412 of the
Internal Revenue Code that is funded wholly or partially through an
insurance policy, all premiums required to have been paid to date under
the insurance policy have been paid, and, except as set forth on Schedule
3.01(r), as of the Effective Time there will be no liability of the
Company under any such insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring prior to the
Effective Time.
(viii) None of the ERISA Affiliates has made any contribution
to any Plan that may be subject to any excise tax under Section 4972 of
the Internal Revenue Code for which the Company may be held liable.
26
(s) Environmental Matters. The Company is in compliance in all
material respects with all Federal, state or local statutes, ordinances, orders,
judgments, rulings or regulations relating to environmental pollution or to
environmental regulation or control. Except as set forth on Schedule 3.01(s)
hereto, neither the Company nor any of its respective officers, employees,
representatives or agents has treated, stored, processed, discharged, spilled or
otherwise disposed of any substance defined as hazardous or toxic by any
applicable Federal, state or local law, rule, regulation, order or directive, or
any waste or by-product thereof, at any real property or any other facility
owned, leased or used by the Company, in material violation of any applicable
statutes, regulations, ordinances or directives of any governmental authority or
court, which violations may result in any material liability to the Company,
taken as a whole. Except as set forth on Schedule 3.01(s), no employee of the
Company or other person has ever made a claim or demand against the Company
based on alleged damage to health caused by any such hazardous or toxic
substance or by any waste or by-product thereof. Except as set forth on Schedule
3.01(s), the Company has not been charged by any governmental authority with
improperly using, handling, storing, discharging or disposing of any such
hazardous or toxic substance or waste or by-product thereof or with causing or
permitting any pollution of any body of water. Except as set forth on Schedule
3.01(s), to the best knowledge of Holdings and the Company, the Fee or Leased
Properties and the Business are not subject to any pending or threatened
administrative or judicial proceeding under any environmental law and there are
no facts or circumstances known to the Company which are reasonably likely to
give rise to any proceeding. Except as set forth on Schedule 3.01(s), to the
best knowledge of Holdings and the Company, there are no inactive, closed, or
abandoned storage or disposal areas or facilities or underground storage tanks
on the Fee or Leased Properties.
(t) Personal Property. The Company has provided Parent lists of (i)
all of the tangible personal property used by the Company in its business having
an original acquisition cost of $50,000 or more, and (ii) all leases of personal
property binding upon the Company having an annual rental in excess of $25,000.
All of such tangible personal property is presently utilized by the Company in
the ordinary course of its business and is in good repair, ordinary wear and
tear excepted.
(u) Contracts. Schedule 3.01(u) lists all contracts and arrangements
of the following types to which the Company is a party or by which it is bound
and which are material to the conduct of the Business or to the financial
condition or results of operations of the Company, taken as a whole, including
without limitation the following:
(i) any contract or arrangement with a sales representative,
distributor, dealer, broker, sales agency, advertising agency or other
person engaged in sales, distribution or promotional activities, or any
contract to act as one of the foregoing on behalf of any person, which is
not terminable by the Company on 30 or fewer days notice;
(ii) any contract or arrangement of any nature which involves
the payment or receipt of cash or other property, an unperformed
commitment, or goods or services, having a value in excess of $100,000;
(iii) any contract or arrangement pursuant to which the
Company has made or will make loans or advances, or has or will have
incurred indebtedness for
27
borrowed money or become a guarantor or surety or pledged its credit on or
otherwise become responsible with respect to any undertaking of another
(except for the negotiation or collection of negotiable instruments in
transactions in the ordinary course of business) in excess of $50,000;
(iv) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of real property or personal property,
loan commitment or other contract or arrangement relating to the borrowing
of funds, an extension of credit or financing;
(v) any contract or arrangement involving a partnership, a
limited liability company, a joint venture or other cooperative
undertaking requiring a sharing of assets or technology of the Company;
(vi) any contract or arrangement involving any restrictions
with respect to the geographical area of operations or scope or type of
business of the Company;
(vii) any power of attorney or agency agreement or arrangement
with any person pursuant to which such person is granted the authority to
act for or on behalf of the Company, or the Company is granted the
authority to act for or on behalf of any person;
(viii) any contract not fully performed and relating to any
acquisition or disposition of the Company or any predecessor in interest
of the Company, or any acquisition or disposition of any subsidiary,
division, line of business, or real property of the Company;
(ix) any contract or arrangement with a customer or
financial institution;
(x) all such contracts and arrangements between the
Company and Holdings or its affiliates that are material to the
operations of the Company; and
(xi) any contract not specified above which the cancellation,
breach, or nonperformance of would constitute a Company Material Adverse
Effect.
The Company has delivered to Parent complete and accurate copies of the
contracts and agreements set forth on Schedule 3.01(u), and each such contract
or agreement is a valid and subsisting agreement, without any material default
of the Company thereunder and, to Holdings' and the Company's knowledge, without
any material default thereunder of the other party thereto. Except as set forth
on Schedule 3.01(u), the Company has not received notice of any cancellation or
termination of, or of any threat to cancel or terminate, any of such contracts
or agreements required to be listed on Schedule 3.01(u) where such cancellation
or termination would have a Company Material Adverse Effect.
(v) Insurance.
28
(i) All policies of fire, liability, workers' compensation
and other forms of insurance providing insurance coverage to or for the
Company for events or occurrences arising or taking place in the case of
occurrence type insurance, and for claims made and/or suits commenced in
the case of claims-made type insurance, between the Effective Date of this
Agreement and the Effective Time, are listed on Schedule 3.01(v) hereto,
and, except as set forth on Schedule 3.01(v), all premiums with respect
thereto have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. All such policies are in
full force and effect, and, except as set forth on Schedule 3.01(v),
provide insurance in such amounts and against such risks as Holdings and
the Company believe are customary for companies engaged in similar
businesses to protect the employees, properties, assets, businesses and
operations of the Company. All such policies will remain in full force and
effect and will not be adversely modified or affected by, or terminate or
lapse by reason of, any of the transactions contemplated hereby, except by
reason of an insurer's assessment of Parent or the conduct of the Business
after the Effective Time.
(ii) The Company has provided Parent information concerning
all claims, which (including related claims which in the aggregate) exceed
$50,000 and which have been made by the Company in the last two years
under any workers' compensation, general liability, property, directors'
and officers' liability or other insurance policy applicable to the
Company or any of its properties. Except as set forth in written materials
provided by the Company to Parent, there are no pending or threatened
claims under any insurance policy, the outcome of which would have a
Company Material Adverse Effect.
(w) Pending Transactions. Except for this Agreement and the
transactions contemplated hereby, the Company is not a party to or bound by any
agreement, negotiation, discussion, commitment or undertaking with respect to a
merger or consolidation with, or an acquisition of all or substantially all of
the property and assets of, any other corporation or person or the sale, lease
or exchange of all or substantially all of its properties and assets to any
other person.
(x) Claims Against Officers and Directors. Except as set forth on
Schedule 3.01(x), to the knowledge of Holdings and the Company, there are no
pending or threatened claims against any director, officer, employee or agent of
the Company which could give rise to any claim for indemnification against the
Company.
(y) Customers, Suppliers, Etc. The Company has provided Parent
information concerning the 15 largest customers of the Company in terms of
revenue to the Company ("Major Customers") and the 10 largest suppliers in terms
of charges to the Company ("Major Suppliers") during the fiscal year ended July
31, 1996. Except to the extent set forth in Schedule 3.01(y), between July 31,
1996 and the Effective Date of this Agreement: (i) there has not been any
material dispute between the Company and any Major Customer or Major Supplier;
(ii) the Company did not receive notice from any Major Customer stating that
such Major Customer intends to reduce its purchases from the Company; or (iii)
the Company did not receive notice from any Major Supplier stating that such
Major Supplier intends to reduce its sale of goods or services to the Company.
29
(z) Improper and Other Payments. Except as set forth on Schedule
3.01(z), neither the Company nor, to the knowledge of Holdings and the Company,
any director, officer, employee, agent or representative of the Company, nor any
person acting on behalf of any of them, has (i) made, paid or received any
bribes, kickbacks or other similar payments to or from any person, whether
lawful or unlawful, (ii) made any unlawful contributions, directly or
indirectly, to a domestic or foreign political party or candidate, or (iii) made
any improper foreign payment (as defined in the Foreign Corrupt Practices Act).
(aa) Brokers. Except as set forth on Schedule 3.01(aa), the Company
has not used any broker or finder in connection with the transactions
contemplated hereby, and the Company has not nor will have any liability or
otherwise suffer or incur any loss as a result of or in connection with any
brokerage or finder's fee or other commission of any person retained by the
Company or the sole stockholder of the Company in connection with any of the
transactions contemplated by this Agreement.
(bb) Accounts Receivable and Advances. Except as disclosed on
Schedule 3.01(bb), (i) each account receivable of the Company (collectively, the
"Accounts Receivable") represents a sale made in the ordinary course of business
other than to affiliates and which arose pursuant to an enforceable written
contract for a bona fide sale of goods or for services performed, and the
Company has performed all of its obligations to produce the goods or perform the
services to which such Accounts Receivable relates, and (ii) no Account
Receivable is subject to any claim for reduction, counterclaim, set-off,
recoupment or other claim for credit, allowances or adjustments by the obligor
thereof, in an amount individually or in the aggregate that would have a Company
Material Adverse Effect.
(cc) OCC Examination. The Office of the Comptroller of the Currency
("OCC") has not notified the Company of, nor imposed upon the Company, any
order, judgment, decree, injunction, stipulation, liability, obligation,
violation, fine, penalty, or burden that has material and adverse financial
consequences on the Company or its Business.
