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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 31,
2001, by and among PLATO LEARNING, INC., a Delaware corporation ("Parent"), WILC
ACQUISITION CORPORATION, a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and WASATCH INTERACTIVE LEARNING CORPORATION, a
Washington corporation (the "Company"). Parent, Merger Sub and the Company are
referred to collectively herein as the "Parties".
RECITALS
WHEREAS, the Board of Directors of each of Parent and the Company have
determined that it is in the best interests of each corporation and their
respective stockholders that the parties consummate the business combination
transaction provided for herein in which Merger Sub will merge with and into the
Company (the "Merger") and, in furtherance thereof, have approved this
Agreement, the Merger and the transactions contemplated by this Agreement and
declared the Merger advisable;
WHEREAS, pursuant to the Merger, the issued and outstanding shares of
common stock of the Company shall be converted into shares of common stock of
Parent at the rate determined herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder; and
WHEREAS, in connection with and immediately prior to the execution and
delivery of this Agreement, and as a condition to Parent's willingness to enter
into this Agreement, certain holders of Company Shares (as hereafter defined)
are each entering into a stockholder voting agreement in the form attached as
Exhibit A hereto (the "Voting Agreement").
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law, as
amended (the "DGCL"), and the Washington Business Corporation Act, as amended
(the "WBCA"), at the Effective Time, Merger Sub shall be merged with and into
the Company, the separate corporate existence of Merger Sub shall thereupon
cease and the Company shall continue as the surviving corporation and shall
succeed to and assume all the rights and obligations of Merger Sub in accordance
with the DGCL and the WBCA. The Company, as the surviving corporation after the
consummation of the Merger, is sometimes hereinafter referred to as the
"Surviving Corporation."
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to Article
VIII, the closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
local time, at the offices of Winston & Xxxxxx, 00 X. Xxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxx, on the first business day after all of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date) to
the obligations of the Parties to consummate the Merger as set forth in Article
VII have been satisfied or waived (subject to applicable law), or such other
date, time or place as is agreed to in writing by the Parties (the actual time
and date of the Closing being referred to herein as, the "Closing Date").
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1.3 Effective Time. Subject to the provisions of this Agreement, the
Parties shall cause the Merger to be consummated on the close of business on the
Closing Date by filing (i) the certificate of merger of Merger Sub and the
Company with the Secretary of State of the State of Delaware (the "Delaware
Certificate of Merger") in such form as required by, and executed in accordance
with, the relevant provisions of the DGLC and (ii) the articles of merger of
Merger Sub and the Company with the Secretary of State of the State of
Washington (the "Washington Certificate of Merger," and together with the
Delaware Certificate of Merger, the "Certificate of Mergers") in such form as
required by, and executed in accordance with, the relevant provisions of the
WBCA, each as soon as practicable on or before the Closing Date. The Merger
shall become effective at the close of business on the Closing Date or, if
later, such time as the Certificate of Mergers are duly filed with the Secretary
of State of Delaware and the Secretary of State of the State of Washington, as
the case may be, or at such subsequent date or time as the Parties shall agree
and specify in the Certificate of Mergers (the date and time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
1.4 Effect of the Merger. At and after the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the DGCL and WBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
ARTICLE II
CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION
2.1 Certificate of Incorporation; Name. At and after the Effective Time,
the articles of incorporation of the Merger Sub shall be the articles of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
2.2 Bylaws. At the Effective Time, the bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable law.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION AND PARENT
3.1 Directors of the Surviving Corporation. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, the directors of Merger Sub as of the Effective Time will
be the directors of the Surviving Corporation.
3.2 Officers of the Surviving Corporation. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, the officers of the Merger Sub as of the Effective Time
will be the officers of the Surviving Corporation.
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ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 Share Consideration for the Merger; Conversion or Cancellation of
Shares in the Merger. At the Effective Time, the manner of converting or
canceling shares of the Company and Parent shall be as follows:
(a) Conversion of Company Stock. Each share of common stock, $0.0001
par value of the Company ("Company Shares") issued and outstanding
immediately prior to the Effective Time (excluding any Company Shares
described in Section 4.1(b)), shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted automatically
into the right to receive an aggregate amount (the "Exchange Ratio") of
validly issued, fully paid and non-assessable shares of common stock, $0.01
par value, of Parent (collectively, "Parent Shares") equal to (i) (A)
12,000,000 divided by (B) the Parent Share Market Value (as hereafter
defined) divided by (ii) the aggregate number of issued and outstanding
Company Shares immediately prior to the Effective Time; provided, that
fractional Parent Shares shall be paid for in accordance with this Section
4.1(a) and Section 4.3. All Company Shares to be converted into Parent
Shares pursuant to this Section 4.1(a) shall, by virtue of the Merger and
without any action on the part of the holders thereof, cease to be
outstanding, be canceled and cease to exist, and each holder of a
certificate representing any such Company Shares shall thereafter cease to
have any rights with respect to such Company Shares, except the right to
receive for each of the Company Shares, upon the surrender of such
certificate in accordance with Section 4.2, the number of Parent Shares
specified above and cash in lieu of fractional shares in accordance with
the further provisions contained in Section 4.3.
(b) Cancellation of Parent Owned and Treasury Stock. All of the
Company Shares that are owned by Parent, any direct or indirect
wholly-owned subsidiary of Parent or by the Company as treasury stock
shall, by virtue of the Merger, cease to be outstanding and shall be
canceled and retired and no Parent Shares or other consideration shall be
delivered in exchange therefor.
(c) Stock of Merger Sub. Each share of common stock, $0.01 par value,
of Merger Sub issued and outstanding immediately prior to the Effective
Time, shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted automatically into and exchanged for one
(1) validly issued, fully paid and nonassessable share of common stock,
$0.01 par value, of the Surviving Corporation. Each stock certificate
representing any shares of Merger Sub shall continue to represent ownership
of such shares of capital stock of the Surviving Corporation.
(d) Outstanding Warrants. Each outstanding warrant to purchase
Company Shares (each, a "Company Warrant") prior to the Effective Time and
which remains outstanding immediately prior to the Effective Time shall
cease to represent a right to acquire Company Shares and shall be converted
automatically, at the Effective Time (in accordance with the further
provisions contained in Section 6.19), into and represent a warrant to
purchase, on the same terms and conditions as were applicable under the
Company Warrant (taking into account any changes thereto), Parent Shares
("Substitute Warrants"), and Parent shall assume each such Substitute
Warrant subject to the terms of the agreements evidencing grants thereunder
(the "Company Warrant Agreements"), provided, however, that from and after
the Effective Time: (i) the number of Parent Shares purchasable upon
exercise of the Substitute Warrant shall be equal to the number of Parent
Shares that were purchasable under the Substitute Warrant immediately prior
to the Effective Time multiplied by the Exchange Ratio, rounded down to the
nearest whole share, and (ii) the per share exercise price under each
Substitute Warrant shall be
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adjusted by dividing the per share exercise price of each Substitute
Warrant by the Exchange Ratio, rounded up to the nearest cent. The terms of
each Substitute Warrant shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock
dividend, recapitalization or other similar transaction with respect to
Parent Shares subsequent to the Effective Time.
(e) Certain Adjustments. If, between the date of this Agreement and
the Effective Time, the outstanding Company Shares or Parent Shares shall
have been changed into a different number of shares or different class by
reason of any reclassification, recapitalization, stock split, split-up,
combination or exchange of shares or a stock dividend or dividend payable
in any other securities shall be declared with a record date within such
period, or any similar event shall have occurred, the Exchange Ratio shall
be appropriately adjusted to provide to the holders of Company Shares the
same economic effect as contemplated by this Agreement prior to such event.
4.2 Payment for Shares in the Merger. The manner of making payment for
Shares in the Merger shall be as follows:
(a) Exchange Agent. On or prior to the Closing Date, Parent shall
appoint a commercial bank or trust company having net capital of not less
than $300,000,000 or a wholly-owned subsidiary thereof to act as exchange
agent (the "Exchange Agent") hereunder for the purposes of exchanging
certificates for Company Shares. At or prior to the Effective Date, Parent
shall deposit with the Exchange Agent in trust for the benefit of the
holders of Company Shares, a sufficient number of certificates representing
the Parent Shares required to effect the delivery of the aggregate
consideration in Parent Shares and cash for the fractional Parent Shares
required to be delivered pursuant to Sections 4.1 and 4.3(collectively, the
"Merger Consideration," and the certificates representing the Parent Shares
comprising the Merger Consideration being referred to hereinafter as the
"Stock Merger Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration out of the Stock
Merger Exchange Fund and the Fractional Securities Fund (as hereafter
defined). The Stock Merger Exchange Fund and the Fractional Securities Fund
shall not be used for any purpose other than as set forth herein.
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of
outstanding Company Shares (i) a form of letter of transmittal, in a form
reasonably satisfactory to the Parties and (ii) instructions for use in
effecting the surrender of the certificates representing Company Shares
("Certificates") for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and any other documents as may be required by the Exchange Act,
the holder of such Certificate shall be entitled to receive in exchange for
each of the Company Shares represented by the Certificates held of record
by such holder (1) one or more Parent Shares (which shall be in
uncertificated book-entry form unless a physical certificate is requested)
representing, in the aggregate, the whole number of Parent Shares that such
holder has the right to receive pursuant to Section 4.1(a) and (2) a check
in the amount equal to the cash that such holder has the right to receive
in lieu of any fractional Parent Shares pursuant to Sections 4.1 and
4.3. No interest will be paid or will accrue on any cash payable pursuant
to Sections 4.1 and 4.3. The Certificates so surrendered pursuant to this
Section 4.2(b) shall forthwith be canceled. Until so surrendered, such
Certificates shall represent solely the right to receive the Merger
Consideration allocable to such Certificates.
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(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions that are declared or made with respect to Parent Shares
with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the Parent Shares that such
holder would be entitled to receive by reason of the Merger upon surrender
of such Certificate and no cash payment in lieu of fractional Parent Shares
shall be paid to any such holder pursuant to Sections 4.1 and 4.3 until
such holder shall surrender such Certificate. Subject to the effect of
applicable law, following surrender of any such Certificate, there shall be
paid to such holder of Parent Shares issuable in exchange therefor, without
interest, (i) promptly after the time of such surrender, the amount of any
cash payable in lieu of fractional Parent Shares to which such holder is
entitled pursuant to Sections 4.1 and 4.3 and the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid prior to the time of such surrender with respect to such whole Parent
Shares, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but
prior to such surrender and a payment date subsequent to such surrender
payable with respect to such Parent Shares. Any dividends or other
distributions that are payable with respect to Parent Shares deliverable
upon surrender of unexchanged Certificates shall be deposited by Parent in
the Stock Merger Exchange Fund.
(d) Transfers of Ownership. If any certificate representing Parent
Shares is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the issuance of certificates for such
Parent Shares in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(e) No Liability. Neither the Exchange Agent nor any of the Parties
shall be liable to a holder of Company Shares for any Parent Shares or
dividends thereon, or, in accordance with Sections 4.1 and 4.3, cash in
lieu of fractional Parent Shares, delivered to a public official pursuant
to applicable abandoned property, escheat or similar law. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the Parent Shares held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions
paid or distributed with respect to such Parent Shares for the account of
the Persons entitled thereto.
(f) Termination of Funds. Subject to applicable law, any portion of
the Stock Merger Exchange Fund and the Fractional Securities Fund which
remains unclaimed by the former stockholders of the Company for six months
after the Effective Time shall be delivered to Parent or as otherwise
directed by Parent, and any former stockholder of the Company shall
thereafter look only to Parent for payment of their applicable claim for
the Merger Consideration for their Company Shares. Any such portion of the
Stock Merger Exchange Fund and the Fractional Securities Fund remaining
unclaimed by holders of Company Shares five years after the Effective Time
(or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any Governmental Entity having
jurisdiction thereover) shall, to the extent permitted by law, become the
property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled thereto.
(g) No Further Ownership Rights in Company Shares. All Parent Shares
issued and cash paid upon conversion of Company Shares in accordance with
the terms of this Article IV (including any cash paid pursuant to Sections
4.1 and 4.3) shall be deemed to have been issued or paid in full
satisfaction of all rights pertaining to the Company Shares.
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4.3 Cash For Fractional Parent Shares. No certificates or scrip or shares
of Parent Shares representing fractional Parent Shares or book-entry credit of
the same shall be issued upon the surrender for exchange of Certificates and
such fractional share interests will not entitle the owner thereof to vote or to
have any rights of a stockholder of Parent or a holder of Parent Shares.