(dd) Accuracy of Statements. Neither this Agreement, the
Holdings/Company Disclosure Letter, nor any schedule, exhibit, statement, list,
document, certificate or other information furnished or to be furnished by or on
behalf of the Company to Parent in connection with this Agreement, when read
together, or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
SECTION 3.02 Representations and Warranties of Holdings. Except as set
forth in the Holdings/Company Disclosure Letter, Holdings represents and
warrants to Parent and Acquisition as follows:
(a) Organization and Qualification. Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
30
(b) Ownership. Holdings owns beneficially and of record 100% of the
Company Common Stock, free and clear of any liens, claims, charges,
restrictions, rights of others, security interests, prior assignments or other
encumbrances.
(c) Authority Relative to Agreement. Holdings has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement by Holdings and the consummation by Holdings of the transactions
contemplated hereby have been duly authorized by Holdings' Board of Directors
and no other corporate approvals or proceedings on the part of Holdings are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Holdings and constitutes
the legal, valid and binding obligation of Holdings, enforceable against
Holdings in accordance with its terms, subject to the effect, if any, of (a)
applicable bankruptcy and other similar laws affecting the rights of creditors
generally, (b) rules of law governing specific performance, injunctive relief
and other equitable remedies, and (c) the limitations imposed by public policy
on the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities. No approval of the holders of any
class or series of Holdings' capital stock is necessary to approve this
Agreement, the Merger and the transactions contemplated hereby and thereby.
(d) Non-Contravention. The execution and delivery of this Agreement
by Holdings and the consummation by Holdings of the transactions contemplated
hereby will not (i) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of Holdings or (ii) except as set forth on Schedule
3.02(d) hereof, result in any violation of, conflict with, or default (or an
event which with notice or lapse of time or both would constitute a default) or
loss of a benefit under, or permit the termination of or the acceleration of any
obligation under, any mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company's Business as
conducted by the Company or the Company's properties, or (iii) result in the
creation or imposition of any Claim in favor of any third person or entity upon
any of the assets of the Company or the Company's Business, other than any such
violation, conflict, default, loss, termination or acceleration that would not
have a Company Material Adverse Effect.
(e) Consents. Except as set forth on Schedule 3.02(e), no consent,
approval, order or authorization of, or registration, declaration or filing
with, any Federal, state, local or foreign governmental or regulatory authority
is required to be made or obtained by Holdings or any of its subsidiaries in
connection with the execution and delivery of this Agreement by Holdings or the
consummation by Holdings of the transactions contemplated hereby, except for (i)
compliance by Holdings with the HSR Act, (ii) filing with the SEC of such
reports, schedules, and information under Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated by the SEC
thereunder, as may be required to be filed by Holdings in connection with this
Agreement, the Merger, and other transactions contemplated hereby, (iii) the
filing of a certificate of merger with the Secretary of State of the State of
Delaware in accordance with the Delaware GCL, and (iv) such consents, approvals,
orders or authorizations which if not obtained,
31
or registrations, declarations or filings which if not made, would not
materially adversely affect the ability of Holdings to consummate the
transactions contemplated hereby and thereby.
(f) Certain Information. Provided that Parent allows Holdings and
the Company to modify any information regarding Holdings or the Company
contained therein, none of the information supplied by Holdings for inclusion in
the Registration Statement or the Proxy Statement/Prospectus will, at the
respective times such documents or any amendments or supplements thereto are
filed with the SEC, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that no
representation is made by Holdings with respect to information supplied by
Parent which relates to the Parent or any affiliate or associate of Parent for
inclusion in the Registration Statement or the Proxy Statement/Prospectus.
Provided that Parent allows Holdings and the Company to modify any information
regarding Holdings or the Company contained therein, none of the information
relating to Holdings and its subsidiaries included in the Registration Statement
or the Proxy Statement/Prospectus that has been supplied by Holdings or its
subsidiaries will, at the time the Proxy Statement/Prospectus is distributed to
the Company's and/or Parent's stockholders, be false or misleading with respect
to any material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(g) Brokers. Except as set forth on Schedule 3.02(h), neither
Holdings nor any of its subsidiaries has used any broker or finder in connection
with the transactions contemplated hereby, and neither Holdings nor any of its
subsidiaries has or shall have any liability or otherwise suffer or incur any
loss as a result of or in connection with any brokerage or finder's fee or other
commission of any person retained by Holdings, any of its subsidiaries, or the
stockholders of Holdings in connection with any of the transactions contemplated
by this Agreement.
(h) Accuracy of Statements. Neither this Agreement nor any schedule,
exhibit, statement, list, document, certificate or other information furnished
or to be furnished by or on behalf of Holdings to Parent in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
SECTION 3.03 Representations and Warranties of Parent. Except as set forth
in the Parent Disclosure Letter dated of even date herewith, Parent represents
and warrants to Holdings and the Company as follows:
(a) Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Parent Material Adverse Effect (as hereinafter
32
defined). As used in this Agreement, the term "Parent Material Adverse Effect"
shall mean a material adverse effect on the properties, assets, financial
condition, operating results or business of Parent, taken as a whole; provided,
however, that the term "Parent Material Adverse Effect" shall not include any
such material adverse effect arising or resulting, directly or indirectly, from
industry conditions or the public announcement of, or the response or reaction
of customers, vendors, licensors, investors, Parent employees or others to, this
Agreement, the Merger, or any of the agreements or transactions contemplated by
this Agreement or entered into in connection with this Agreement or the Merger.
(b) Subsidiaries. Schedule 3.03(b) includes a complete and accurate
list of each subsidiary of the Parent, indicating the jurisdiction of
incorporation and the nature and level of ownership in such subsidiary by the
Parent, any subsidiary of the Parent and any other person. Complete and correct
copies of the certificate of incorporation and by-laws of the Parent and of each
subsidiary of the Parent have previously been delivered to the Company. Except
as set forth on Schedule 3.03(b) hereto, neither the Parent nor any of its
subsidiaries owns of record or beneficially, directly or indirectly, (i) any
shares of outstanding capital stock or securities convertible into capital stock
of any other corporation or (ii) any participating interest in any partnership,
joint venture or other noncorporate business enterprise. Each subsidiary of the
Parent is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted. Each
subsidiary of the Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Parent Material Adverse Effect. All the outstanding shares of capital
stock of the Parent's subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and, except as set forth on Schedule 3.03(b), are owned
by the Parent or by a wholly owned subsidiary of the Parent free and clear of
any Claims, and there are no proxies or voting or transfer agreements or
understandings outstanding with respect to any such shares. Without limiting the
foregoing representations and warranties, Parent owns beneficially of record all
of the issued and outstanding shares of the capital stock of Acquisition free
and clear of all Claims.
For purposes of this Agreement, the term "subsidiary," when
used with respect to the Parent, shall mean any corporation or other business
entity a majority of whose outstanding equity securities is at the time owned,
directly or indirectly, by the Parent and/or one or more other subsidiaries of
the Parent.
(c) Capitalization. The authorized capital stock of Parent consists
of 150,000,000 shares of Parent Common Stock and 15,000,000 shares of Parent
Preferred Stock, and, as of August 31, 1996, 41,669,035 shares of Parent Common
Stock were issued and outstanding, all of which were duly authorized and validly
issued and are fully paid and nonassessable, and no shares of Parent Preferred
Stock were issued and outstanding. As of August 31, 1996, Parent had outstanding
options to purchase up to a total of 3,387,803 shares of Parent Common Stock.
Except as provided in the immediately preceding sentence or in Schedule 3.03(c)
hereto, Parent has, no subscription, warrant, option, convertible security,
stock appreciation or other right (contingent or other) to purchase or acquire
any shares of any class of capital stock of Parent that is authorized or
outstanding and there is not any commitment of
33
Parent to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets. Except as disclosed in Schedule 3.03, Parent does not
have any obligation (contingent or other) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof.
(d) Authority Relative to Agreements. Parent has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by Parent
and the consummation by Parent of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Parent, and except for approval by
the stockholders of Parent, no other corporate approvals or proceedings on the
part of Parent are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, subject to the effect,
if any, of (a) applicable bankruptcy and other similar laws affecting the rights
of creditors generally, (b) rules of law governing specific performance,
injunctive relief and other equitable remedies, and (c) the limitations imposed
by public policy on the enforceability of provisions requiring indemnification
in connection with the offering, issuance or sale of securities. The Parent's
Board of Directors has by the requisite vote of its Board of Directors present
(i) determined that this Agreement and the Merger is advisable and fair and in
the best interests of the Parent and its stockholders, and (ii) resolved to
recommend the approval of this Agreement and the Merger by the Parent's
stockholders and directed that the Merger be submitted for consideration by such
stockholders. The affirmative vote of the holders of a majority of the
outstanding Parent Common Stock is the only vote of the holders of any class or
series of the Parent's capital stock necessary to approve this Agreement, the
Merger, and the transactions contemplated hereby and thereby.
(e) Non-Contravention. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
will not (i) violate or conflict with any provision of the Certificate of
Incorporation or By-Laws of Parent, (ii) result in any violation of, conflict
with, or default (or an event which with notice or lapse of time or both would
constitute a default) or loss of a benefit under, or permit the termination of
or the acceleration of any obligation under, any material mortgage, indenture,
lease, agreement or other instrument to which Parent is a party or by which its
assets are bound, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its subsidiaries or their respective properties, or (iii) result in
the creation or imposition of any Claim in favor of any third person or entity
upon any of the assets of Parent or any of its subsidiaries, other than any such
violation, conflict, default, loss, termination or acceleration that would not
have a Parent Material Adverse Effect or adversely affect the ability of Parent
to consummate the Merger or any other transaction contemplated hereby.
(f) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by
Parent in connection with the execution and delivery of this Agreement by Parent
or the consummation by Parent of the transactions contemplated hereby, except
for (i) compliance by Parent with the HSR Act, (ii) filings pursuant
34
to the Securities Act as contemplated by Section 4.02 hereof, (iii) the filing
of a certificate of merger with the Secretary of State of the State of Delaware
in accordance with the Delaware GCL, (iv) any licenses, permits, franchises or
other governmental authorizations pertaining to the Business that are required
as a result of the consummation of the transactions contemplated hereby, (v) the
consents described in Schedule 3.03(f), and (vi) such consents, approvals,
orders or authorizations which if not obtained, or registrations, declarations
or filings which if not made, would not have a Parent Material Adverse Effect or
materially adversely affect the ability of Parent to consummate the transactions
contemplated hereby or to conduct the Business after the Effective Time.