Notwithstanding any other provision of this Agreement, each holder of Company
Shares exchanged pursuant to the Merger who would otherwise have been entitled
to receive a fractional Parent Share (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, a cash payment
(without interest) in an amount equal to the product of (i) the fractional
interest of a Parent Share to which such holder otherwise would have been
entitled multiplied by (ii) the Parent Share Market Value (the cash comprising
such aggregate payments in lieu of fractional Parent Shares being hereinafter
referred to as the "Fractional Securities Fund").
4.4 Transfer of Shares after the Effective Time. No transfers of Company
Shares shall be made on the stock transfer books of the Company after the close
of business on the day prior to the date of the Effective Time.
4.5 Investment of the Stock Merger Exchange Fund and Fractional Securities
Fund. The Exchange Agent shall invest any cash included in the Stock Merger
Exchange Fund and the Fractional Securities Fund in obligations of, or
guaranteed by, the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Xxxxx'x Investor Services or Standard & Poor's
Corporation, respectively, in each case with maturities not exceeding seven
days; provided, that no such investment or loss thereon shall affect the amounts
payable to Company stockholders pursuant to Article IV and the other provisions
of this Agreement. Any interest and other income resulting from such investments
shall promptly be paid to Parent.
4.6 Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation (or Parent, as applicable), the posting by such Person of
a bond in such reasonable amount as the Surviving Corporation (or Parent, as
applicable) may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will deliver in exchange
for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect to the Company Shares formerly represented thereby
and unpaid dividends and distributions on Parent Shares deliverable in respect
thereof, pursuant to and in accordance with the terms of this Agreement.
4.7 Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Sub, as applicable,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
4.8 Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, Company Shares that are issued and outstanding immediately prior to
the Effective Time and are held by stockholders of the Company who did not vote
in favor of the Merger and who comply with all of the relevant provisions of
Section 23B.13.230 of the WBCA (the "Dissenting Stockholders") shall not be
converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such stockholders shall have failed to perfect
or shall have effectively withdrawn or lost their rights to appraisal under the
WBCA. The Company shall give Parent (i) prompt notice of any written demands for
appraisal of any Merger Consideration, attempted withdrawals of such demands and
any other instruments served pursuant to the WBCA and received by the Company
relating to stockholders' rights of appraisal, and (ii) the opportunity to
direct all negotiations and proceedings
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with respect to demands for appraisal under the WBCA. Neither the Company nor
the Surviving Corporation shall, except with the prior written consent of
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail to
perfect or shall have effectively withdrawn or lost the right to dissent, then
(i) as of the occurrence of such event, such holder's Company Shares shall be
converted into and represent the right to receive the Parent Shares issuable
pursuant to Section 4.1, and (ii) promptly following the occurrence of such
event, Parent shall deliver to the Exchange Agent the Merger Consideration to
which such holder is entitled pursuant to Section 4.1.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub that the statements contained
in this Section 5.1 are true and correct, except to the extent specifically set
forth on the disclosure schedule delivered by the Company to Parent and Merger
Sub (the "Company Disclosure Schedule"). The Company Disclosure Schedule shall
be arranged in sections and paragraphs corresponding to the letter and numbered
paragraphs contained in this Section 5.1, and the disclosure in any paragraph
shall qualify only the corresponding paragraph in this Section 5.1 or other
paragraphs or sections to which it is clearly apparent (from a plain reading of
the disclosure) that such disclosure relates.
(a) Corporate Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of incorporation and is duly qualified and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where failure to so qualify or be in good standing as
a foreign corporation would not have a Material Adverse Effect on the
Company. The Company has all requisite power and authority (corporate or
otherwise) to own, lease and operate its properties and to carry on its
business as it is now being conducted except where failure to have such
power and authority would not have a Material Adverse Effect on the
Company. The copies of articles of incorporation and bylaws of the Company
which were previously furnished or made available to Parent are true,
complete and correct copies of such documents as in effect on the date of
this Agreement.
(b) Capitalization. As of the date of this Agreement, the authorized
capital stock of the Company consists of 100,000,000 shares of common
stock, $0.0001 par value per share, of which 8,636,482 shares were issued
and outstanding. Since November 15, 2000 to the date of this Agreement,
there have been no issuances of Company Shares or any other securities of
the Company other than issuances of Company Shares pursuant to options or
rights outstanding as of November 15, 2000 under the stock option plans of
the Company identified in Section 5.1(b) of the Company Disclosure Schedule
(the "Company Option Plans"). All of the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and free of any preemptive or similar rights. The Company has
no outstanding stock appreciation rights, phantom stock, restricted stock
or similar rights. The Company does not own any interest in, or securities
of, any Person and there are no subsidiaries of the Company. As of the date
of this Agreement, except for options to purchase 895,000 Company Shares
issued pursuant to the Company Option Plans, there are no outstanding or
authorized options, warrants, calls, rights (including preemptive rights),
commitments or any other agreements of any character to which the Company
is a party, or by which the Company may be bound, requiring it to issue,
transfer, grant, sell, purchase, redeem or acquire any shares of capital
stock or any of its securities or rights convertible into, exchangeable
for, or evidencing the
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right to subscribe for, any shares of capital stock of the Company. Section
5.1(b) of the Company Disclosure Schedule sets forth a complete and correct
list, as of the date hereof, of the holders of all Company Options (as
hereafter defined) and the number of Company Shares subject to all
outstanding options to purchase Company Shares (each, a "Company Option"),
warrants or other rights to purchase or receive Company Shares granted
under the Company Option Plans, warrants or otherwise, the dates of grant,
the terms of vesting and the exercise prices thereof. No options or
warrants or other rights to acquire capital stock from the Company have
been issued or granted or accelerated or had their terms modified since
November 15, 2000 to the date of this Agreement. The transactions
contemplated by this Agreement will accelerate the vesting of all the
outstanding Company Options. The Company has the power and right not to
issue additional options under the Company Option Plans without any
liability. No bonds, debentures, notes or other indebtedness of the Company
having the right to vote on any matters on which stockholders may vote are
issued or outstanding. Except as otherwise set forth in this Section
5.1(b), as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party or by which it is
bound obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
voting securities of the Company or obligating the Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company. Except for the Voting Agreement, there are not as of the date
hereof and there will not be at the Effective Time any stockholder
agreements, voting trusts or other agreements or understandings to which
the Company is a party or to which it is bound relating to the voting of
any shares of the capital stock of the Company. No existing rights with
respect to the registration of Company Shares under the Securities Act,
including, but not limited to, demand rights or piggy-back registration
rights, shall apply with respect to any Parent Shares issuable in
connection with the Merger.
(c) [Intentionally Omitted]
(d) Authority Relative to this Agreement. The Board of Directors of
the Company has declared the Merger fair and advisable for the Company's
stockholders and the Company has the requisite corporate power and
authority to approve, authorize, execute and deliver this Agreement and,
subject to the approval of the Merger by the stockholders of the Company in
accordance with the WBCA, to consummate the transactions contemplated
hereby. This Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than the approval of
the Merger by the stockholders of the Company in accordance with the WBCA).
This Agreement has been duly and validly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding
agreement of Parent and Merger Sub, constitutes the valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(e) Present Compliance with Obligations and Laws. The Company is not:
(i) in violation of its articles of incorporation or bylaws or similar
documents; (ii) in default in the performance of any obligation, agreement
or condition of any debt instrument which (with or without the passage of
time or the giving of notice, or both) affords to any Person the right to
accelerate any indebtedness or terminate any right; (iii) in default under
or breach of (with or without the passage of time or the giving of notice)
any other contract to which it is a party or by which it
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or its assets are bound; or (iv) in violation of any law, regulation,
administrative order or judicial order, decree or judgment (domestic or
foreign) applicable to it or its business or assets, except where any
violation, default or breach under clauses (iii) or (iv) would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(f) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the transactions
contemplated hereby will: (A) conflict with or result in any breach of
any provision of its articles of incorporation or bylaws; (B) require
any consent, approval, authorization or permit of, or registration or
filing with or notification to, any Governmental Entity, except (I) in
connection with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (II)
pursuant to the applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder, (III) the filing of the applicable certificates evidencing
the Merger pursuant to the DGCL and WBCA and appropriate documents with
the relevant authorities of other states in which the Company is
authorized to do business, (IV) as may be required by any applicable
state securities or "blue sky" laws, or (V) where the failure to obtain
such consent, approval, authorization or permit, or to make such filing
or notification, would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or to prevent, materially hinder
or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement; (C) result in a violation
or breach of, or constitute (with or without notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation
or acceleration or lien or other charge or encumbrance) under any of the
terms, conditions or provisions of any indenture, note, license, lease,
agreement or other instrument or obligation to which the Company is a
party or by which any of their assets may be bound, except for such
violations, breaches and defaults (or rights of termination,
cancellation, or acceleration or lien or other charge or encumbrance) as
to which requisite waivers or consents have been obtained or which,
individually or in the aggregate, would not have a Material Adverse
Effect on the Company; (D) cause the suspension or revocation of any
authorizations, consents, approvals or licenses currently in effect
which would have a Material Adverse Effect on the Company; or (E)
assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in this Section 5.1(f) are duly and timely
obtained or made and the approval of the Merger by the stockholders of
the Company in accordance with WBCA has been obtained, violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to the Company or to any of their respective assets, except for
violations which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(ii) The business and operations of the Company have been conducted
in compliance with all applicable domestic and foreign statutes,
regulations and rules regulating such business and operations except
where the failure to so conduct such business and operations would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company or to prevent, materially hinder or materially delay the ability
of the Company to consummate the transactions contemplated by this
Agreement.
(g) Litigation. There are no actions, suits, claims, investigations
or proceedings pending or, to the knowledge of the Company, threatened
against the Company that, alone or in the aggregate, would be reasonably
likely to result in obligations or liabilities of the Company that
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would have a Material Adverse Effect on the Company. The Company is not
subject to any outstanding order, writ, injunction or decree which (i) has
or may have the effect of prohibiting or impairing any business practice of
the Company, any acquisition of property (tangible or intangible) by the
Company, the conduct of the business by the Company, or Company's ability
to perform its obligations under this Agreement or (ii) insofar as can be
reasonably foreseen, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
(h) SEC Reports; Financial Statements.
(i) Since November 30, 2000 the Company has filed all forms,
reports and documents with the SEC required to be filed by it pursuant
to the federal securities laws and the SEC rules and regulations
thereunder, all of which complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder (the "Company SEC
Reports"). None of the Company SEC Reports, including, without
limitation, any financial statements or schedules included therein, at
the time filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(ii) The balance sheets and the related statements of income,
stockholders' equity and cash flow (including the related notes thereto)
of the Company included in the Company SEC Reports (collectively, the
"Company Financial Statements") comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved (except as otherwise noted therein or, in the case of
unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act), and present fairly the financial
position of the Company as of their respective dates and the results of
its operations and its cash flow for the periods presented therein
(subject, in the case of the unaudited interim financial statements, to
normal and recurring year-end adjustments). Since November 30, 2000,
there has not been any material change by the Company in accounting
principles, methods or policies for financial accounting purposes except
as required by concurrent changes in GAAP.
(i) No Liabilities; Absence of Certain Changes or Events. The Company
does not have any material indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due
or to become due or asserted or unasserted), and there is no reasonable
basis for the assertion of any material claim or liability of any nature
against the Company, except for liabilities (i) which are fully reflected
in, reserved against or otherwise described in the Company Financial
Statements for the period ending November 30, 2000, (ii) which have been
incurred after November 30, 2000 in the ordinary course of business,
consistent with past practice, or (iii) which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. Since
November 30, 2000, the business of the Company has been carried on only in
the ordinary and usual course, and there has not been any Material Adverse
Effect on the Company.
(j) Brokers and Finders. The Company has not employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
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(k) X-0 Xxxxxxxxxxxx Xxxxxxxxx, X-0 Registration Statement and Proxy
Statement/Prospectus. None of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference in the S-3
Registration Statement (as hereafter defined), the S-4 Registration
Statement (as hereafter defined) or the Proxy Statement (as hereafter
defined, and together with S-3 Registration Statement and S-4 Registration
Statement, the "Registration Statements") will (i) in the case of each of
the Registration Statements, at the time they become effective or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading, or (ii) in the case of the
Proxy Statement, at the time of the mailing of the Proxy Statement and at
the time of the Company Stockholder Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company or its
officers and directors should occur which is required to be described in an
amendment of, or a supplement to, the Registration Statements, the Company
shall promptly inform Parent, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. Each of
the Registration Statements will (with respect to the Company) comply as to
form in all material respects with the requirements of the Securities Act
and the rules and regulations promulgated thereunder. The Proxy Statement
will (with respect to the Company) comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing
provisions of this Section 5.1(k), no representation or warranty is made by
the Company with respect to statements made or incorporated by reference in
the Registration Statements based on information supplied by Parent or
Merger Sub for inclusion or incorporation by reference therein.
(l) Taxes.
(i) The Company has timely filed all federal, state, local and
foreign returns, information, statements, and reports relating to Taxes
("Returns") required by applicable Tax law to be filed by the Company,
except for any such failures to file that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. All Taxes
owed by the Company to a taxing authority, or for which the Company is
liable, whether to a taxing authority or to other Persons or entities
under a Significant Tax Agreement, as of the date of this Agreement,
have been paid and, as of the Effective Time, will have been paid,
except for any such failure to pay that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company. The
Company has made accruals for Taxes on the Company Financial Statements
which are adequate to cover any Tax liability of the Company determined
in accordance with generally accepted accounting principles through the
date of the Company Financial Statements, except where failures to make
such accruals or provisions would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(ii) Except to the extent that any such failure to withhold would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company, the Company has (A) withheld with respect to its employees
all federal, state, local and foreign income taxes, FICA, FUTA and other
Taxes required to be withheld, (B) paid all employer contributions and
premiums and (C) filed all federal, state, local and foreign returns and
reports with respect to employee income tax, withholding, social
security and unemployment taxes and premiums.
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(iii) There is no Tax deficiency outstanding, proposed or assessed
against the Company, except any such deficiency that, if paid, would
not, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company has not executed or requested any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any federal or material state, local or foreign Tax that
is still in effect.
(iv) No federal, state, local or foreign Tax audit or other
examination of the Company is presently in progress, nor has the Company
been notified in writing of any request for such federal or material
state, local or foreign Tax audit or other examination, except in all
cases for Tax audits and other examinations which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company has not entered into any closing agreement or other
agreement which affects any Taxes of the Company for any taxable year
ending after the Effective Date.
(v) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(vi) The Company is not a party to (A) any agreement with a party
other than the Company providing for the allocation or payment of Tax
liabilities or payment for Tax benefits with respect to a consolidated,
combined or unitary Return which Return includes or included the Company
or (B) any Significant Tax Agreement other than any Significant Tax
Agreement described in clause (A). The Company is not a party to any
joint venture, partnership or other arrangement that could be treated as
a partnership for federal income tax purposes.
(vii) The Company has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code.
(viii) The Company has not agreed to make nor is it required to
make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise which have not yet been taken
into account. Neither the Internal Revenue Service nor any other agency
has proposed to the Company any such adjustment or change. The Company
does not have any application for accounting method changes pending with
any taxing authorities that affect any taxable year ending after the
Effective Date.
(ix) The Company is not, and has not at any time been, a "United
States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.
(x) There is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company that, individually or
collectively, could give rise to the payment by the Company of any
amount that would not be deductible by reason of Section 280G of the
Code.
(xi) No asset of the Company is tax-exempt use property under
Section 168(h) of the Code. No portion of the cost of any asset of the
Company has been financed directly or indirectly from the proceeds of
any tax-exempt state or local government obligation described in Section
103(a) of the Code. None of the assets of the Company is property that
the Company is required to treat as being owned by any other person
pursuant to the safe harbor lease provision of former Section 168(f)(8)
of the Code.
(xii) The Company does not have nor has it ever had a permanent
establishment in any foreign country or engages or has engaged in a
trade or business in any foreign country.
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(xiii) Neither the Code nor any other provision of law requires
Parent or Merger Sub to withhold any portion of the Merger
Consideration.
(xiv) In the past five years, the Company has not been a party to a
transaction that has been reported as a reorganization within the
meaning of Section 368 of the Code other than as set forth on Section
5.1(l)(xiv) of the Company Disclosure Schedule, distributed a
corporation (or been distributed) in a transaction that is reported to
qualify under Section 355 of the Code.
(xv) Section 5.1(l)(xv) of the Company Disclosure Schedule sets
forth the amount of any net operating loss, net capital loss, unused
investment credit, unused foreign tax, or excess charitable contribution
allocable to the Company.
(m) Employee Benefits.
(i) Section 5.1(m)(i) of the Company Disclosure Schedule lists each
"employee pension benefit plan" (as such term is defined in Section 3(2)
of ERISA), "employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA), material personnel or payroll policy (including,
but not limited to, vacation time, holiday pay, service awards, moving
expense reimbursement programs and sick leave) or material fringe
benefit, severance agreement or plan or any medical, hospital, dental,
vision care, life or disability plan, excess benefit plan, bonus, stock
option, stock purchase or other incentive plan (including any equity or
equity-based plan), top hat plan or deferred compensation plan, salary
reduction agreement (including, but not limited to, cafeteria benefit or
dependent care), change-of-control agreement, employment agreement,
consulting agreement, or collective bargaining agreement,
indemnification agreement, retainer agreement, or any other material
benefit plan, policy, program, arrangement, agreement or contract,
whether or not written or terminated, with respect to any employee,
former employee, director, independent contractor or any beneficiary or
dependent thereof maintained, sponsored, adopted or administered by the
Company or any former subsidiary or to which the Company or any current
or former Plan Affiliate, or under or with respect to which the Company
or any Plan Affiliate could reasonably be expected to have any
liability, including (but not limited to) any plan subject to Section
412 of the Code, or any plan with any remaining liability or benefit
obligation, that has been terminated by Company. Each plan, policy,
program, arrangement, agreement or contract described in the preceding
sentence, whether or not set forth in Section 5.1(m) of the Company
Disclosure Schedule on the Company Financial Statement, is referred to
in this Agreement as a "Company Scheduled Plan".
(ii) The Company has delivered or made available to Parent a
complete and accurate copy of each written Company Scheduled Plan,
together with, if applicable: a copy of its audited financial
statements, actuarial reports and Form 5500 Annual Reports (including
required schedules), if any, for the three most recent plan years; the
most recent IRS determination letter or IRS recognition of exemption;
each other material letter, ruling or notice issued by a governmental
body with respect to each such plan; a copy of each trust agreement,
insurance contract or other funding vehicle, if any, with respect to
each such plan; the three most recent PBGC Forms 1 filed with respect to
each such plan; the current summary plan description and summary of
material modifications thereto with respect to each such plan; Form 5310
and any related filings with the Pension Benefit Guaranty Corporation
(together with any entity succeeding to any or all of its functions,
"PBGC") with respect to the last three (3) plan years for which those
filings have yet been made; the general notification to employees of
their rights under Code Section 4980B and form of letter distributed
upon the occurrence of a qualifying event described in Code Section
4980B; and a copy or description of each other general explanation or
written or oral
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communication which describes a material term of each Company Scheduled
Plan that has not previously been disclosed to Parent pursuant to this
Section 5.1(m). Section 5.1(m)(ii) of the Company Disclosure Schedule
contains a description of the material terms of any unwritten Company
Scheduled Plan. Except as set forth in Section 5.1(l) of the Company
Disclosure Schedule, there are no negotiations, demands or proposals
which are pending or threatened which concern matters now covered, or
that would be covered, by any unwritten Company Scheduled Plan.
(iii) The representations in this Section 5.1(m)(iii) cover
compliance issues with respect to the Company Scheduled Plans.
(1) Each Company Scheduled Plan (A) has complied and currently
complies in form and in operation in all material respects with all
applicable requirements of ERISA and the Code, and any other legal
requirements; (B) has been and is operated and administered in
compliance with its terms (except as otherwise required by law); (C)
has been and is operated in compliance with applicable legal
requirements in such a manner as to qualify, where appropriate, for
both Federal and state purposes, for income tax exclusions to its
participants, income tax exemption, tax-exempt income for its funding
vehicle, and the allowance of deductions and credits with respect to
contributions thereto; and (D) with respect to each Scheduled Company
Plan that is intended to be tax-qualified under Section 401(a) of the
Code, has received a favorable determination letter or recognition of
exemption from the Internal Revenue Service, and, to the knowledge of
the Company, has experienced or presented no circumstances that would
adversely affect its tax-qualified status.
(2) With respect to each Company Scheduled Plan, there are no
claims or other proceedings pending or, to the knowledge of the
Company, threatened with respect to the assets thereof (other than
routine claims for benefits), and there are no facts known to the
Company which could reasonably give rise to any material liability,
claim or other proceeding against any Company Scheduled Plan, any
fiduciary or plan administrator or other Person dealing with any
Company Scheduled Plan or the assets of any such Company Scheduled
Plan.
(3) With respect to each Company Scheduled Plan, to the
knowledge of the Company, no Person: (A) has entered into any
"prohibited transaction," as such term is defined in Section 406 of
ERISA or Section 4975 of the Code; (B) has materially breached a
fiduciary obligation or violated Sections 402, 403, 405, 503, 510 or
511 of ERISA; (C) has any material liability for any failure to act
or comply in connection with the administration or investment of the
assets of the plan; or (D) has engaged in any transaction or
otherwise acted with respect to the plan in a manner that could
subject Parent, or any fiduciary or plan administrator or any other
Person dealing with the plan, to material liability under Section 409
or 502 of ERISA or Sections 4972 or 4976 through 4980B of the Code.
(4) Except as set forth in Section 5.1(m)(iii) of the Company
Disclosure Schedule, each Company Scheduled Plan may be amended,
terminated, modified or otherwise revised by the Company or Parent,
as provided in the Company Scheduled Plan as so amended, on and after
the Closing, without (A) further material liability to the Company or
Parent (excluding ordinary administrative expenses and routine claims
for benefit plans), including, but not limited to, any withdrawal
liability under ERISA for any multiemployer plan or any liability
under any Company Scheduled Plan subject to Title IV of ERISA or (B)
additional vesting or acceleration of such benefits.
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(5) None of the Company or any current or former Plan Affiliate
has at any time participated in, made contributions to or had any
other liability with respect to any Company Scheduled Plan that is a
"multiemployer plan" as defined in Section 4001 of ERISA, a
"multiemployer plan" within the meaning of Section 3(37) of ERISA, a
"multiple employer plan" within the meaning of Section 413(c) of the
Code, a "multiple employer welfare arrangement" within the meaning of
Section 3(40) of ERISA or any pension plan (within the meaning of
Section 3(2) of ERISA) that is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(6) Except as set forth in Schedule 5.1(m)(iii) of the Company
Disclosure Schedule, there is no agreement, contract or arrangement
to which Company is a party that may result in the payment of any
amount that would not be deductible by reason of Section 280G or
Section 404 of the Code.
(7) No Company Scheduled Plan provides, reflects or represents
any liability to provide retiree medical or other post-employment
welfare benefits to any person for any reason, except as may be
required by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), or other applicable continuation coverage
statute, and neither the Company nor any Plan Affiliate has ever
represented, promised or contracted (whether in oral or written form)
to any current or former employee, consultant or director (either
individually or as a group) or any other person that any current or
former employee(s) or other person would be provided with retiree
medical or other post-employment welfare benefit, except to the
extent required by an applicable continuation coverage statute like
COBRA.
(8) No Company Scheduled Plan has incurred an "accumulated
funding deficiency," as that term is defined in Section 302 of ERISA
or Section 412 of the Code, whether or not waived, or has posted or
is required to provide security under Code Section 401(a)(29) or
Section 307 of ERISA. No event has occurred that has or could result
in the imposition of a lien under Code Section 412 or Section 302 of
ERISA, nor has any liability to the PBGC (except for payment of
premiums) been incurred nor any reportable event within the meaning
of Section 4043 of ERISA occurred with respect to any Company
Scheduled Plan. The PBGC has not threatened or taken steps to
institute the termination of any Company Scheduled Plan.
(9) The requirements of COBRA and the Health Insurance
Portability and Accountability Act, the requirements of the Family
and Medical Leave Act of 1993, as amended, the requirements of the
Women's Health and Cancer Rights Act, the requirements of the
Newborns' and Mothers' Health Protection Act of 1996, and any
amendment to each such act, and any similar provisions of state law
applicable to the employees or other individuals providing services
to the Company or Plan Affiliate, have, in all material respects,
been satisfied with respect to each Company Scheduled Plan.
(10) All contributions, payments, premiums, expenses,
reimbursements and accruals for all periods ending prior to the
Closing for each Company Scheduled Plan (including periods from the
first day of the current plan year to the Closing) shall have been
timely made (if then due) or accrued on the Company financial
statements (if not yet due) in accordance with generally applied
accounting principles, including FAS 87, 88, 106 and 112. No Company
Scheduled Plan has or could have any unfunded liability (including
benefit liabilities as defined in Section 4001(a)(16) of
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ERISA) that is not reflected on the Company financial statements. The
same shall be true for all periods ending as of the Closing for each
Company Scheduled Plan.