(g) SEC Filings. Parent has filed all forms, reports and documents
required to be filed with the SEC since September 28, 1995, and Parent has made
available to the Company, as filed with the SEC, complete and accurate copies of
all reports, statements and registration statements (including Current Reports
on Form 8-K) filed by Parent with the SEC since September 28, 1995, in each case
including all amendments and supplements (collectively, the "Parent SEC
Filings"). The Parent SEC Filings (including, without limitation, any financial
statements or schedules included therein) (i) were prepared in compliance with
the requirements of the Securities Act or Exchange Act, as the case may be, and
(ii) did not at the time of filing (or if amended, supplemented or superseded by
a filing prior to the date hereof, on the date of that 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.
The financial statements of Parent included in the Parent SEC
Filings have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied and consistent with prior periods
indicated (except as otherwise noted therein or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present (subject,
in the case of unaudited statements, to normal, recurring year-end adjustments
and any other adjustments described therein) the consolidated financial position
of Parent and its consolidated subsidiaries as at the dates thereof and the
consolidated results of operations and cash flows of Parent and its consolidated
subsidiaries for the periods then ended. Since June 30, 1996, there has been no
change in any of the significant accounting (including tax accounting) policies,
practices or procedures of the Parent or any of its subsidiaries. Except for
liabilities or obligations that are accrued or reserved against in Parent's
financial statements included in the Parent SEC Reports neither of Parent or its
subsidiaries has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) that would be
required by GAAP to be reflected on a consolidated balance sheet, or the notes
thereto, or which would have a Parent Material Adverse Affect.
(h) Absence of Certain Changes or Events. Except as set forth in the
Parent SEC Filings made through the date hereof, (i) Parent has not conducted
its business and operations other than in the ordinary course of business and
consistent with past practices or taken any of the actions set forth in Section
4.02 hereof and (ii) there has not been any fact, event, circumstance or change
affecting or relating to Parent or its subsidiaries that has caused or is
reasonably likely to cause a Material Adverse Change in Parent's financial
condition, properties, assets, liabilities, business, operations, or results of
operations. As used with reference Parent, the term "Material Adverse Change"
refers to a material adverse change other
35
than a change arising or resulting, directly or indirectly, from industry
conditions or the public announcement of, or the response or reaction of
customers, vendors, licensors, investors, Parent employees or others to, this
Agreement, the Merger, or any of the agreements or transactions contemplated by
this Agreement or entered into in connection with this Agreement of the Merger.
(i) Certain Information. None of the information supplied by Parent
or Acquisition for inclusion in the Registration Statement or the Proxy
Statement/Prospectus (as defined in Section 4.02 hereof) will, at the respective
times such documents or any amendments or supplements thereto are filed with the
SEC, contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except no
representation is made by Parent or Acquisition with respect to information
supplied by the Company which relates to the Company or any affiliate or
associate of the Company for inclusion in the Registration Statement or the
Proxy Statement/Prospectus. None of the information relating to Parent included
in the Registration Statement or the Proxy Statement/Prospectus that has been
supplied by Parent will, at the time the Proxy Statement/Prospectus is
distributed to the Company's and/or Parent's stockholders, be false or
misleading with respect to any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(j) Registration Rights. Except as set forth on Schedule 3.03(j) and
except as otherwise provided for in this Agreement, Parent is not a party to any
agreement obligating or requiring it to register under the Securities Act any
Parent Common Stock or other security of Parent.
(k) Brokers. Except as set forth on Schedule 3.03(k), neither Parent
nor any of its subsidiaries has used any broker or finder in connection with the
transactions contemplated hereby, and neither Parent nor any of its subsidiaries
has or shall have any liability or otherwise suffer or incur any loss as a
result of or in connection with any brokerage or finder's fee or other
commission of any person retained by Parent or any of its subsidiaries in
connection with any of the transactions contemplated by this Agreement.
(l) Title to Properties. Parent has good and valid title to the
properties and assets reflected on the audited balance sheet of Parent as of
June 30, 1996 other than nonmaterial properties and assets disposed of in the
ordinary course of business consistent with past practice since the date of such
balance sheet, and all such properties and assets are free and clear of Claims,
except (i) as described in the Parent SEC Filings, (ii) liens for current taxes
not yet due, and (iii) minor imperfections of title, if any, not material in
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company (collectively, "Permitted Liens"). Such properties and assets
constitute all of the assets necessary to conduct Parent's business
substantially in the same manner as it has been conducted prior to the date
hereof.
(m) Intellectual Property Rights. The patents, trademarks and trade
names, trademark and trade name registrations, service xxxx, brand xxxx and
brand name registrations, copyrights, inventions, know-how, trade secrets,
proprietary processes and information, software
36
source and object code, the applications therefor and the licenses with respect
thereto (collectively, "Intellectual Property Rights") currently owned by, or
licensed to, Parent and its subsidiaries hereto constitute all material
proprietary rights owned or held by Parent or its subsidiaries that are
necessary to the conduct of Parent's business as currently conducted. Except as
set forth in the Parent SEC Filings, Parent and its subsidiaries conduct their
business without any known infringement or claim of infringement of any
Intellectual Property Right of others; (ii) to the knowledge of Parent, no
person is challenging, infringing, misappropriating or otherwise violating any
such Intellectual Property Rights or claiming that the conduct by Parent of its
business, infringes, misappropriates or otherwise violates the Intellectual
Property Rights of any third party; (iii) none of the Intellectual Property
Rights currently used by Parent is the subject of any outstanding order, ruling,
decree, judgment or stipulation specifically binding on Parent; (v) to the
knowledge of Parent, none of the activities of any employee of Parent or its
subsidiaries on behalf thereof violates any obligations of such employee to
third parties, including, without limitation, confidentiality or noncompetition
obligations under agreements with a former employer; (vi) Parent is not aware of
any unauthorized use by a third party of any computer software programs or
applications that Parent considers to be a trade secret belonging to the
Company; (vii) Parent has taken and is taking reasonable precautions to protect
all material trade secrets and other confidential information relating to its
proprietary computer software programs and applications or included in the
Intellectual Property Rights that are material to the conduct of its business;
and (viii) the execution, delivery, and performance of this Agreement and the
consummation of the Merger will not constitute a breach or default of any
Intellectual Property Rights that are material to the conduct of Parent's
business.
(n) Environmental Matters. Parent and its subsidiaries are in
compliance in all material respects with all Federal, state or local statutes,
ordinances, orders, judgments, rulings or regulations relating to environmental
pollution or to environmental regulation or control. Parent has not been charged
by any governmental authority with improperly using, handling, storing,
discharging or disposing of any such hazardous or toxic substance or waste or
by-product thereof or with causing or permitting any pollution of any body of
water. To the best knowledge of Parent no properties or facilities used by
Parent or its subsidiaries are subject to any pending or threatened
administrative or judicial proceeding under any environmental law and there are
no facts or circumstances known to Parent which are reasonably likely to give
rise to any proceeding. To the best knowledge of Parent, there are no inactive,
closed, or abandoned storage or disposal areas or facilities or underground
storage tanks on the properties or facilities used by Parent or its
subsidiaries.
(o) Insurance. All policies of fire, liability, workers'
compensation and other forms of insurance providing insurance coverage to or for
Parent are in full force and effect, and provide insurance in such amounts and
against such risks as Parent believes are customary for companies engaged in
similar businesses to protect the employees, properties, assets, businesses and
operations of Parent and its subsidiaries. All such policies will remain in full
force and effect and will not be adversely modified or affected by, or terminate
or lapse by reason of, any of the transactions contemplated hereby, except by
reason of an insurer's assessment of Parent or the conduct of the Business after
the Effective Time.
(p) Pending Transactions. Except for this Agreement and the
transactions contemplated hereby, Parent is not a party to or bound by any
agreement, negotiation, discussion,
37
commitment or undertaking with respect to a merger or consolidation with, or an
acquisition of all or substantially all of the property and assets of, any other
corporation or person or the sale, lease or exchange of all or substantially all
of its properties and assets to any other person.
(q) Claims Against Officers and Directors. To the knowledge of
Parent, there are no pending or threatened claims against any director, officer,
employee or agent of the Company which could give rise to any claim for
indemnification against the Company.
SECTION 3.04 Representations and Warranties of Acquisition. Acquisition
represents and warrants to Holdings and the Company as follows:
(a) Organization and Qualification. Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Acquisition is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on the financial condition, operating
results or business of Acquisition.
(b) Capitalization. The authorized capital stock of Acquisition
consists of 3,000 shares of Common Stock, $.01 par value. As of the date hereof,
100 shares of Common Stock are issued and outstanding, all of which were duly
authorized and validly issued and are fully paid and nonassessable, and all such
shares are owned of record and beneficially by Parent free of all Claims, and no
shares of Common Stock are held in the treasury of Acquisition. Acquisition has
no commitments to issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from Acquisition, any shares of its
capital stock, and no securities or obligations evidencing any such rights are
outstanding.
(c) Authority Relative to Agreement. Acquisition has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by
Acquisition and the consummation by Acquisition of the transactions contemplated
hereby have been duly authorized by the Board of Directors of Acquisition and by
Parent as its sole stockholder, and no other corporate approvals or proceedings
on the part of Acquisition are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Acquisition and constitutes the legal, valid and binding obligation
of Acquisition, enforceable against Acquisition in accordance with its terms
subject to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (b) rules of law governing
specific performance, injunctive relief and other equitable remedies, and (c)
the limitations imposed by public policy on the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
(d) Non-Contravention. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby will not (i) violate or conflict with any provision of the
Certificate of Incorporation or By-Laws of
38
Acquisition or (ii) result in any violation of, conflict with, or default (or an
event which with notice or lapse of time or both would constitute a default) or
loss of a benefit under, or permit the termination of or the acceleration of any
obligation under, any material mortgage, indenture, lease, agreement, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Acquisition or its properties.