(11) Neither the Company nor a Plan Affiliate has any liability
(A) for the termination of any single employer plan under Section
4062 of ERISA or any multiple employer plan under Section 4063 of
ERISA, (B) for any lien imposed under Section 302(f) of ERISA or
Section 412(n) of the Code, (C) for any interest payments required
under Section 302(e) of ERISA or Section 412(m) of the Code, (D) for
any excise tax imposed by Code Sections 4971, 4972, 4977, or 4979, or
(E) for any minimum funding contributions under Section 302(c)(11) of
ERISA or Code Section 412(c)(11).
(12) All the Company Scheduled Plans to the extent applicable,
are in compliance with Section 1862(b)(1)(A)(i) of the Social
Security Act and neither the Company nor any Plan Affiliate has any
liability for any excise tax imposed by Code Section 5000.
(13) With respect to any Company Scheduled Plan which is a
welfare plan as defined in Section 3(1) of ERISA: (A) each such
welfare plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code
materially meets such requirements and (B) there is no disqualified
benefit (as that term is defined in Code Section 4976(b)) which would
subject the Company or any Plan Affiliate to a tax under Code Section
4976(a).
(iv) Neither the execution of this Agreement nor the consummation
of the transactions contemplated by this Agreement will (either alone or
in conjunction with any other event, such as termination of employment)
(A) entitle any current or former employee of the Company or a Plan
Affiliate to severance pay, unemployment compensation or any other
payment or benefit, (B) accelerate the time of payment or vesting of any
payment (other than for a terminated or frozen tax-qualified plan,
pursuant to a requirement herein to freeze or terminate that plan),
cause the forgiveness of any indebtedness, or increase the amount of any
compensation due to any current employee or former employee of the
Company or a Plan Affiliate, or (C) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which
an exemption is not available. No individual who is a party to an
employment or change of control agreement listed in the Company
Disclosure Schedule has terminated employment or has been terminated.
(v) There has been no amendment to, written interpretation or
announcement (whether written or otherwise) by the Company or other Plan
Affiliates relating to, or change in participation or coverage under,
any Company Scheduled Plan that would materially increase the expense of
maintaining that plan above the level of expense incurred with respect
to that plan for the most recent fiscal quarter included in the Company
Financial Statements.
(n) Company Intangible Property.
(i) Company owns, or possesses a valid and enforceable license or
otherwise possesses legally enforceable rights to use, all Company
Intellectual Property Rights (as hereafter defined) that are necessary
to conduct the business of the Company as currently conducted or planned
to be conducted and has no restriction on the rights to use the same.
(ii) Section 5.1(n)(ii) of the Company Disclosure Schedule contains
a list and description (showing in each case the registered or other
owner, registration, application or issue date and number, if any) of
all Company Intellectual Property Rights.
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(iii) Section 5.1(n)(iii) of the Company Disclosure Schedule
contains a list and description (showing in each case any licensee) of
all Software (as hereafter defined) owned by or licensed to the Company
excluding Software licensed to the Company having a fee less than five
hundred dollars ($500).
(iv) Section 5.1(n)(iv) of the Company Disclosure Schedule contains
a list and description (showing in each case the parties thereto and the
material terms thereof) of all material agreements, contracts, licenses,
sublicenses, assignments and indemnities which relate to (A) any
copyright, patent right, servicemark or trademark listed in Section
5.1(n)(ii) of the Company Disclosure Schedule, (B) any trade secrets
owned by, licensed to or used by the Company or (C) any Software listed
in Section 5.1(n)(iii) of the Company Disclosure Schedule.
(v) The Company is not nor will be as a result of the execution and
delivery of this Agreement or the performance of its obligations under
this Agreement, in breach in any material respect of any license,
sublicense or other agreement relating to the Company Intellectual
Property Rights or any license, sublicense or other agreement pursuant
to which the Company is authorized to use any third party patents,
trademarks or copyrights, including Software, which are used in the
manufacture of, incorporated in, or form a part of any product of the
Company. All such agreements of the Company are listed in Section
5.1(n)(v)of the Company Disclosure Schedule.
(vi) (A) All patents, registered trademarks, service marks and
copyrights held by the Company are valid and enforceable and any and all
applications to register any unregistered copyrights, patent rights,
servicemarks and trademarks to identified are pending and in good
standing; and (B) the Company has the sole and exclusive right to bring
actions for infringement or unauthorized use of the Company Intellectual
Property Rights and Software owned by the Company, and the Company has
no knowledge of any basis for any such action. The Company has not been
sued in any suit, action or proceeding which involves a claim of
infringement of any patent, trademark, service xxxx or copyright or the
violation of any trade secret or other proprietary rights of any third
party. The conduct of the business of the Company does not violate or
infringe any intellectual property rights owned or controlled by any
third party, and there are no claims, proceedings or actions pending or,
to the knowledge of the Company, threatened against the Company (A)
alleging that the Company's activities infringe upon, violate or
otherwise constitute the unauthorized use of any intellectual property
rights of any third party or (B) challenging the ownership, use,
validity or enforceability of any Company Intellectual Property Rights,
nor is there a valid basis for any such claim.
(vii) The Company has taken reasonable measures to safeguard and
maintain their proprietary rights in all Company Intellectual Property
Rights owned by the Company. There has been no disclosure of any trade
secret of the Company to any third party, other than pursuant to valid,
enforceable, written non-disclosure agreements.
(viii) The completion of the transactions contemplated by this
Agreements will not alter or impair the right of the Company to use any
of the Company Intellectual Property Rights.
(ix) All Company Intellectual Property Rights owned by the Company
have been (A) acquired from a person or entity having full, effective
and exclusive ownership thereof, (B) developed or created by employees,
agents, consultants or contractors who have contributed to or
participated in the creation or development of any copyrightable,
patentable or trade secret material on behalf of the Company or any
predecessor in interest
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thereof either: (1) with respect to copyrightable materials, is a party
to a "work-for-hire" agreement under which the Company or any
predecessor in interest thereof is deemed to be the original owner/
author of all property rights therein; or (2) with respect to
copyrightable or patentable materials or materials subject to trade
secret protection, has executed an assignment or an agreement to assign
in favor of the Company or any predecessor in interest thereof, of all
right, title and interest in such material.
(x) Correct and complete copies of: (A) registrations for all
registered copyrights, issued patents, and registered trademarks
identified in Section 5.1(n)(ii); and (B) all pending applications to
register unregistered copyrights, patent rights and trademarks
identified in Section 5.1(n)(ii) of the Company Disclosure Schedule as
being owned by the Company (together with any subsequent correspondence
or filings relating to the foregoing) have heretofore been delivered by
the Company to the Parent.
(xi) Excluding the Software identified in Section 5.1(n)(xi)of the
Company Disclosure Schedule, (A) the Software owned or exclusively
licensed by the Company is not subject by agreement to any transfer,
assignment, site, equipment, or other operational limitations; (B) the
Company has maintained and protected the Software that it owns (the
"Company Owned Software") (including, without limitation, all source
code and system specifications) with appropriate proprietary notices
(including, without limitation, the notice of copyright in accordance
with the requirements of 17 U.S.C. sec. 401), confidentiality and
non-disclosure agreements and such other measures as are reasonably
necessary to protect the proprietary, trade secret or confidential
information contained therein; (C) the Owned Software has been
registered or is eligible for protection and registration under
applicable U.S. copyright law and has not been forfeited to the public
domain; (D) the Company has copies of all releases or separate versions
of the Company Owned Software so that the same may be subject to
registration in the United States Copyright Office; (E) the Company has
complete and exclusive right, title and interest in and to the Company
Owned Software; (F) the Company has developed the Company Owned Software
through its own efforts and for its own account; (G) the Company Owned
Software does not infringe any copyright of any other Person; (H) any
Company Owned Software includes the source code, system documentation,
statements of principles of operation and schematics, as well as any
pertinent commentary, explanation, program (including compilers),
workbenches, tools, and higher level (or "proprietary") language used
for the development, maintenance, implementation and use thereof, so
that a trained computer programmer could develop, maintain, support,
compile and use all releases or separate versions of the same that are
currently subject to maintenance obligations by the Company; and (i)
there are no agreements or arrangements in effect with respect to the
marketing, distribution, licensing or promotion of the Company Owned
Software by any other Person.
(xii) "Company Intellectual Property Rights" means any or all of
the following and all rights in, arising out of, or associated
therewith, whether registered or unregistered, as applicable: (i) United
States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) inventions and discoveries (whether
or not patentable), disclosures, trade secrets, formulae, methods,
proprietary information, know-how technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) copyrights,
copyright registrations and applications therefor and all other
corresponding rights thereto throughout the world; (iv) industrial
designs and any registrations and applications therefor throughout the
world; (v) trade names, logos, common law trademarks and service marks;
trademark and servicemark registrations and applications therefor and
all goodwill associated therewith throughout the world, (vi) data bases
and data collections and all rights therein throughout
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the world; (vii) all Software, all Web addresses, sites and domain
names; (viii) any similar corresponding or equivalent rights to any one
of the foregoing; and (ix) all documentation directly related to any of
the foregoing.
(o) Agreements, Contracts and Commitments; Material Contracts. Except
as set forth in the Section 5.1(o) of the Company Disclosure Schedule, as
of the date of this Agreement, the Company is not a party to or bound by:
(i) any contract relating to the borrowing of money, the guaranty
of another Person's borrowing of money, or the creation of an
encumbrance or lien on the assets of the Company and with outstanding
obligations in excess of $100,000;
(ii) any employment or consulting agreement, contract or commitment
with any officer, director or other principal employee. Attached hereto
as Section 5.1(o) of the Company Disclosure Schedule is a list of the
top five compensated officers or employees as of the last fiscal year
ended and their current salary;
(iii) any agreement of indemnification or guaranty by the Company
not entered into in the ordinary course of business other than
indemnification agreements between the Company and any of its officers
or directors in standard forms as filed by the Company with the SEC;
(iv) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or
conduct business in any geographical area, compete with any person;
(v) any joint venture, partnership, and other contract (however
named) involving a sharing of profits or losses by the Company with any
other Person;
(vi) any contract for capital expenditures in excess of $50,000;
(vii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business;
(viii) any agreement, contract or commitment for the purchase of
any ownership interest in any corporation, partnership, joint venture or
other business enterprise for consideration in excess of $50,000, in any
case, which includes all escrow and earn-out agreements with outstanding
obligations; or
(ix) any other material contract or agreement of the Company and
that involves payment of $50,000 or more not otherwise listed in any
other section of the Company Disclosure Schedule.
A true and complete copy (including all amendments) of each contract or
other agreement required to be disclosed by this Section 5.1(o) (a "Company
Material Contract") (or if standard forms are used, copies of the applicable
forms with an indication of any material differences from the actual listed
Company Material Contract), or a summary of each oral contract, has been made
available to Parent. Each Company Material Contract is in full force and effect,
and is a legal, valid and binding obligation of the Company and, to the
knowledge of the Company, each of the other parties thereto, enforceable in
accordance with its terms against the Company, except (a) that the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and (b) as
would not, individually or in the aggregate, result in a Material Adverse Effect
on the Company. No condition exists or event has occurred which (whether with or
without notice or lapse of time or both, or the happening or occurrence of any
other event) would constitute a default
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by the Company of the Company or, to the knowledge of the Company, any other
party thereto under, or result in a right in termination of, any Company
Material Contract, except as would not, individually or in the aggregate, result
in a Material Adverse Effect on the Company. Except as provided for herein, at
the Effective Time, no Person will have the right, by contract or otherwise, to
become, nor does any entity have the right to designate or cause the Company to
appoint a Person as, a director of the Company.
(p) Listings. The Company's securities are not listed or quoted for
trading on any U.S. domestic or foreign securities exchange other than the
NASD OTC Bulletin Board (the "OTC").