(e) Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by
Acquisition in connection with the execution and delivery of this Agreement by
Acquisition or the consummation by Acquisition of the transactions contemplated
hereby, except for (i) compliance by Acquisition with the HSR Act, (ii) the
filing of a certificate of merger with the Secretary of State of the State of
Delaware in accordance with the Delaware GCL, and (iii) any licenses, permits,
franchises or other governmental authorizations pertaining to the Business that
are required as a result of the consummation of the transactions contemplated
hereby.
(f) Other Matters. Acquisition has been formed for the sole purpose
of effecting the Merger and, except as contemplated by this Agreement,
Acquisition has not conducted any business activities and does not have any
material liabilities or obligations.
ARTICLE IV
COVENANTS
SECTION 4.01 Conduct of the Company's Business. The Company covenants and
agrees that, prior to the Effective Time, unless Parent shall otherwise consent
in writing and except as otherwise expressly contemplated by this Agreement or
by any other contract or agreement that the Company may enter into with Parent
and/or Holdings:
(a) the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of
business consistent with past practice and the Company shall use its best
efforts to preserve intact its present business organization, keep
available the services of its current officers and employees, maintain its
assets (other than those permitted to be disposed of hereunder) in good
repair and condition, maintain its books of account and records in the
usual, regular and ordinary manner and preserve its goodwill and ongoing
business;
(b) the Company shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber any property or
assets (including Intellectual Property Rights) of the Company, except
inventory and immaterial assets in the ordinary course of business
consistent with past practice; (ii) amend or propose to amend its
Certificate of Incorporation or By-Laws; (iii) split, combine or
reclassify any outstanding shares of its capital stock, or declare, set
aside or pay any dividend payable in cash, stock, property or otherwise
with respect to such shares (except for any dividends paid in the ordinary
course to the Company); (iv) redeem, purchase, acquire or offer to acquire
(or permit any of its subsidiaries to redeem, purchase, acquire or offer
to acquire) any shares of its capital stock; (v) incorporate or otherwise
form or create any subsidiary; (vi)
39
materially change the Company's equipment or technology; or (vii) enter
into any contract, agreement, commitment or arrangement with respect to
any of the matters set forth in this paragraph (b);
(c) the Company shall not (i) issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of, any additional shares of, or
securities convertible or exchangeable for, or any options, warrants or
rights of any kind to acquire any shares of, its capital stock of any
class or other property or assets; (ii) acquire (by merger, consolidation
or acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof or any material amount of
assets; (iii) incur or guarantee any indebtedness for borrowed money other
than in the ordinary course of business and consistent with past
practices, or refinance any such indebtedness or issue or sell any debt
securities; (iv) enter into or modify any material contract, lease,
agreement or commitment, or permit or perform any act that would cause a
material breach of any such contract, lease, agreement or commitment; (v)
terminate, modify, assign, waive, release or relinquish any material
contract rights or amend any material rights or claims; (vi) discharge or
satisfy any material claim or settle or compromise any material claim,
action, suit or proceeding pending or threatened against the Company (or,
if the Company may be liable or obligated to provide indemnification to
its directors or officers), against the Company's directors or officers,
before any court, governmental agency or arbitrator; (vii) make any loans,
advances or capital contributions to or investments in, any other person,
except as may be required under agreements in effect as of and identified
on Schedule 3.01(u) hereto and upon prior notice to Parent; (viii) alter
through merger, liquidation, reorganization, restructuring or in any other
manner the corporate structure or ownership of the Company; (ix) violate
or fail to perform, in any material respect, any obligation imposed upon
the Company by any applicable laws, orders or decrees, ordinances,
government rules or regulations or conciliation agreements; or (x) to the
extent not described herein, take any action described in Section 3.01(h)
hereof;
(d) the Company shall not grant any increase in the salary or other
compensation of its directors, officers or employees, except reasonable
salary increases for employees or executive officers of the Company, in
the ordinary course of business consistent with past practice, or grant
any bonus to any employee or enter into any employment agreement or make
any loan to or enter into any material transaction of any other nature
with any employee of the Company;
(e) the Company shall not take any action to institute any new
severance or termination pay practices with respect to any directors,
officers or employees of the Company or to increase the benefits payable
under its severance or termination pay practices;
(f) the Company shall not adopt or amend, in any material respect,
any plan for the benefit or welfare of any directors, officers or
employees of the Company, except as contemplated hereby or as may be
required by applicable law or regulation;
(g) the Company shall use its best efforts, to the extent not
prohibited by the foregoing provisions of this Section 4.01, to maintain
its relationships with its suppliers
40
and customers, clients, and others having business dealings with it, and
if and as requested by Parent or Acquisition, (i) the Company shall use
its best efforts to make reasonable arrangements for representatives of
Parent or Acquisition to meet with customers and suppliers of the Company,
and (ii) the Company shall schedule, and the management of the Company
shall participate in, meetings of representatives of Parent or Acquisition
with employees of the Company for purposes of dealing with the transition
issues related to the Merger;
(h) the Company shall provide to Parent a draft of any Federal
income Tax return pertaining only to the Company or material state, local
or foreign Tax return (other than state or local sales and use taxes)
pertaining only to the Company required to be filed on behalf of the
Company between the Effective Date of this Agreement and the Effective
Time at least 15 days prior to the date on which such return is due; and
(i) the Company shall respond to inquiries of and shall consult with
Parent as to the management, Business, and affairs of the Company;
provided, however, that the final decisions as to the conduct of the
management, Business, and affairs of the Company shall remain with the
Company.
SECTION 4.02 Registration Statement; Stockholder Approval; Etc.
(a) Parent, Holdings, and the Company shall, in consultation with
each other, prepare a joint proxy statement pertaining to the Merger and
containing the recommendation of the Board of Directors of each of Parent and
the Company to approve and adopt this Agreement and the Merger as promptly as
reasonably practicable after the date hereof. The Company's proxy or information
statement shall also constitute the prospectus included in the Registration
Statement to be filed by Parent pursuant to Section 4.02(b) hereof (the "Proxy
Statement/Prospectus"). Parent, Holdings, and the Company shall cooperate fully
with each other in the preparation of the Proxy Statement/Prospectus and any
amendments and supplements thereto, and Parent, Holdings, and the Company will
provide any audited and unaudited financial statements that may be required by
the applicable rules of the Securities and Exchange Commission or otherwise to
be included in the Proxy Statement/Prospectus. The Proxy Statement/Prospectus
shall not be distributed, and no amendment or supplement thereto shall be made
by Parent, Holdings, or the Company, without the prior consent of any other
party and its counsel. Each of Parent and the Company shall cause a definitive
Proxy Statement/Prospectus to be distributed to its stockholders entitled to
vote upon the Merger promptly following the effective date of the Registration
Statement.
(b) (i) As promptly as reasonably practicable after the date hereof,
Parent shall prepare and file with the SEC under the Exchange Act and the
Securities Act, a Registration Statement on Form S-4 (the "Registration
Statement") with respect to the approval of the Merger and the issuance of the
shares of Parent Common Stock to be issued in the Merger, and shall use its best
efforts to have the Proxy Statement and Registration Statement declared
effective by the SEC as promptly as practicable. Parent shall also take any
action required to be taken under state blue sky or other securities laws in
connection with the issuance of shares of Parent Common Stock in the Merger.
41
(ii) As soon as reasonably practicable after the effective
date of the Registration Statement, Parent shall take all action necessary,
subject to and in accordance with the Delaware GCL and its Certificate of
Incorporation and By-Laws, to obtain the requisite approval and adoption of this
Agreement and the Merger by the Parent's stockholders at a duly called meeting
pursuant to the Delaware GCL and shall take such other actions as may be
required by applicable law and the applicable rules of the Nasdaq NM. The Board
of Directors of the Parent has determined that the Merger is advisable and in
the best interests of the stockholders of the Parent and shall recommend that
Parent's stockholders vote to approve and adopt this Agreement and the Merger
and any other matters to be submitted to Parent's stockholders in connection
therewith.
(iii) Holdings and the Company shall cooperate fully with
Parent in the preparation of the Proxy Statement/Prospectus and the Registration
Statement and any amendments and supplements thereto and shall furnish Parent
with all information and shall take such other action as Parent may reasonably
request in connection therewith. Holdings and the Company shall provide Parent
with all pro forma financial information required by Regulation S-X to be
included in the Registration Statement or in any other filing that is required
to be made by Parent pursuant to the Securities Act or the Exchange Act in
connection with the Merger. All such pro forma financial information shall be
prepared in accordance with Regulation S-X and shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) As soon as reasonably practicable after the effective date of
the Registration Statement, the Company and Parent shall take all action
necessary, subject to and in accordance with the Delaware GCL and its
Certificate of Incorporation and By-Laws, to obtain the requisite approval and
adoption of this Agreement and the Merger by their respective stockholders at a
duly called meeting or by written consents pursuant to Section 228 of the
Delaware GCL and shall take such other actions as may be required by applicable
law. The Board of Directors of the Company and Parent have each determined that
the Merger is advisable and in the best interests of their respective
stockholders and shall recommend that their respective stockholders vote to
approve and adopt this Agreement and the Merger and any other matters to be
submitted to such stockholders in connection therewith.
(d) Parent shall notify Holdings and the Company of the receipt of
any comments of the SEC with respect to (and of any requests by the SEC for
amendments or supplements to) the Proxy Statement/Prospectus or the Registration
Statement, or for additional information within 24 hours after receipt thereof
from the SEC, and shall promptly supply Holdings and the Company with copies of
all correspondence between Parent (or its representatives) and the SEC (or its
staff) with respect thereto within 24 hours after receipt thereof from the SEC.
If, at any time prior to the approval of the Merger by Parent's or the Company's
stockholders, any event should occur relating to or affecting Holdings, the
Company, Parent or Acquisition, or to their respective officers or directors,
which event should be described in an amendment or supplement to the Proxy
Statement/Prospectus or the Registration Statement, the parties shall promptly
inform one another and shall cooperate in promptly preparing, filing and
clearing with the SEC and, if required by applicable securities laws,
distributing to Parent's or the Company's stockholders, such amendment or
supplement.
42
(e) Parent shall cause the Parent Common Stock to be issued in the
Merger, to be listed on the Nasdaq NM, subject to official notice of issuance.
SECTION 4.03 Access to Information.
(a) Each of Parent, Holdings, and the Company shall, and shall cause
its respective subsidiaries, officers, directors, employees, representatives,
advisors and agents to, afford, from the date hereof to the Effective Time, the
officers, employees, representatives, advisors and agents of the other party
complete access at all reasonable times to its officers, employees, agents,
properties, books, records and workpapers, and shall furnish each other party
all financial, operating and other information and data as Parent, Holdings, or
Company, through its officers, employees or agents, may reasonably request and
shall promptly furnish to the other monthly operating and financial reports in
such form as Parent, Holdings, or the Company shall reasonably request. For each
calendar month that ends between August 1, 1996 through the Closing Date, the
Company will within thirty days after the end of such month prepare and deliver
to Parent unaudited monthly balance sheets and statements of operations for the
Company, that shall fairly present the financial condition and the results of
operations of the Company in all material respects.
(b) The Company, at least three business days prior to the Effective
Time, shall deliver to Parent a list setting forth the names and locations of
each bank or other financial institution at which the Company has an account
(giving the account numbers) or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto, and the names of all persons,
if any, now holding powers of attorney or comparable delegation of authority
from the Company and a summary statement thereof.
(c) Each of Parent, Holdings, and the Company shall, and shall cause
its respective officers, directors, employees, representatives, advisors and
agents to, afford the officers, employees, representatives, advisors and agents
of the other party with access to such information concerning Parent or the
Company as may be necessary for each party to ascertain the accuracy and
completeness of the information supplied by Parent, Holdings, or the Company for
inclusion in any pre-merger notification report filed under the HSR Act (and any
additional information or documentary material supplied in response to any
request pursuant to Section 7A(e) of the HSR Act and the regulations thereunder)
or in the Proxy Statement/Prospectus.
(d) If this Agreement is terminated, each of the parties hereto
shall, and shall cause its officers, employees, representatives, advisors and
agents to, destroy or return to the other party all confidential documents, work
papers and other materials, and all copies thereof, obtained by it or on its
behalf from such other party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution and delivery hereof.
(e) Each of the parties hereto and its officers and employees shall
not disclose or use any information so obtained, except as required by
applicable law or legal process or by any applicable rules or regulations of a
national securities exchange or the NASD upon the advice of counsel, without the
prior written consent of the other party; provided that any such information may
be disclosed to a party's financial advisors, accountants, counsel and other
43
representatives, as may be appropriate or required in connection with the
transactions contemplated hereby, but only if such persons shall be specifically
informed by such party of the confidential nature of such information and agree
to comply with the restrictions contained herein. The agreements contained in
this Section 4.03(e) do not apply to information that (i) is or becomes
generally available to the public other than as a result of a disclosure by a
receiving party or its representatives, (ii) can be demonstrated to have been
known to the receiving party on a non-confidential basis prior to its receipt,
(iii) becomes available to a party on a non-confidential basis from a source not
bound by any duty of confidentiality to the other party or (iv) is independently
developed by a receiving party without reference to any confidential
information.
If any party or any of its respective representatives becomes
required by law (by deposition, interrogatory, request for documents, subpoena,
civil investigative demand, or similar process) or otherwise become required to
disclose any confidential information or material the recipient party will
provide the disclosing party with prompt prior written notice of such
requirement so that the disclosing party may seek a protective order or other
remedy, or waive compliance with the terms of this Agreement. If such protective
order or other remedy is not obtained, or if the disclosing party is required to
waive compliance with the provisions hereof, the recipient party will furnish
only that portion of the confidential information or material which it is
advised by written opinion of counsel is legally required and exercise all
reasonable efforts to obtain assurance that confidential treatment, if
available, will be accorded such confidential information or material.
(f) No investigation pursuant to this Section 4.03 shall affect, add
to, or subtract from any representations or warranties of the parties hereto or
the conditions to the obligations of the parties hereto to effect the Merger.
SECTION 4.04 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Merger and all other transactions contemplated by
this Agreement, including, without limitation, using all reasonable efforts to
obtain all necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to cause the conditions to Closing set forth in
Article V hereof to be promptly fulfilled; provided, that the foregoing shall
not require Parent to agree to make, or to require or permit the Company to
make, or require Holdings to make any divestiture of a significant asset in
order to obtain any waiver, consent or approval.
SECTION 4.05 Inquiries and Negotiations. Neither Holdings, the Company nor
any of their subsidiaries, nor any of their respective affiliates, directors,
officers, employees, representatives, advisors or agents, shall, directly or
indirectly, encourage, solicit or initiate any discussions, submissions of
proposals or offers or negotiations with, or, subject to the fiduciary
obligations of the Board of Directors of the Company and the Board of Directors
of Holdings under applicable law as advised by counsel, participate in any
negotiations or discussions with, or provide any information or data of any
nature whatsoever to, or otherwise cooperate in any other way with, or assist or
participate in, facilitate or encourage any effort or attempt by, any person,
other than Parent and its affiliates, representatives and agents, concerning any
merger,
44
consolidation, sale of substantial assets, sale of shares of capital
stock or other equity securities, recapitalization, debt restructuring or
similar transaction involving the Company, or any division of the Company (such
transactions being hereinafter referred to as "Alternative Transactions").
Holdings and the Company shall immediately notify Parent if any proposal, offer,
inquiry or other contact is received by, any information is requested from, or
any discussions or negotiations are sought to be initiated or continued with,
the Company in respect of an Alternative Transaction, and shall, in any such
notice to Parent, indicate the identity of the offeror and the terms and
conditions of any proposals or offers or the nature of any inquiries or
contacts, and thereafter shall keep Parent informed of the status and terms of
any such proposals or offers and the status of any such discussions or
negotiations. The Company shall not release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party. Nothing herein shall prevent Holdings from participating in any
merger or other business combination that does not involve the transfer of the
Company Common Stock or the Company's assets; provided, however, that any third
party acquiror of Holdings expressly consents to abide by the terms, conditions,
and obligations of this Agreement.
SECTION 4.06 Notification of Certain Matters. Holdings and the Company
shall give prompt notice to Parent and Acquisition, and Parent and Acquisition
shall give prompt notice to Holdings and the Company, of (i) the occurrence, or
failure to occur, of any event that such party believes would cause any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time and (ii) any failure of Holdings, the Company, Parent or
Acquisition, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that failure to
give such notice shall not constitute a waiver of any defense that may be
validly asserted.
SECTION 4.07 Compliance with the Securities Act. Prior to the Effective
Time, the Company shall deliver to Parent a list identifying all persons who
might, in its opinion, be deemed to be "affiliates" of the Company for purposes
of Rule 145 under the Securities Act (the "Affiliates"). The Company shall use
its best efforts to cause each person who is identified as an Affiliate to
deliver to Parent on or prior to the Effective Time a written agreement, in such
form as may be agreed to by the parties, that he will not offer to sell, sell or
otherwise dispose of any of the shares of Parent Common Stock issued to him in
connection with the Merger, except pursuant to an effective registration
statement or in compliance with Rule 145 or pursuant to an exemption from the
registration requirements of the Securities Act. Parent shall be entitled to
place appropriate legends on the certificates evidencing the Parent Common Stock
to be received by Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stock transfer instructions to the transfer agent for Parent
Common Stock, to the effect that the shares received or to be received by such
Affiliate pursuant to this Agreement may only be sold, transferred or otherwise
conveyed, and the holder thereof may only reduce his interest in or risks
relating to such shares, pursuant to an effective registration statement under
the Securities Act or in accordance with the provisions of paragraph (d) of Rule
145 or pursuant to an exemption from registration provided under the Securities
Act. The foregoing restrictions on the transferability of Parent Common Stock
shall apply to all purported sales, transfers and other conveyances of the
shares received or to be received by such Affiliate pursuant to this Agreement
and to all purported reductions in the interest in or risks relating to such
shares, whether or not such
45
Affiliate has exchanged the certificates previously evidencing shares of the
Company's capital stock, into which such shares were converted.
SECTION 4.08 Conduct of Parent's Business. Parent covenants and agrees
that, prior to the Effective Time, unless the Company shall otherwise agree in
writing, or as otherwise expressly contemplated by this Agreement:
(a) the business of Parent and its subsidiaries shall be
conducted only in the ordinary course of business consistent with past
practice;
(b) Parent shall not (i) amend its Certificate of Incorporation
(other than to increase the number of authorized shares of capital stock of
Parent) or (ii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property;
(c) Parent shall not authorize for issuance, issue or sell or agree
to issue or sell any shares of, or rights to acquire or convert into any shares
of, its capital stock, except for (i) the issuance of options or rights pursuant
to existing employee benefit plans or arrangements in a manner and in amounts
consistent with past practice, (ii) the issuance of shares of Parent Common
Stock upon the exercise of options or other rights to purchase Parent Common
Stock outstanding on the Effective Date of this Agreement or upon the exercise
of options or other rights described in the immediately preceding clause (i),
(iii) the issuance of Parent Common Stock pursuant to the agreements set forth
on Schedule 3.03(c), and (iv) the issuance of up to an additional 5,000,000
shares (as may be adjusted from time to time for stock splits or stock
dividends) of Parent Common Stock, or options or rights to purchase such shares
of stock, for any other corporate purpose, including acquisitions; and
(d) neither Parent nor Acquisition shall take any action that would
jeopardize qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
SECTION 4.09 Employment and Severance Liabilities. Holdings covenants and
agrees that it will retain any and all employment and severance liabilities and
obligations for the employees and former employees of the Company specifically
listed on Schedule 4.09 hereof.