(q) Environmental Matters. Except as disclosed in Section 5.1(q) of
the Company Disclosure Schedule, (i) the Company and the operations, assets
and properties thereof are in material compliance with all Environmental
Laws and, to the Company's knowledge, any operations, assets and properties
formerly owned or leased by the Company were in material compliance with
all Environmental Laws during the Company's period of ownership or
operation; (ii) there are no judicial or administrative actions, claims,
suits, judgments, orders, decrees, proceedings, information requests or
investigations pending or, to the knowledge of the Company, threatened
against the Company alleging the violation of or liability under any
Environmental Law and the Company has not received notice from any
Governmental Entity or Person alleging any violation of or liability under
any Environmental Laws; (iii) to the knowledge of the Company after due
inquiry, there are no facts, circumstances or conditions relating to,
arising from, associated with or attributable to the Company or any real
property currently or previously owned, operated or leased by the Company
that could reasonably be expected to result in material Environmental Costs
and Liabilities; and (iv) the Company has never generated, transported,
treated, stored, recycled, handled, disposed of or released or threatened
to release any Hazardous Material at any site, location or facility in a
manner that has created, or, to the knowledge of the Company, could create
any material Environmental Costs and Liabilities, and no such Hazardous
Material has been or is currently present on, in, at or under any real
property owned, leased or used by the Company in a manner that could create
any material Environmental Costs and Liabilities. The Company has provided
to Parent and Merger Sub any and all documents, correspondence, pleadings,
reports, (including, without limitation, environmental site assessment
reports and compliance audits), assessments, analytical results, permits,
or other records concerning Environmental Laws, Hazardous Materials or
other environmental subjects related to the Company or any real property
currently or previously owned, operated or leased. For the purpose of this
Section 5.1(q), the following terms have the following definitions: (X)
"Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, liens,
actions, claims, diminutions in value, costs and expenses (including,
without limitation, fees, disbursements and expenses of legal counsel,
experts, engineers and consultants and the costs of investigation and
feasibility studies, remedial or removal actions and cleanup activities)
arising from or under or relating to matters covered by any Environmental
Law; (Y) "Environmental Laws" means any and all federal, state, foreign,
interstate, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, decrees, permits, licenses,
authorizations, requirements, directives of any Governmental Entity, any
and all common law requirements, rules and bases of liability regulating,
relating to or imposing liability or standards of conduct concerning
pollution, Hazardous Materials or protection of human health, safety or the
environment, as currently in effect and includes the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section
9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the
Clean Air Act, 42 U.S.C.
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Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 136 et seq., Occupational Safety and Health Act 29 U.S.C.
Section 651 et seq. and the Oil Pollution Act of 1990, 33 U.S.C. Section
2701 et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state or local
statutes; and (Z) "Hazardous Material" means any substance, material or
waste regulated or defined by any Environmental Law, including, without
limitation, any substance, material or waste which is defined as a
"hazardous waste," "hazardous material," "hazardous substance," "toxic
waste" or "toxic substance" and including but not limited to petroleum and
petroleum products including crude oil and any fraction thereof, natural
gas and synthetic gas and mixtures thereof, radioactive substances,
asbestos and polychlorinated biphenyls.
(r) Sufficient Assets; Properties.
(i) The Company owns or leases all equipment, furniture, fixtures,
improvements and other tangible assets necessary and sufficient for the
conduct of its business as presently conducted.
(ii) The Company has good and marketable title to, or a valid
leasehold interest in, the real and personal property material to the
operation of its business. None of such property is subject to any
mortgage, pledge, deed of trust, lien (other than for taxes not yet due
and payable), conditional sale agreement, security title, encumbrance,
or other adverse claim or interest which would have a Material Adverse
Effect on the Company. Since November 15, 2000, there has not been any
sale, lease, or any other disposition or distribution by the Company of
any of its assets or properties material to the Company.
(iii) The Company does not own any real property or any interest in
real property, except for the real property, leaseholds created under
the real property leases and any licenses or usufructs identified in
Section 5.1(r) of the Company Disclosure Schedule. Section 5.1(r) of the
Company Disclosure Schedule lists such real property and the premise
covered by such leases, as applicable. The Company enjoys peaceful and
undisturbed possession of such premises.
(iv) All leases or licenses, whether oral or written, pursuant to
which the Company leases real or personal property are in good standing
and are valid and effective in accordance with their respective terms
and there exists no default thereunder that would have a Material
Adverse Effect on the Company.
(s) Labor and Employee Relations.
(i) (A) None of the employees of the Company is represented in his
or her capacity as an employee thereof by any labor organization; (B)
the Company has not recognized any labor organization nor has any labor
organization been elected as the collective bargaining agent of any of
their employees, nor has the Company signed any collective bargaining
agreement or union contract recognizing any labor organization as the
bargaining agent of any of their employees; and (C) to the knowledge of
the Company, there is no active or current union organization activity
involving the employees of the Company, nor has there ever been union
representation involving employees of the Company.
(ii) As of the date of this Agreement, except for complaints which,
in the aggregate, do not represent claims which could reasonably involve
liabilities in excess of $25,000, there are no complaints against the
Company pending or, to the knowledge of the Company, overtly threatened
before the National Labor Relations Board or any similar foreign, state
or local labor agencies, or before the Equal Employment Opportunity
Commission or any
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xxxxxxx xxxxxxx, xxxxx or local agency, or before any other governmental
agency or entity by or on behalf of any employee or former employee of
the Company and at Closing there will be no such pending or threatened
complaints that either individually or in the aggregate would have a
Material Adverse Effect on the Company.
(iii) The Company has provided to Parent a description of all
written employment policies under which the Company is currently
operating.
(t) Licenses and Other Authorizations. The Company holds all material
licenses, permits, registrations, orders, franchises, approvals and other
authorizations, including those issued by any state or other regulatory
authority, which are necessary to permit it to conduct its businesses as
presently conducted ("Necessary Authorizations"). All such Necessary
Authorizations are now, and will be after the Closing, valid and in full
force and effect, and the Surviving Corporation shall have full benefit of
the same. The Company has not received any notification of any asserted
present failure (or past and unremedied failure) by it to have obtained any
Necessary Authorization. Except as disclosed on the Company Disclosure
Schedule, no fines or other penalties exceeding $1,000 individually or
$10,000 in the aggregate have been assessed against the Company in any of
the last five years relating to its business activities.
(u) Transactions with Affiliates. Since the date of Company's last
proxy statement to its stockholders, no event has occurred that would be
required to be reported by Company as a Certain Relationship or Related
Transaction, pursuant to Item 404 of Regulation S-K promulgated by the SEC.
(v) Year 2000. The Company has implemented a program directed at
ensuring that its products (including prior and current products and
technology and products and technology currently under development) will,
when used in accordance with associated documentation on a specified
platform or platforms, be capable upon installation of (i) operating in the
same manner on dates in both the Twentieth and Twenty-First centuries and
(ii) accurately processing, providing and receiving date data from, into
and between the Twentieth and Twenty-First centuries, including the years
1999 and 2000, and making leap-year calculations. The Company has taken
commercially reasonable steps to assure that the year 2000 date change will
not adversely affect, and such date change has not adversely affected the
systems and facilities that support the operations of the Company, except
as would not have a Material Adverse Effect on the Company.
(w) State Takeover Laws. The Board of Directors of the Company has
taken all necessary action so that the restrictions contained in Section
23B.19.040 of the WBCA applicable to a "significant business transaction"
(as defined in Section 23B.19.020(15)) will not apply to the execution,
delivery or performance of this Agreement or the Voting Agreement or the
consummation of the Merger or the other transactions contemplated by this
Agreement or the Voting Agreements. No other state takeover statute or
similar statute or regulation is applicable to this Agreement or the Voting
Agreements.
(x) Shareholder Rights Plan. There is no shareholder rights plan or
similar plan of the Company in effect that would cause additional
securities of the Company or the right to receive such securities to be
issued to some or all of the present holders of the Company Shares by
reason of this Agreement or the consummation of the transactions
contemplated hereby.
5.2 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub hereby represent and warrant to the Company that the statements
contained in this Section 5.2 are true and correct, except to the extent
specifically set forth on the disclosure schedule delivered by Parent to the
Company (the "Parent Disclosure Schedule"). The Parent Disclosure Schedule shall
be
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arranged in sections and paragraphs corresponding to the letter and numbered
paragraphs contained in this Section 5.2, and the disclosure in any paragraph
shall qualify only the corresponding paragraph in this Section 5.2 or other
paragraphs or sections to which it is clearly apparent (from a plain reading of
the disclosure) that such disclosure relates.
(a) Corporate Organization and Qualification. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation or
organization and is duly qualified and in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification,
except where failure to so qualify or be in good standing as a foreign
corporation would not have a Material Adverse Effect on Parent. Merger Sub
is a direct, wholly-owned subsidiary of Parent, was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
(b) Capitalization. As of the date of this Agreement, the authorized
capital stock of Parent consists of (i) 25,000,000 shares of common stock,
$0.01 par value per share, of which 8,355,721 shares were issued and
outstanding as of January 26, 2001, and (ii) 5,000,000 shares of preferred
stock, $0.01 par per share, none of which are issued or outstanding. All of
the outstanding shares of capital stock of Parent are, and when Parent
Shares are issued in the Merger such shares will be, duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights. Except as set forth in the Parent SEC Reports, the Parent
has no outstanding stock appreciation rights, phantom stock, restricted
stock or similar rights. As of the date of this Agreement, except as set
forth in the Parent SEC Reports, there are no outstanding or authorized
options, warrants, calls, rights (including preemptive rights), commitments
or any other agreements of any character to which the Parent is a party, or
by which the Parent may be bound, requiring it to issue, transfer, grant
sell, purchase, redeem or acquire any shares of capital stock or any of its
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock of the Parent. The
transactions contemplated by this Agreement will not accelerate the vesting
of any options, warrants or similar rights for the purchase of the Parent
Shares.
(c) Authority Relative to this Agreement. The Board of Directors of
Parent has declared the issuance of Parent Shares advisable and Parent has
the requisite corporate power and authority to approve, authorize, execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Merger Sub has the requisite corporate power and authority to
approve, authorize, execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the consummation
by Parent of the transactions contemplated hereby have been duly and
validly authorized by the Boards of Directors of Parent and Merger Sub and
no other corporate proceedings on the part of Parent or Merger Sub
(including, in the case of Merger Sub, all stockholder action by Parent as
its sole stockholder) are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and,
assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes the valid and binding agreement of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(d) Present Compliance with Obligations and Laws. Neither Parent nor
any of its subsidiaries is: (i) in violation of its certificate of
incorporation, bylaws or similar documents; (ii) in default in the
performance of any obligation, agreement or condition of any debt
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instrument which (with or without the passage of time or the giving of
notice, or both) affords to any Person the right to accelerate any
indebtedness or terminate any right; (iii) in default under or breach of
(with or without the passage of time or the giving of notice) any other
contract to which it is a party or by which it or its assets are bound; or
(iv) in violation of any law, regulation, administrative order or judicial
order, decree or judgment (domestic or foreign) applicable to it or its
business or assets, except where any violation, default or breach under
clauses (iii) or (iv) or, with respect to the Parent's subsidiaries only,
clause (i) would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
(e) Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by Parent of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective certificate of incorporation (or
other similar documents) or bylaws (or other similar documents) of Parent
or any of its subsidiaries; (ii) require any consent, approval,
authorization or permit of, or registration or filing with or notification
to, any Governmental Entity, except (A) in connection with the applicable
requirements of the HSR Act, (B) pursuant to the applicable requirements of
the Securities Act and the rules and regulations promulgated thereunder,
and the Exchange Act and the rules and regulations promulgated thereunder,
(C) the filing of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in
which Merger Sub is authorized to do business, (D) as may be required by
any applicable state securities or "blue sky" laws, or (E) where the
failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not, individually or in the
aggregate, have a Material Adverse Effect on Parent; (iii) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under
any of the terms, conditions or provisions of any indenture, note, license,
lease, agreement or other instrument or obligation to which Parent or any
of its subsidiaries is a party or by which any of their assets may be
bound, except for such violations, breaches and defaults (or rights of
termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained
or which, individually or in the aggregate, would not have a Material
Adverse Effect on Parent; (iv) cause the suspension or revocation of any
authorizations, consents, approvals or licenses currently in effect which
would have a Material Adverse Effect on Parent; or (v) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 5.2(e) are duly and timely obtained or made,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or any of its subsidiaries or to any of their
respective assets, except for violations which would not, individually or
in the aggregate, have a Material Adverse Effect on Parent.
(f) Litigation. There are no actions, suits, claims, investigations
or proceedings pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries that, alone or in the aggregate would be
reasonably likely to result in obligations or liabilities of Parent or any
of its subsidiaries that, individually or in the aggregate, would have a
Material Adverse Effect on Parent. Neither Parent nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or
decree which (i) has or may have the effect of prohibiting or impairing any
business practice of Parent or any of its subsidiaries, any acquisition of
property (tangible or intangible) by Parent or any of its subsidiaries, the
conduct of the business by Parent or any of its subsidiaries, or Parent's
or Merger Sub's ability to perform its obligations under this Agreement or
(ii) insofar as can be reasonably foreseen, individually or in the
aggregate, would have a Material Adverse Effect on Parent.