SECTION 4.10 Contractual Obligations. Holdings covenants and agrees that
it will honor and comply in all material respects with any and all obligations
and/or liabilities that it is contractually bound to, or otherwise obligated for
under the contracts, agreements, and arrangements listed on Schedule 4.10 hereof
insofar as they involve the Business of the Company.
SECTION 4.11 Indemnity. Parent agrees to defend, indemnify and hold
Holdings harmless from and against, any and all suits, claims, demands, actions,
causes of action, loss, damages, liabilities, cost and expense (including but
not limited to reasonably attorneys' fees and court costs and costs of other
professionals) arising in any manner out of any failure of Parent or the Company
after the Effective Time, to comply with or perform any contractual or other
obligation to which the Company is now, or hereafter becomes, bound or
obligated.
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SECTION 4.12 Agreements Executed. Concurrently with their execution of
this Agreement, the applicable parties hereto shall execute and deliver to each
other: (a) that certain Services and License Agreement by and among Parent,
Holdings and the Company, a copy of which is attached hereto as Exhibit B and
incorporated herein by reference (the "Services and License Agreement"); (b) an
Assignment and License Agreement by and between Holdings and the Company which
is attached hereto as Exhibit C and incorporated herein by reference; (c) a
Stock Restriction Agreement, which is attached hereto as Exhibit D and
incorporated herein by reference.
SECTION 4.13 Stockholder Agreements and Proxies. Xxxxx X. Xxxxx and Xxxx
X. Xxxxxxx shall, concurrently with the execution of this Agreement by Holdings
and the Company, each have executed and delivered to Holdings (i) a Stockholder
Agreement and (ii) an Irrevocable Proxy, copies of which are attached hereto as
Exhibit E and incorporated herein by reference. Parent shall use its best
efforts to cause Tribune Company to also execute and deliver such a Stockholder
Agreement and Irrevocable Proxy as soon as practicable.
SECTION 4.14 Revenue Make-Up.
(a) As soon as reasonably practicable after July 31, 1997, Parent
shall deliver to Holdings the Company's unaudited statement of operations for
the twelve-month period beginning on August 1, 1996 and ending on July 31, 1997
(such twelve-month period being hereinafter called the "Revenue Period"),
prepared by Parent's auditors in accordance with generally accepted accounting
principles consistently applied and consistent with the Company's revenue
recognition policies for its fiscal year ended July 31, 1996 (such unaudited
statement of operations is hereinafter called the "Revenue Statement"). As used
herein, the term "Gross Revenues" means the Company's total gross revenues
derived during the Revenue Period determined in accordance with generally
accepted accounting principles consistently applied and consistent with the
Company's revenue recognition policies for its fiscal year ended July 31, 1996.
The Company and Parent shall maintain complete and accurate books and records
relating to the determination of Gross Revenues.
(b) If the Company's Gross Revenues are less than Forty-Six Million
Dollars ($46,000,000), then, provided that (i) Parent and the Company have, at
all times after the Effective Time, used their respective good faith efforts to
maximize the Gross Revenues of the Company during the Revenue Period; (ii) the
Company has not discontinued or disposed of any material portion of its business
or assets (as such exist immediately prior to the Effective Time); (iii) Parent
has fully and timely paid to Holdings all fees required to be paid to Holdings
under Section 8.1.5 of the Services and License Agreement; and (iv) Holdings has
received from the Company the Revenue Statement stating that the Company's Gross
Revenues for the Revenue Period are less than Forty-Six Million Dollars
($46,000,000), Holdings shall, within sixty-five (65) days after its receipt of
the Revenue Statement, pay to Parent, in cash, a sum equal to Forty-Six Million
Dollars ($46,000,000) minus the amount of the Gross Revenues (the "Revenue
Make-Up Payment"), subject to the provisions of paragraph (c) below.
(c) Within thirty (30) days after it receives the Revenue Statement,
Holdings may request an audit of the Company's and Parent's records pertaining
to the determination of the Gross Revenues by Holdings' auditors (the "Audit")
by giving the Company and Parent written
47
notice (the "Audit Notice"). Upon timely submission of the Audit Notice,
Holdings' auditor may perform the Audit during business hours and the Company
and Parent shall cooperate in good faith in facilitating such Audit and promptly
making available all records necessary to enable Holdings' Auditor to perform
the Audit. The Audit shall be completed within sixty (60) days after Holdings
receives the Revenue Statement (subject to potential extension due to failure by
the Company or Parent to cooperate and provide records as required above). If
the Audit reveals that the Gross Revenues are higher than indicated in the
Revenue Statement, then the amount of the Revenue Make-Up Payment shall be
reduced to the sum equal to Forty-Six Million Dollars ($46,000,000) minus the
Gross Revenues as determined by the Audit.
SECTION 4.15 Board Visitation Rights. So long as Holdings holds no less
than ten percent (10%) of the outstanding shares of the Parent Common Stock,
Parent will permit one (1) representative of Holdings (the "Designee") to attend
all meetings of Parent's Board of Directors in a non-voting observer capacity.
Parent will also timely provide such Designee with copies of all notices,
minutes and other materials that it provides to its directors with respect to
such meetings. Holdings may change its Designee from time to time with the prior
written consent of Parent, which will not unreasonably be withheld. Holdings'
initial designee will be Xxxx X. X. Xxxx. Nothing contained herein shall require
Parent to permit the Designee to have access to information, including Board
minutes, or to attend or to participate in meetings of the Board of Directors
which, in the reasonable judgment of Parent's Board of Directors, pertains to
matters with respect to which Holdings' interests may conflict with those of
Parent prior to public disclosure by Parent of such matters or which the
Parent's Board of Directors deems the presence of such Designee would unduly
prohibit the full discussion of any matter before Parent's Board of Directors.
In addition, the Designee would be required to first sign a reasonable
nondisclosure and confidentiality agreement as appropriate for a public company
and which would impose on the Designee the same confidentiality obligations he
would have if he were in fact a member of Parent's Board of Directors.
SECTION 4.16 Reimbursement for Certain Charges and Costs.
(a) Holdings covenants and agrees that it will reimburse Parent for
any charges, costs, or penalties associated with, or arising out of matters
listed on Schedule 4.16.
(b) Reimbursements made pursuant to this Section 4.16 shall be paid
in cash and shall be in addition to, not in lieu of, and not set off against any
right of payment, by indemnification or otherwise, or Merger Consideration
Adjustment, required by any other provision of this Agreement.
(c) Prior to any obligation on Holdings to reimburse Parent, Parent
must give notice of such right to reimbursement within six (6) months after the
Effective Time (except for Item G on Schedule 4.16 which shall be within
eighteen (18) months after the Effective Date of this Agreement) and shall
provide Holdings with reasonable documentation of Parent's reimbursement claim.
SECTION 4.17 Debt. Holdings covenants and agrees that, at Closing, the
Company will have no debt and will have $3,000,000 in cash.
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ARTICLE V
CONDITIONS TO THE MERGER
SECTION 5.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) this Agreement and the Merger shall have been approved and
adopted by the requisite vote of (i) the sole stockholder of the Company and
(ii) the stockholders of Parent;
(b) the expiration or earlier termination of any waiting period
under the HSR Act shall have occurred;
(c) no preliminary or permanent injunction or other order, decree or
ruling issued by any court of competent jurisdiction nor any statute, rule,
regulation or order entered, promulgated or enacted by any governmental,
regulatory or administrative agency or authority shall be in effect that would
prevent the consummation of the Merger as contemplated hereby;
(d) the Registration Statement shall have been declared effective
and no stop order with respect thereto shall be in effect at the Effective Time;
(e) the execution and delivery by Parent and Holdings of an escrow
agreement (the "Escrow Agreement"), a copy of which is attached hereto as
Exhibit F and incorporated herein by reference; and
(f) the execution and delivery by Parent and Holdings of a
Registration Rights Agreement, which is attached hereto as Exhibit G and
incorporated herein by reference.
SECTION 5.02 Conditions to the Obligation of Holdings and the Company to
Effect the Merger. The obligation of Holdings and the Company to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
(a) Parent and Acquisition shall have performed and complied in all
material respects with all their obligations, covenants, and agreements required
to be performed and complied with by them under this Agreement at or prior to
the Effective Time;
(b) the representations and warranties made by Parent and/or
Acquisition in Sections 3.03 and 3.04 hereof (as qualified by the schedules
hereto and the Parent Disclosure Letter), shall not, as of the Effective Date of
this Agreement, have been incorrect, untrue or false in any respect that failed
to correctly state facts in existence on the Effective Date of this Agreement
that constituted a Parent Material Adverse Effect on the Effective Date of this
Agreement;
(c) Holdings and the Company shall have received a certificate from
the Chief Executive Officer of Parent and Acquisition, dated as of the Effective
Time, to the effect that the conditions set forth in paragraphs (a) and (b)
above have been satisfied;
49
(d) the shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing on the Nasdaq NM, subject to official
notice of issuance; and
(e) Holdings and the Company shall have received the opinion of
Porter, Wright, Xxxxxx & Xxxxxx, counsel to Parent and Acquisition, with respect
to the matters set forth on Exhibit H and incorporated herein by reference,
subject to appropriate limitations and qualifications.