(g) SEC Reports; Financial Statements.
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(i) Since October 31, 2000, Parent has filed all forms, reports and
documents with the SEC required to be filed by it pursuant to the
federal securities laws and the SEC rules and regulations thereunder,
all of which complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder (collectively, the "Parent SEC
Reports"). None of the Parent SEC Reports, including, without
limitation, any financial statements or schedules included therein, at
the time filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file
any forms, reports or other documents with the SEC.
(ii) The consolidated balance sheets and the related consolidated
statements of income, stockholders' equity and cash flows (including the
related notes thereto) of Parent included in the Parent SEC Reports
(collectively, "Parent Financial Statements") comply as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP applied on a basis consistent
throughout the periods involved (except as otherwise noted therein or,
in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act), and present
fairly the consolidated financial position of Parent and its
consolidated subsidiaries as of their respective dates, and the
consolidated results of their operations and their cash flows for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments).
Since October 31, 2000, there has not been any material change, by
Parent or any of its subsidiaries, in accounting principles, methods or
policies for financial accounting purposes except as required by
concurrent changes in GAAP.
(h) No Liabilities; Absence of Certain Changes or Events. Neither
Parent nor any of its subsidiaries has any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to knowledge of Parent, there is no reasonable basis for
the assertion of any material claim or liability of any nature against
Parent or any of its subsidiaries, except for liabilities (i) which are
fully reflected in, reserved against or otherwise described in the Parent
Financial Statements for the period ending October 31, 2000, (ii) which
have been incurred after October 31, 2000 in the ordinary course of
business, consistent with past practice, or (iii) which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Parent. Since October 31, 2000, the business of Parent and its
subsidiaries has been carried on only in the ordinary and usual course, and
there has not been any Material Adverse Effect on Parent.
(i) Brokers and Finders. Neither Parent nor any of its subsidiaries
has employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any investment banking, brokerage,
finder's or similar fee or commission in connection with this Agreement or
the transactions contemplated hereby.
(j) The Registration Statements and Proxy Statement/Prospectus. None
of the information supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in the Registration Statements will
(i) in the case of each of the Registration Statements, at the time they
become effective or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or
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necessary in order to make the statements therein not misleading, or (ii)
in the case of the Proxy Statement, at the time of the mailing of the Proxy
Statement and at the time of the Company Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with
respect to Parent, Merger Sub or any of their respective affiliates,
officers and directors or any of its subsidiaries should occur which is
required to be described in an amendment of, or a supplement to, the
Registration Statements, Parent shall promptly inform the Company, such
event shall be so described, and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. Each of the Registration Statements will (with
respect to Parent and Merger Sub) comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder. The Proxy Statement will (with respect
to Parent and Merger Sub) comply as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations
promulgated thereunder. Notwithstanding the foregoing provisions of this
Section 5.2(j), no representation or warranty is made by Parent or Merger
Sub with respect to statements made or incorporated by reference in the
Registration Statements based on information supplied by the Company for
inclusion or incorporation by reference therein.
(k) Parent Intangible Property.
(i) Parent owns, or possesses a valid and enforceable license or
otherwise possesses legally enforceable rights to use, all material
Parent Intellectual Property Rights (as hereafter defined) that are
necessary to conduct the business of the Parent as currently conducted
or planned to be conducted and has no restriction on the rights to use
the same.
(ii) Section 5.2(k)(ii) of the Parent Disclosure Schedule contains
a list and description of all material Parent Intellectual Property
Rights.
(iii) Section 5.2(k)(iii) of the Parent Disclosure Schedule
contains a list and description (showing in each case any licensee) of
all Software owned by or licensed to the Parent excluding Software
licensed to the Parent having a fee less than five thousand dollars
($5,000).
(iv) Section 5.2(k)(iv) of the Parent Disclosure Schedule contains
a list and description (showing in each case the parties thereto) of all
material agreements, contracts, licenses, sublicenses, assignments and
indemnities which relate to (A) any copyright, patent right, servicemark
or trademark listed in Section 5.2(k)(ii) of the Parent Disclosure
Schedule, (B) any trade secrets owned by, licensed to or used by the
Parent or (C) any Software listed in Section 5.2(k)(iii) of the Parent
Disclosure Schedule.
(v) The Parent is not nor will be as a result of the execution and
delivery of this Agreement or the performance of its obligations under
this Agreement, in breach in any material respect of any license,
sublicense or other agreement relating to the Parent Intellectual
Property Rights or any license, sublicense or other agreement pursuant
to which the Parent is authorized to use any third party patents,
trademarks or copyrights, including Software, which are used in the
manufacture of, incorporated in, or form a part of any product of the
Parent. All such agreements of the Parent are listed in Section
5.2(k)(v) of the Parent Disclosure Schedule.
(vi) (A) All material patents, registered trademarks, service marks
and copyrights held by the Parent are valid and enforceable and any and
all applications to register any unregistered copyrights, patent rights,
servicemarks and trademarks to identified are pending
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and in good standing; and (B) the Parent has the sole and exclusive
right to bring actions for infringement or unauthorized use of the
material Parent Intellectual Property Rights and Software owned by the
Parent, and the Parent has no knowledge of any basis for any such
action. To the best of Parent's knowledge, the Parent has not been sued
in any suit, action or proceeding which involves a claim of infringement
of any patent, trademark, service xxxx or copyright or the violation of
any trade secret or other proprietary rights of any third party. To the
best of Parent's knowledge, the conduct of the business of the Parent
does not violate or infringe any intellectual property rights owned or
controlled by any third party, and there are no claims, proceedings or
actions pending or, to the knowledge of the Parent, threatened against
the Parent (A) alleging that the Parent's activities infringe upon,
violate or otherwise constitute the unauthorized use of any intellectual
property rights of any third party or (B) challenging the ownership,
use, validity or enforceability of any Parent Intellectual Property
Rights, nor is there a valid basis for any such claim to the best of
Parent's knowledge.
(vii) The Parent has taken reasonable measures to safeguard and
maintain their proprietary rights in all Parent Intellectual Property
Rights owned by the Parent. There has been no disclosure of any trade
secret of the Parent to any third party, other than pursuant to valid,
enforceable, written non-disclosure agreements.
(viii) The completion of the transactions contemplated by this
Agreements will not alter or impair the right of the Parent to use any
of the Parent Intellectual Property Rights.
(ix) All material Parent Intellectual Property Rights owned by the
Parent have been (A) acquired from a person or entity having full,
effective and exclusive ownership thereof, (B) developed or created by
employees, agents, consultants or contractors who have contributed to or
participated in the creation or development of any copyrightable,
patentable or trade secret material on behalf of the Parent or any
predecessor in interest thereof either: (1) with respect to
copyrightable materials, is a party to a "work-for-hire" agreement under
which the Parent or any predecessor in interest thereof is deemed to be
the original owner/author of all property rights therein; or (2) with
respect to copyrightable or patentable materials or materials subject to
trade secret protection, has executed an assignment or an agreement to
assign in favor of the Parent or any predecessor in interest thereof, of
all right, title and interest in such material.
(x) Excluding the Software identified in Section 5.2(k)(x) of the
Parent Disclosure Schedule, (A) the Software owned or exclusively
licensed by the Parent is not subject by agreement to any transfer,
assignment, site, equipment, or other operational limitations; (B) the
Parent has maintained and protected the Software that it owns (the
"Parent Owned Software") (including, without limitation, all source code
and system specifications) with appropriate proprietary notices
(including, without limitation, the notice of copyright in accordance
with the requirements of 17 U.S.C. sec. 401), confidentiality and
non-disclosure agreements and such other measures as are reasonably
necessary to protect the proprietary, trade secret or confidential
information contained therein; (C) the material Parent Owned Software
has been registered or is eligible for protection and registration under
applicable U.S. copyright law and has not been forfeited to the public
domain; (D) the Parent has copies of all releases or separate versions
of the Parent Owned Software so that the same may be subject to
registration in the United States Copyright Office; (E) the Parent has
complete and exclusive right, title and interest in and to the Parent
Owned Software; (F) the Parent has developed the Parent Owned Software
through its own efforts and for its own account or has otherwise
acquired title thereto; (G) to the best of the Parent's knowledge, the
Parent Owned Software does not infringe any copyright of any other
Person;
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(H) any Parent Owned Software includes the source code, system
documentation, statements of principles of operation and schematics, as
well as any pertinent commentary, explanation, program (including
compilers), workbenches, tools, and higher level (or "proprietary")
language used for the development, maintenance, implementation and use
thereof, so that a trained computer programmer could develop, maintain,
support, compile and use all releases or separate versions of the same
that are currently subject to maintenance obligations by the Parent; and
(i) there are no agreements or arrangements in effect with respect to
the marketing, distribution, licensing or promotion of the Parent Owned
Software by any other Person.
(xi) "Parent Intellectual Property Rights" means any or all of the
following and all rights in, arising out of, or associated therewith,
whether registered or unregistered, as applicable: (i) United States and
foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) inventions and discoveries (whether
or not patentable), disclosures, trade secrets, formulae, methods,
proprietary information, know-how technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) copyrights,
copyright registrations and applications therefor and all other
corresponding rights thereto throughout the world; (iv) industrial
designs and any registrations and applications therefor throughout the
world; (v) trade names, logos, common law trademarks and service marks;
trademark and servicemark registrations and applications therefor and
all goodwill associated therewith throughout the world, (vi) data bases
and data collections and all rights therein throughout the world; (vii)
all Software, all Web addresses, sites and domain names; (viii) any
similar corresponding or equivalent rights to any one of the foregoing;
and (ix) all documentation directly related to any of the foregoing.
(l) Agreements, Contracts and Commitments; Material Contracts. Except
as set forth in the Section 5.2(l) of the Parent Disclosure Schedule, as of
the date of this Agreement, the Parent is not a party to or bound by:
(i) any contract relating to the borrowing of money, the guaranty
of another Person's borrowing of money, or the creation of an
encumbrance or lien on the assets of the Parent and with outstanding
obligations in excess of $100,000;
(ii) any agreement of indemnification or guaranty by the Parent not
entered into in the ordinary course of business other than
indemnification agreements between the Parent and any of its officers or
directors in standard forms as filed by the Parent with the SEC;
(iii) any agreement, contract or commitment containing any covenant
limiting the freedom of the Parent to engage in any line of business or
conduct business in any geographical area, compete with any person;
(iv) any material joint venture, partnership, and other contract
(however named) involving a sharing of profits or losses by the Parent
with any other Person;
(v) any contract for capital expenditures in excess of $50,000;
(vi) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business; or
(vii) any other material contract or agreement of the Parent and
that involves payment of $50,000 or more not otherwise listed in any
other section of the Parent Disclosure Schedule.
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No condition exists or event has occurred which (whether with or without
notice or lapse of time or both, or the happening or occurrence of any other
event) would constitute a default by the Parent of the Parent or, to the
knowledge of the Parent, any other party thereto under, or result in a right in
termination of, any contract listed herein, except as would not, individually or
in the aggregate, result in a Material Adverse Effect on the Parent. Except as
provided for herein, at the Effective Time, no Person will have the right, by
contract or otherwise, to become, nor does any entity have the right to
designate or cause the Parent to appoint a Person as, a director of the Parent.
(m) Listings. The Parent's securities are not listed or quoted for
trading on any U.S. domestic or foreign securities exchange other than the
NASDAQ (as hereafter defined) and the Parent is in material compliance with
the rules and regulations of the NASD with respect to such listing.
(n) Taxes. Other than as disclosed in Section 5.2(n) of the Parent
Disclosure Schedule, (i) Parent and each of its subsidiaries have filed all
Tax Returns required to be filed by it or requests for extensions to file
such Tax Returns have been timely filed, granted and have not expired,
except to the extent that such failures to file or to have extensions
granted that remain in effect do not have a Material Adverse Effect; (ii)
all Tax Returns filed by Parent and each of its subsidiaries are complete
and accurate except to the extent that such failure to be complete and
accurate does not have a Material Adverse Effect; (iii) Parent and each of
its subsidiaries have paid (or Parent has paid on the subsidiaries' behalf)
all Taxes shown as due on such returns (and all Taxes required to be paid
whether or not shown as due on such returns, except to the extent that the
failure to pay unreported Taxes does not have a material Adverse Effect),
and the most recent financial statements contained in the Parent SEC
Reports reflect an adequate reserve, in accordance with GAAP, for all Taxes
payable by Parent and its subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements; (iv) no
deficiencies for any Taxes have been proposed, asserted or assessed against
Parent or any of its subsidiaries that are not adequately reserved for,
except for deficiencies that do not have a Material Adverse Effect, and no
requests for waivers of the time to assess any such Taxes have been granted
or are pending; (v) the Parent has made adequate provisions in the Parent's
books and records for Taxes with respect to its current taxable year; (iv)
there is no claim or assessment pending against Parent or any of its
subsidiaries for any alleged deficiency in Taxes (except for assessments
assessed prior to the date payment is required); and (vii) to the knowledge
of Parent there is no audit or investigation currently being conducted that
could cause Parent or any of its subsidiaries to be liable for any Taxes
and there are no agreements in effect to extend the period of limitations
for the assessment or collection of any tax for which Parent or any of its
subsidiaries may be liable, and (viii) parent is not a party to any
agreement that would require it to make any excess parachute payment
pursuant to Section 280G of the Code. "Tax Returns" means returns, reports
and information statements with respect to Taxes required to be filed with
the IRS or any other federal, state or local taxing authority domestic or
foreign, including without limitation, consolidated, combined unitary and
estimated tax returns.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Conduct of Business of the Company.