SECTION 5.03 Conditions to the Obligation of Parent and Acquisition to
Effect the Merger. The obligation of Parent and Acquisition to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) Holdings and the Company shall have performed and complied in
all material respects with all their obligations, covenants, and agreements
required to be performed and complied with by them under this Agreement at or
prior to the Effective Time;
(b) the representations and warranties made by Holdings and/or the
Company in Sections 3.01 and 3.02 hereof (as qualified by the schedules hereto
and the Holdings/Company Disclosure Letter), shall not, as of the Effective Date
of this Agreement, have been incorrect, untrue or false in any respect that
failed to correctly state facts in existence on the Effective Date of this
Agreement that constituted a Company Material Adverse Effect as of the Effective
Date of this Agreement;
(c) Parent shall have received a certificate from the Chief
Executive Officer and the Chief Financial Officer of Holdings and the Company,
dated as of the Effective Time, to the effect that the conditions set forth in
paragraphs (a) and (b) above have been satisfied;
(d) Parent shall have received a certificate from the Chief
Executive Officer and the Chief Financial Officer of Holdings and the Company,
dated as of the Effective Time, to the effect that the Company has not incurred,
realized, or otherwise experienced a Material Adverse Change; provided, however;
the existence of such Material Adverse Change will not entitle Parent to
terminate this Agreement pursuant to Article VI;
(e) Parent shall have received the consents described in
Schedule 3.03(f); and
(f) Parent and Acquisition shall have received the opinion of
Fenwick & West LLP, counsel to Holdings and the Company, with respect to the
matters set forth on Exhibit I and incorporated herein by reference, subject to
appropriate limitations and qualifications.
ARTICLE VI
TERMINATION AND ABANDONMENT
SECTION 6.01 Termination and Abandonment. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval by the stockholders of Parent and the Company:
50
(a) by mutual written consent approved by the Boards of
Directors of Parent, Holdings, and the Company;
(b) by Holdings or the Company if the conditions set forth in
Sections 5.01 or 5.02 shall not have been complied with, waived or performed and
such noncompliance or nonperformance shall not have been cured or eliminated (or
by its nature cannot be cured or eliminated), by Parent and Acquisition on or
before March 31, 1997; or
(c) by Holdings or the Company, if Parent's Board of Directors fails
to recommend approval of this Agreement or the Merger to Parent's stockholders
or recommends against approval of this Agreement or the Merger to Parent's
stockholders; or
(d) by Parent or Acquisition, if the conditions set forth in
Sections 5.01 or 5.03 shall not have been complied with, waived or performed and
such noncompliance or nonperformance shall not have been cured or eliminated (or
by its nature cannot be cured or eliminated), by Holdings and the Company on or
before March 31, 1997; or
(e) by Parent, if the representations and warranties made by
Holdings and/or the Company in Sections 3.01 and 3.02 hereof (as qualified by
the schedules hereto and the Holdings/Company Disclosure Letter), shall, as of
the Effective Date of this Agreement, have been incorrect, untrue or false in
any respect that failed to correctly state facts in existence on the Effective
Date of this Agreement that constituted a Company Material Adverse Effect on the
Effective Date of this Agreement; or
(f) by Holdings or the Company, if the representations and
warranties made by Parent and/or Acquisition in Sections 3.03 and 3.04 hereof
(as qualified by the schedules hereto and the Parent Disclosure Letter), shall,
as of the Effective Date of this Agreement, have been incorrect, untrue or false
in any respect that failed to correctly state facts in existence on the
Effective Date of this Agreement that constituted a Parent Material Adverse
Effect on the Effective Date of this Agreement.
SECTION 6.02 Effect of Termination. In the event of the termination of
this Agreement and the abandonment of the Merger pursuant to Section 6.01, this
Agreement shall thereafter become void and have no effect, and no party hereto
shall have any liability to any other party hereto or its stockholders or
directors or officers on account of such termination, and each party shall be
responsible for its own expenses, except as follows: (i) the obligations imposed
by Sections 4.03(d) and 4.03(e) hereof shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any willful breach hereof.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Indemnification by Holdings. Subject to the terms,
conditions, and limitations set forth herein, if the Merger is consummated,
Holdings agrees to indemnify Parent against, and agrees to hold Parent harmless
from, any and all actions, suits, losses, costs, claims,
51
damages and expenses (including reasonable attorneys' fees) (the "Losses"),
incurred or suffered by them relating to or arising out of or in connection with
any material breach of, or any material misrepresentation or inaccuracy in, any
representation or warranty made by Holdings and/or the Company in Section 3.01
or Section 3.02 of this Agreement (as qualified by the Holdings/Company
Disclosure Letter and the schedules hereto) where such material breach or
material misrepresentation or inaccuracy existed as of the Effective Date of
this Agreement; provided, however, that the amount of Losses recoverable under
the indemnity provisions of this Article shall be reduced, dollar-for-dollar, by
the amount of any insurance proceeds paid to Parent and by the amount of tax
benefits realized by Parent in respect of such Losses. In addition,
notwithstanding anything herein to the contrary, the term "Losses" shall not
include, and Parent shall not be entitled to indemnification for, any actions,
suits, losses, costs, claims, damages and expenses (including reasonable
attorneys' fees), to the extent that Parent has recovered or been compensated or
reimbursed therefor by virtue of (a) the Merger Consideration Adjustment
pursuant to Section 2.02 hereof, or (b) a Revenue Makeup Payment made pursuant
to Section 4.14 hereof, or (c) a payment made pursuant to Section 4.16 hereof,
with the purpose and intent that Parent shall not receive a redundant or double
recovery of any Losses.
SECTION 7.02 Claims. The provisions of this Section shall be subject to
Section 7.03. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement, Parent shall promptly give
written notice to Holdings of such claim and the amount Parent believes it will
be entitled to receive hereunder in indemnification from Holdings under this
Article VII in respect of such claim; provided, that the failure of Parent to
promptly give such notice shall not relieve Holdings of its obligations except
to the extent (if any) that Holdings shall have been prejudiced thereby. If
Holdings does not object in writing to such indemnification claim within 30 days
of receiving written notice thereof, Parent shall be entitled to recover, on the
60th day after such written notice was given, from Holdings the amount of such
claim, and no later objection by Holdings shall be permitted; if Holdings agrees
that it has an indemnification obligation but objects that it is obligated to
pay only a lesser amount, Parent shall nevertheless be entitled to recover from
Holdings, on the 60th day after such notice was given, the lesser amount,
without prejudice to Parent's claim for the difference. In addition to the
amounts recoverable by Parent from Holdings pursuant to the foregoing
provisions, Parent shall also be entitled to recover from Holdings interest on
such amounts at the rate equal to the published prime rate at The Chase
Manhattan Bank, New York, New York, from, and including, the 60th day after such
notice of an indemnification claim is given to, but not including, the date such
recovery is actually made by Parent.
SECTION 7.03 Notice and Defense of Third Party Claims. Parent shall give
written notice as promptly as is reasonably practicable to Holdings of the
assertion of any claim, or the commencement of any suit, action or proceeding,
by any person or entity not a party hereto in respect of which indemnity may be
sought under Article VII of this Agreement ("Third Party Claim"); provided that
the failure of Parent to promptly give such notice shall not relieve Holdings of
its obligations except to the extent (if any) that Holdings shall have been
prejudiced thereby. If Parent does not promptly elect to defend or contest the
Third
52
Party Claim, then Holdings, at its sole option (i) shall be free to assume and
control the prosecution or defense of any such Third Party Claim in a reasonable
manner, (ii) may take all reasonably necessary steps to contest the Third Party
Claim or to prosecute such Third Party Claim to conclusion or settlement
satisfactory to Holdings, (iii) shall notify Parent of the progress of any such
Third Party Claim, (iv) shall permit Parent, at the sole cost of such Parent, to
participate in such prosecution or defense, and (v) shall provide Parent with
reasonable access to all relevant information and documentation relating to the
Third Party Claim and Holdings' prosecution or defense thereof. In any case, the
party not in control of the defense or prosecution of the Third Party Claim
shall cooperate with the other party in the conduct of the prosecution or
defense of such Third Party Claim. If, however, Parent reasonably determines in
its judgment that representation by Holdings' counsel of both Holdings and
Parent would present such counsel with a conflict of interest, then Parent may
employ separate counsel to represent or defend it in any such claim, action,
suit or proceeding and Holdings shall pay the fees and disbursements of such
separate counsel. Whether or not Holdings chooses to defend or prosecute any
such claim, suit, action or proceeding, all of the parties hereto shall
cooperate in the defense or prosecution thereof.
SECTION 7.04 Settlement or Compromise. Neither party shall compromise or
settle any Third Party Claim without the prior written consent of either
Holdings (if Parent controls and defends such Third Party Claim) or Parent (if
Holdings controls and defends such Third Party Claim), such consent not to be
unreasonably withheld (provided, that, in the case of Parent, such consent shall
be deemed to be unreasonably withheld if Parent will, as part of the terms of
such compromise or settlement, be fully released of liability arising from such
Third Party Claim). The person controlling the defense of such Third Party Claim
will give the other person at least 20 days' notice of any proposed settlement
or compromise of any Third Party Claim for which it is controlling the defense.
SECTION 7.05. Limitations on Indemnification.
(a) Basket. Any indemnification pursuant to this Agreement shall be
subject to the requirement that no claim may be made until the aggregate amount
of Losses exceeds $500,000, after which time claims for indemnification may be
made for the aggregate amount of all Losses, subject to the terms, conditions
and limitations set forth herein.
(b) Maximum Liability. Holdings' total and maximum aggregate
lifetime liability under this Article VII shall not exceed a dollar amount equal
to thirty-five percent (35%) of the Merger Consideration, as adjusted pursuant
to Section 2.02 hereof, multiplied by the per share closing price of Parent
Common Stock as reported on the Nasdaq NM for the five (5) trading days
immediately preceding the Effective Date of this Agreement.
(c) Deadline for Indemnity Claims. Except as otherwise provided in
Section 7.01, Holdings shall have no liability with respect to any matter or
claim for indemnification hereunder, unless Parent notifies Holdings in
accordance with this Article VII no later than the close of business on the
first (1st) anniversary of the Effective Time of a claim for indemnification
hereunder; provided, however, that (i) claims of indemnification for Loss
suffered as a result of a material breach of the representations and warranties
under Sections 3.01(p) and (r) hereof (the "Tax Warranties") shall survive until
six (6) months after the expiration of the applicable statute of limitations
with respect to Taxes, including any extensions thereof; and (ii) such
limitation shall not apply in any matter involving intentional misrepresentation
or fraud on the part of Holdings.
53
ARTICLE VIII
NONCOMPETITION AGREEMENT
SECTION 8.01 Certain Acknowledgments. Holdings expressly acknowledges that
the noncompetition agreements set forth in this Article VIII are a material part
of this Agreement and are an integral part of the obligations of Holdings
hereunder; and the noncompetition agreements set forth in this Article VIII are
reasonable and necessary to protect the legitimate business interests of Parent
following the consummation of the Merger.
SECTION 8.02 Noncompetition Agreement. Except as provided in Section 8.03
below, during the period beginning on the Effective Time and ending on the fifth
(5th) anniversary of the Effective Time, except with Parent's prior written
consent, Holdings shall not, directly or indirectly, own or operate a back-end
computer-based system for processing consumer or small business remote payment
instructions in order to generate remittance information and payment (via remote
check printing or electronic funds transfer) to merchants in the United States
of America (the "Competing Business"). The parties agree, without limitation,
that Holdings shall not be deemed to be engaged in the Competing Business by
virtue of, nor shall Holdings be at any time prohibited from: (a) developing and
providing client-software or web/Internet-based applications which create and
transmit payment instructions or remittance information to third parties; or (b)
developing and providing client-software or web/Internet-based applications
which facilitate the on-line purchase of goods or services.
SECTION 8.03 Exception. The ownership by Holdings or any subsidiary or
affiliate controlled by Holdings of not more than five percent in the aggregate
of the outstanding securities of any public company shall not, by itself,
constitute a breach of the noncompetition agreement in Section 8.02, even if
such public company competes with Parent or engages in the Competing Business.
SECTION 8.04 No Objection or Defense. Holdings expressly waives any
objection to or defense regarding the scope, duration or geographic area of the
restriction on competition set forth in this Article VIII.
SECTION 8.05 Enforcement of Noncompetition Agreement. Holdings expressly
acknowledges that it would be extremely difficult to measure the damage that
might result form any breach of the noncompetition agreements in this Article
VIII, and that any such breach will result in irreparable injury to Parent for
which money damages could not adequately compensate. If a breach of the
noncompetition agreements in this Article VIII occurs, then Parent shall be
entitled, in addition to all other rights or remedies that it may have at law or
in equity. to have an injunction issued by any competent court enjoining and
restraining Holdings and all other persons involved therein from continuing such
breach. The existence of any claim or cause of action that Holdings or any such
other person may have against Parent shall not constitute a defense or bar to
the enforcement of any of the noncompetition agreements under this Article VIII.
If Parent must resort to litigation to enforce any of the noncompetition
agreements under this Article VIII that has a fixed term, then such term shall
be extended for a period of time equal to the period during which a breach of
such agreement was occurring, beginning on the date of a
54
final court order (without further right of appeal) holding that such breach
occurred or, if later, the last day of the original fixed term of such
agreement.
SECTION 8.06 Early Termination of Noncompetition Agreement. In the event
that Holdings is merged or consolidated with, or a majority of Holdings' voting
stock or all or substantially all of Holdings' assets are acquired by, a person,
corporation or other party who, at the time of such merger, consolidation, stock
or asset acquisition, is engaged in the Competing Business, then upon the
consummation of such merger, consolidation, sale, acquisition or similar
business combination, all Holdings' obligations, duties and covenants under this
Article VIII shall automatically immediately terminate and expire.
SECTION 8.07 Effect on Acquiror. In the event that Holdings is merged or
consolidated with, or a majority of Holdings' voting stock or all or
substantially all of Holdings' assets are acquired by, a person, corporation or
other party (the "Acquiror"), and the provisions of Section 8.06 do not apply,
then the Acquiror shall not be bound by or obligated under any of Holdings'
obligations or duties under this Article VIII; except that such Acquiror may not
utilize technology or personnel of Holdings to engage in the Competing Business
so long as Holdings' obligations, duties and covenants under this Article VIII
remain in effect.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties. Except as
otherwise specified, the representations and warranties of Holdings and the
Company contained herein shall survive the Closing for a period expiring at the
close of business on the first (1st) anniversary of the Effective Time;
provided, however, that the Tax Warranties shall survive until six (6) months
after the expiration of the applicable statute of limitations with respect to
Taxes, including any extensions thereof.
SECTION 9.02 Interpretation of Representations and Warranties. Each
representation and warranty made in this Agreement or pursuant hereto is
independent of all other representations and warranties made by the same
parties, whether or not covering related or similar matters, and must be
independently and separately satisfied. Exceptions or qualifications to any such
representation or warranty shall qualify, and shall be exceptions to, any other
representation or warranty.
SECTION 9.03 Reliance by Parent and Acquisition. Notwithstanding the right
of Parent and Acquisition to investigate the business, assets, and financial
condition of Holdings and/or the Company, and notwithstanding any knowledge
determinable by Parent or Acquisition as a result of such investigation, Parent
and Acquisition have the unqualified right to rely upon, and have relied upon,
each of the representations and warranties made by Holdings and/or the Company
in this Agreement or pursuant hereto, as qualified by the Holdings/Company
Disclosure Letter and the schedules hereto, except to the extent that Parent or
Acquisition had actual knowledge to the contrary at the Effective Date of this
Agreement.
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SECTION 9.04 Expenses, Etc. Whether or not the transactions contemplated
by this Agreement are consummated, neither Holdings and the Company, on the one
hand, and Parent and Acquisition, on the other hand, shall have any obligation
to pay any of the fees and expenses of the other incident to the negotiation,
preparation and execution of this Agreement, including the fees and expenses of
counsel, accountants, investment bankers and other experts and Parent shall pay
all such fees and expenses incurred by Acquisition. Holdings and the Company, on
the one hand, and Parent and Acquisition, on the other hand, shall indemnify the
other and hold it harmless from and against any claims for finders' fees or
brokerage commissions in relation to or in connection with such transactions as
a result of any agreement or understanding between such indemnifying party and
any third party. The Company represents that, in connection with the
transactions contemplated by this Agreement, the Company has committed to pay
only the fees and expenses set forth on Schedule 9.04 hereto.
SECTION 9.05 Publicity; Confidentiality. Holdings, the Company, and Parent
agree that this Agreement and the exchange of information pursuant thereto is
confidential and they will not disclose or issue any press release or make any
other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party, which will not
be unreasonably withheld, except that Holdings, the Company, or Parent may make
such public disclosure that it believes in good faith to be required by law or
any applicable rules and regulations of a national securities exchange or the
NASD (in which event such party shall consult with the other prior to making
such disclosure).
SECTION 9.06 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 9.07 Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, and shall be deemed given upon receipt, as
follows:
If to Parent to:
CHECKFREE CORPORATION
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxx X. Xxxxx
Chairman
with copies to:
CHECKFREE CORPORATION
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopy Number: (000) 000-0000
56
Attention: Xxxxxxx X. Xxxxxxx
General Counsel
and
PORTER, WRIGHT, XXXXXX & XXXXXX
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
If to Holdings and/or the Company, to:
INTUIT INC.
0000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx,
Executive Vice President
with a copies to:
INTUIT INC.
0000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxxxx Xxxxxxxxx, Esq.
General Counsel
and
FENWICK & WEST LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 9.08 Waivers. Holdings and the Company, on the one hand, and
Parent and Acquisition, on the other hand, may, by written notice to the other,
(i) extend the time for the performance of any of the obligations or other
actions of the other under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement; (iii) waive compliance with any
of the conditions of the other contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding
57
sentence, no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 9.09 Amendments, Supplements, Etc. At any time, this Agreement may
be amended or supplemented by such additional agreements, articles or
certificates, as may be determined by the parties hereto to be necessary,
desirable or expedient to further the purposes of this Agreement, or to clarify
the intention of the parties hereto, or to add to or modify the covenants, terms
or conditions hereof or to effect or facilitate any governmental approval or
acceptance of this Agreement or to effect or facilitate the filing or recording
of this Agreement or the consummation of any of the transactions contemplated
hereby. Any such instrument must be in writing and signed by all of the parties
hereto.
SECTION 9.10 Entire Agreement. This Agreement and its schedules and
exhibits, and the documents to be executed or delivered at the Effective Time in
connection herewith, constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by any party that is not embodied in this
Agreement or such other documents, and none of the parties shall be bound by, or
be liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein.
SECTION 9.11 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
SECTION 9.12 Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Except for the provisions of Article VII hereof, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 9.13 Assignability. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto.
SECTION 9.14 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
SECTION 9.15 Variation and Amendment. This Agreement may be varied or
amended at any time before or after the approval and adoption of this Agreement
by the stockholders of Parent and the Company by action of the respective Boards
of Directors of Holdings, the
58
Company, Parent, and Acquisition, without action by the stockholders thereof,
provided that after approval and adoption of this Agreement by Parent's
stockholders no such variance or amendment shall, without consent of such
stockholders, increase the consideration that the holders of the capital stock
of the Company shall be entitled to receive upon the Effective Time pursuant to
Section 2.01 hereof.
59
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
CHECKFREE CORPORATION
By: /s/ Xxxxx X. Xxxxx
---------------------
Xxxxx X. Xxxxx, President
CHECKFREE ACQUISITION CORPORATION II
By: /s/ Xxxxx X. Xxxxx
--------------------
Xxxxx X. Xxxxx, President
INTUIT INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------
Xxxxx X. Xxxxxx, Senior Vice President
INTUIT SERVICES CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxxxxx X. Xxxxxxxxx, Secretary