(a) The Company covenants and agrees that, during the period from the
date of this Agreement to the Effective Time (unless the Parties shall
otherwise agree in writing and except as otherwise contemplated by this
Agreement) it will conduct its operations according to its ordinary and
usual course of business consistent with past practice and, to the extent
consistent
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therewith, with no less diligence and effort than would be applied in the
absence of this Agreement, seek to preserve intact its current business
organizations, use its best efforts to keep available the service of its
current officers and employees and preserve its relationships with
customers and others having business dealings with it to the end that
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
(b) Without limiting the generality of the foregoing, and except as
otherwise permitted in this Agreement, prior to the Effective Time, the
Company shall not without the prior written consent of Parent, which will
not be unreasonably withheld:
(i) accelerate, amend or change the period of exercisability or
vesting of any outstanding options or other rights granted under the
Company Option Plans, reprice options granted under the Company Option
Plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans, as the case may be, or authorize
cash payments in exchange for any options or other rights granted under
any of such plans, except to the extent required under any Company
Option Plan or any individual agreement as in effect on the date of this
Agreement;
(ii) except for shares to be issued upon (A) exercise of
outstanding options as contemplated pursuant to Section 6.14, (B)
exercise of outstanding warrants, or (C) delivery of the number of
Company Shares to National Financial Communications Corp, doing business
as OTC Financial Network, a Massachusetts corporation ("NFCC"), in
connection with the Company's termination of that certain Consulting
Agreement by and between the Company and NFCC, dated as of November 6,
2000, determined in accordance with the terms and conditions thereof,
issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (1) any additional shares of capital stock of any class,
or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of capital stock, or
any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of capital
stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock, or
(2) any other securities in respect of, in lieu of, or in substitution
for, shares outstanding on the date of this Agreement;
(iii) redeem, purchase or otherwise acquire, or offer to redeem,
purchase or otherwise acquire, any of its outstanding securities
(including the Company Shares), other than the Debentures and Debenture
Warrants (as hereafter defined);
(iv) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock;
(v) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger as provided for herein);
(vi) adopt any amendments to its articles of incorporation or
bylaws or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any of its subsidiaries;
(vii) make any acquisition, by means of merger, consolidation or
otherwise, or dispositions, of assets or securities (except for
acquisitions or dispositions in the ordinary course of business, none of
which are acquisitions or dispositions of businesses);
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(viii) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or
guarantee any such indebtedness or make any loans, advances or capital
contributions to, or investments in, any other Person;
(ix) make or revoke any material Tax election, settle or compromise
any material federal, state, local or foreign Tax liability or change
(or make a request to any taxing authority to change) any material
aspect of its method of accounting for Tax purposes (except for Tax
elections which are consistent with prior such elections (in past
years));
(x) incur any material liability for Taxes other than in the
ordinary course of business;
(xi) incur or commit to incur any capital expenditures in excess of
current budgets for capital expenditures which were provided by the
Company to Parent prior to the date of this Agreement;
(xii) enter into, amend, modify, terminate (partially or
completely), grant any waiver under or give any comment with respect to
any contract or license not consistent with past practices of the
Company;
(xiii) enter into any strategic alliance or joint marketing
arrangement or agreement other than routine alliances, arrangements or
agreements;
(xiv) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) or litigation (whether or not commenced prior
to the date of this Agreement), other than the payment, discharge,
settlement or satisfaction in the ordinary course of business consistent
with past practice;
(xv) except as required by this Agreement or as required to be held
in accordance with a valid stockholder request, call or hold any meeting
of stockholders of the Company;
(xvi) transfer or license to any Person or entity or otherwise
extend, amend or modify any Company Intellectual Property Rights other
than in the ordinary course of business consistent with past practices;
(xvii) make any change to accounting policies or procedures, except
as may be required by GAAP or applicable law;
(xviii) take any action (other than pursuant to this Agreement) to
cause the Company Shares not to be eligible for trading on the OTC;
(xix) take any action to render inapplicable, or to exempt any
third party from, any statute referred to in Section 5.1(v);
(xx) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
(c) Between the date of this Agreement and the Effective Time, the
Company shall not (without the prior written consent of Parent): (A) except
for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not materially increase benefits
or compensation expenses of the Company, or as required by the terms of any
contract disclosed pursuant to this Agreement, increase the compensation,
bonus or other benefits payable or to become payable to any director,
officer, other employee or independent contractor; (B) except as required
to comply with applicable law, pay or agree to pay any pension, retirement
allowance or other employee benefit not provided for by (or in a manner or
at a time not provided in) any of the existing benefit, severance, pension
or employment plans, agreements or arrangements as in effect on the date of
this Agreement to any such director, officer,
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employee or independent contractor, whether past or present; (C) enter into
any new or amend any existing employment or severance agreement with or for
the benefit of any such director, officer, employee or independent
contractor; (D) become obligated under any new pension plan, welfare plan,
multi-employer plan, employee benefit plan, severance plan, benefit
arrangement, or similar plan or arrangement, which was not in existence on
the date of this Agreement, or amend, terminate or change any funding
policies or assumptions for any such plan or arrangement in existence on
the date of this Agreement if such amendment, termination or change would
have the effect of enhancing any benefits thereunder or increasing the cost
thereof to the Company; or (E) increase the total head count of Company in
an amount greater than an increase in the ordinary course of business
consistent with past practice.
(d) Between the date of this Agreement and the Effective Time, the
Company will use commercially reasonable best efforts to maintain in full
force and effect all of its presently existing policies of insurance or
insurance comparable to the coverage afforded by such policies.
6.2 No Solicitation.
(a) The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any Persons conducted heretofore by the Company or any of
its Representatives (as hereafter defined) with respect to any proposed,
potential or contemplated Acquisition Proposal (as hereafter defined).
(b) From and after the date of this Agreement, without the prior
written consent of Parent, the Company will not, will not authorize, and
shall use its reasonable best efforts to cause all of its officers,
directors, employees, financial advisors, agents or representatives (each a
"Representative") not to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) or take any other
action to facilitate any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an Acquisition
Proposal from any Person (a "Third Party"), or engage in any discussion or
negotiations relating thereto or accept any Acquisition Proposal.
(c) Notwithstanding the provisions of Section 6.2(b) above, at any
time prior to obtaining the Company Stockholder Approval as contemplated by
Section 6.3 hereof, the Company may, in response to an unsolicited written
offer or proposal with respect to a potential or proposed Acquisition
Proposal (that does not violate Sections 6.2(a) or (b)) engage in
negotiations or discussions with, or provide information or data to, any
Third Party relating to any Acquisition Proposal if the Company's Board of
Directors determines in good faith, upon advice from outside legal counsel
to the Company, that such Acquisition Proposal constitutes a Superior
Proposal and such action is required to comply with its fiduciary duties
under applicable law. Subject to all of the foregoing requirements, the
Company will immediately notify Parent orally and in writing if any
discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any information is requested by any Third Party with
respect to any Acquisition Proposal or which could lead to an Acquisition
Proposal and immediately notify Parent of all material terms of any
Acquisition Proposal, including the identity of the Third Party making the
Acquisition Proposal or the request for information, if known, and
thereafter shall inform Parent on a timely, ongoing basis of the status and
content of any discussions or negotiations with a Third Party, including
immediately reporting any changes to the terms and conditions of the
Acquisition Proposal.
(d) In the event the Board of Directors of the Company has determined
that any Acquisition Proposal constitutes a Superior Proposal (as
determined in accordance with Section 6.2(c)), (i) the Company shall
promptly notify the Parent thereof and (ii) for a period of five days after
delivery of such notice, the Company and its Representatives, if requested
by
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Parent, shall negotiate in good faith with Parent to make such adjustments
to the terms and conditions of this Agreement as would enable the Company
to proceed with the Merger on such adjusted terms. After such five day
period, the Board of Directors of the Company may then (and only then)
withdraw or modify its approval or recommendation of the Merger and this
Agreement and recommend such Superior Proposal.
(e) The Company agrees not to release any Third Party from, or waive
any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or
who may reasonably be considered likely to make, an Acquisition Proposal or
who the Company or any of its Representatives have had discussions with
regarding a proposed, potential or contemplated Company Acquisition
Transaction unless the Company's Board of Directors shall conclude, in good
faith, that such action will lead to a Superior Proposal and that, after
receiving advice from outside legal counsel to the Company, such action is
required for the Board of Directors to comply with its fiduciary duties
under applicable law.
(f) For purposes of this Agreement:
(i) "Acquisition Proposal" shall mean, with respect to the Company,
any bona fide inquiry, proposal or offer from any Third Party relating
to any (A) direct or indirect acquisition or purchase of a business of
the Company, that constitutes 20% or more of the net revenues, net
income or assets of the Company, (B) direct or indirect acquisition or
purchase of 15% or more of any class of equity securities of the Company
whose business constitutes 20% or more of the net revenues, net income
or assets of the Company, (C) tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more
of the capital stock of the Company, or (D) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or
similar transaction involving the Company whose business constitutes 20%
or more of the consolidated net revenues, net income or assets of the
Company.
(ii) Each of the transactions referred to in clauses (A) through
(D) of the definition of Acquisition Proposal, other than any such
transaction to which Parent or any of its subsidiaries is a party, is
referred to herein as a "Company Acquisition Transaction."
(iii) "Superior Proposal" means any bona fide written offer made by
a Third Party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the Company
Shares then outstanding or all or substantially all the assets of the
Company (i) on terms that the Board of Directors of the Company
determines in its good faith judgment (after taking into account all the
terms and conditions of the offer deemed relevant by such Board of
Directors, including any break-up fees, expense reimbursement
provisions, conditions to consummation, and the ability of the party
making such proposal to obtain financing for such offer) are materially
more favorable from a financial point of view to its stockholders than
the Merger; and (ii) that constitutes a transaction that, in such Board
of Directors' judgment, is reasonably likely to be consummated on the
terms set forth, taking into account all legal, financial, regulatory
and other aspects of such proposal.
(g) Except as expressly permitted by Section 6.2(d), neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors of this
Agreement or the Merger or (ii) approve or recommend, or propose publicly
to approve or recommend, any Acquisition Proposal or Company Acquisition
Transaction. Nothing contained in this Section 6.2 shall prohibit the
Company from taking and
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disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act. The foregoing shall in no way limit or
otherwise effect Parent's right to terminate this Agreement pursuant to
Section 8.4 at such time as the requirements of such Section have been met.
The Company shall seek the written consent of the Majority Stockholders
contemplated by Section 6.3 even if the Board of Directors of the Company
have taken any such action pursuant to this Section 6.2(g)(i) or (ii)
above. Nothing in this Section 6.2 shall (x) permit the Company to
terminate this Agreement, (y) permit the Company to enter into any
agreement with respect to any Acquisition Proposal or (z) affect any other
obligation of the Company under this Agreement.
6.3 Company Stockholders Meeting. Subject to Section 6.2(d), the Company
shall take all action necessary in accordance with applicable law and its
articles of incorporation and bylaws to convene, and will convene, a meeting of
its stockholders (the "Company Stockholder Meeting") as promptly as practicable
to consider and vote upon the approval of the Merger. Subject only to Section
6.2(d), the Board of Directors of the Company shall recommend and shall declare
advisable such approval (the "Company Stockholder Approval"). Unless the Board
of Directors of the Company has withdrawn its recommendation of this Agreement
in compliance herewith, the Company shall use its best efforts to solicit from
its stockholders proxies in favor of the approval and adoption of this Agreement
and the Merger and to secure the vote or consent of stockholders required by the
WBCA and its articles of incorporation and bylaws to approve and adopt this
Agreement and the Merger.
6.4 S-3 Registration Statement and S-4 Registration Statement; Proxy
Statement. Parent will, as promptly as practicable, prepare and file with the
SEC (i) a registration statement on Form S-3 (the "S-3 Registration Statement"),
in connection with the registration under the Securities Act of the Parent
Shares issuable after conversion of the Company Shares to the holders of the
Company Shares listed on Schedule 6.4 hereto, containing a resale prospectus for
such Parent Shares, and (ii) a registration statement on Form S-4 (the "S-4
Registration Statement"), containing a proxy statement/prospectus, in connection
with the registration under the Securities Act of the Parent Shares issuable
upon conversion of the Company Shares and the other transactions contemplated
hereby. The Company and Parent will, as promptly as practicable, prepare and
file with the SEC a proxy statement that will be the same proxy
statement/prospectus contained in the S-4 Registration Statement (such proxy
statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to the Company's stockholders,
is herein called the "Proxy Statement"). The Company and Parent will, and will
cause their accountants and lawyers to, use their reasonable best efforts to
have or cause each of the Registration Statements declared effective as promptly
as practicable, including, without limitation, causing their accountants to
deliver necessary or required instruments such as opinions, consents and
certificates, and will take any other action required or necessary to be taken
under federal or state securities laws or otherwise in connection with the
registration process. The Company will use its best efforts to cause the Proxy
Statement to be mailed to its stockholders at the earliest practicable date and
will coordinate and cooperate with Parent with respect to the timing of such
mailing. Parent shall also take any action required to be taken under state
"blue sky" or other securities laws in connection with the issuance of Parent
Shares in the Merger and pursuant to the S-3 Registration Statement.
6.5 Listing Application. Parent shall as soon as practicable prepare and
submit to the Nasdaq Stock Market National Market ("NASDAQ") a listing
application with respect to the Parent Shares issuable in the Merger, and shall
use its reasonable best efforts to obtain, prior to the Effective Time, approval
for the listing of such Parent Shares on such exchange, subject to official
notice of issuance.
6.6 Access to Information. Upon reasonable notice, the Company shall
afford to officers, employees, counsel, accountants and other authorized
representatives of the Parent (the "Authorized
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Representatives") reasonable access, during normal business hours throughout the
period prior to the Effective Time, to its properties, assets, books and records
and, during such period, shall furnish promptly to such Authorized
Representatives all information concerning its business, properties, assets and
personnel as may reasonably be requested for purposes of appropriate and
necessary due diligence, provided that no investigation pursuant to this Section
6.6 shall affect or be deemed to modify any of the representations or warranties
made by the Company.
6.7 Publicity. The Parties agree that they will consult with each other
concerning any proposed press release or public announcement pertaining to this
Agreement or the Merger in order to agree upon the text of any such press
release or the making of such public announcement, which agreement shall not be
unreasonably withheld, except as may be required by applicable law or by
obligations pursuant to any listing agreement with a national securities
exchange or national automated quotation system, in which case the Party
proposing to issue such press release or make such public announcement shall use
its reasonable best efforts to consult in good faith with Parent or the Company,
as applicable, before issuing any such press release or making any such public
announcement. Notwithstanding the foregoing, in the event the Board of Directors
of the Company withdraws its recommendation of this Agreement in compliance
herewith, neither Party will be required to consult with or obtain the agreement
of the other in connection with any press release or public announcement.
6.8 Indemnification of Directors and Officers.
(a) From and after the Effective Time, Parent shall, and in addition
shall cause the Surviving Corporation to, indemnify, defend and hold
harmless the present and former officers and directors of the Company (each
an "Indemnified Party") against all losses, expenses (including reasonable
attorneys' fees), claims, damages or liabilities and amounts paid in
settlement in accordance with the terms of this Section 6.8 arising out of
actions or omissions occurring on or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted by law, including as provided for in
their respective certificates of incorporation or bylaws (or comparable
organizational documents) as in effect as of the Effective Time (and shall
also advance expenses as incurred to the fullest extent permitted under
applicable law, provided that, if required under applicable law, the Person
to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification). Without limiting the foregoing, Parent acknowledges and
agrees that, to the extent permitted by Delaware law, it shall indemnify
and hold harmless, from and after the Effective Time, the officers and
directors of the Company from and against any claim that they have breached
the fiduciary duty to the Company or its shareholders as a result of their
approval of this Agreement and the transactions contemplated thereby. The
articles of incorporation and bylaws of the Surviving Corporation shall
contain, and Parent shall cause the Surviving Corporation to fulfill and
honor, provisions with respect to indemnification and exculpation that are
at least as favorable to the Indemnified Parties as those set forth in the
articles of incorporation and bylaws of the Company as of the date of this
Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of three (3) years from the Effective Time in any
manner that would adversely affect the rights thereunder of any of the
Indemnified Parties.
(b) Parent shall cause the Surviving Corporation to maintain in effect
for not less than three (3) years the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained
by the Company, Parent and their subsidiaries with respect to matters
occurring prior to the Effective Time; provided, however, that Parent may
substitute therefor policies covering the Indemnified Parties with coverage
in amount and scope
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substantially similar to such existing policies; provided further, that in
no event shall Parent be required to pay aggregate premiums for insurance
under this Section 6.8(b) in excess of 125% of amount of aggregate premiums
paid by the Company in 2000 on the annualized basis for such purpose.
(c) If Parent or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) shall transfer all or substantially
all of its properties and assets to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so that
the successors and assigns of Parent or the Surviving Corporation shall
assume all of the obligations set forth in this Section 6.8.
6.9 Affiliates. The Company shall deliver to Parent a letter identifying
all persons who may be deemed at the time this Agreement is submitted for
adoption by the stockholders of the Company, "affiliates" of the Company for
purposes of Rule 145 under the Securities Act ("Company Affiliates"), and such
list shall be updated as necessary to reflect changes from the date thereof.
6.10 Maintenance of Insurance. Between the date of this Agreement and
through the Effective Time, Company shall use commercially reasonable best
efforts to maintain in full force and effect all of its presently existing
policies of insurance comparable to the coverage afforded by such policies.
6.11 Representations and Warranties. Each of the Company and Parent shall
give prompt notice to the other of any circumstances that would cause any of
their respective representations and warranties set forth in Section 5.1 or 5.2,
as the case may be, not to be true and correct in all material respects at and
as of the Effective Time; provided, that delivery of such notice shall not cure
or be deemed to cure any breach of a representation or warranty.
6.12 Filings; Reasonable Best Efforts to Consummate Transactions. Subject
to the terms and conditions herein provided, the Parties shall: (a) promptly
make their respective filings and thereafter make any other required submissions
under the HSR Act (if any), the Securities Act, the Exchange Act, and any other
applicable law with respect to this Agreement and the transactions contemplated
hereby; (b) cooperate in the preparation of such filings or submissions; and (c)
use their reasonable best efforts promptly to take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement as soon as practicable.
6.13 Tax-Free Reorganization Treatment. It is intended that the Merger be
treated as a reorganization within the meaning of Section 368 of the Code. Prior
to the Effective Time, the Parties shall use their reasonable best efforts to
cause the Merger to be treated as a reorganization within the meaning of Section
368 of the Code and to obtain the opinion of their respective counsels
contemplated by Section 7.1(f) and shall not knowingly take or fail to take any
action which action or failure to act would jeopardize the qualification of the
Merger as a reorganization within Section 368 of the Code. After the Effective
Time, the Parties will take tax positions consistent with the qualification of
the Merger as a tax-free reorganization.
6.14 Company Options. The Company shall, (i) encourage each holder of a
Company Option that is vested (or vests before the Effective Time) to exercise
that Company Option as soon as practicable before the Effective Time pursuant to
the terms and conditions of the Company Option Plan governing it or any other
agreement granting that Company Option and (ii) terminate each Company Option
(whether vested or unvested), if any, that is not exercised on or before the
Effective Time, as of the Effective Time, on terms and conditions satisfactory
to Parent. Prior to the
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Effective Time, Company shall deliver to Parent, in form reasonably satisfactory
to Parent, evidence that each holder's rights pursuant to the Company Option
Plans and Company Options granted thereunder to acquire Company Shares or to
receive any other compensation shall be terminated or cancelled and will be of
no further force or effect, from and after the Effective Time.
6.15 Accountant's Comfort Letters.
(a) The Company shall use reasonable best efforts to cause Xxxxxx &
Co., the Company's independent public accountants, to deliver to Parent two
letters, one dated approximately the date on which the Registration
Statements shall become effective and one dated the Closing Date, in form
reasonably satisfactory to Parent and customary in scope for comfort
letters delivered by independent public accountants in connection with
Registration Statements.
(b) Parent shall use reasonable best efforts to cause
PricewaterhouseCoopers LLC, the Parent's independent public accountants, to
deliver to the Company two letters, one dated approximately the date on
which the Registration Statements shall become effective and one dated the
Closing Date, in form reasonably satisfactory to the Company and customary
in scope for comfort letters delivered by independent public accountants in
connection with Registration Statements.
6.16 Debentures. The Company shall have (i) complied with all redemption
obligations of the Debentures (including, without limitation, the monthly
redemption of US$50,000 of principal and accrued interest) and (ii) used
reasonable efforts to redeem in full all amounts due and owing (including,
without limitation, the outstanding principal and interest) to the holders of
the Debentures, each as of and including the date of repayment in accordance
with the terms of the Debenture or pursuant to terms and conditions reasonably
satisfactory to Parent; provided however that the Company's obligations to make
any redemption in excess of existing obligations of the Company shall be subject
to the availability of resources therefor provided by any Person, including the
Parent, on terms reasonably satisfactory to the parties hereto or in accordance
with Section 6.22 below.
6.17 Employee Benefits. From and after the Effective Time until the
one-year anniversary thereof, Parent shall, or shall cause the Surviving
Corporation to, offer to the employees of the Surviving Corporation employee
benefit plans, policies and programs substantially equivalent to all such plans,
policies or programs currently offered to employees of the Company as listed on
the Company Scheduled Plans.
6.18 Company Warrants. After the Effective Time, each Substitute Warrant
shall be subject to the same terms and conditions as were applicable under the
related Company Warrant immediately prior to the Effective Time. The Company
agrees that it will not grant any warrants and will not permit cash payments to
holders of Company Warrants in lieu of the substitution therefor of Substitute
Warrants, as described herein without the prior consent of the Parent which
shall not be unreasonably withheld. As soon as practicable after the Effective
Time, Parent shall deliver to each holder of a Company Warrant an appropriate
notice setting forth such holder's rights pursuant to the Company Warrant
Agreements and such holder's rights to acquire Parent Shares and the agreement
of such holder evidencing the grants of such Company Warrants shall be deemed to
be appropriately amended so that such Company Warrants shall represent rights to
acquire Parent Shares on substantially the same terms and conditions as
contained in the outstanding Company Warrants (subject to the adjustments
required by Section 4.1 after giving effect to the Merger and the terms of the
Company Warrant Agreements).
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6.19 Voting Agreement. The Parent shall have received from Xxxxxx X.
Xxxxxx an executed Voting Agreement no later than February 14, 2001, in form and
substance reasonably satisfactory to Parent.
6.20 Business of Parent Pending Closing. During the period between the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Parent covenants and agrees that unless
the Company shall otherwise agree in writing, which agreement shall not
unreasonably be withheld, and except as contemplated by this Agreement:
(i) Parent shall use its reasonable efforts to preserve substantially
intact the assets and business of the Parent and its subsidiaries;
(ii) Parent shall not materially amend or otherwise change its
Certificate of Incorporation or By-Laws; and
(iii) Parent shall not declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof or any rights to acquire same) in respect of any of its capital
stock, other than regular cash dividends consistent with past practice.
6.21 Fairness Opinion. The Company shall retain a reputable appraiser or
investment banker (the "Company Financial Adviser") to render a written opinion
to the effect that as of the date of the Agreement and based upon and subject to
the matters stated herein, the Exchange Ratio is fair from a financial point of
view to the holders of the Company Shares. The Company shall obtain the
authorization of the Company Financial Advisor to permit the inclusion of such
opinion in the S-4 Registration Statement and Proxy Statement.
6.22 Parent Redemption of Debentures.
(a) At any time after the date of this Agreement prior to the
termination of this Agreement, the Parent may, in its sole discretion,
redeem in full all amounts due and owing to the holders of the Debentures,
on terms and conditions satisfactory to the Parent.
(b) In the event the Parent redeems in full all amounts due and owing
to the holders of the Debentures, the Company hereby agrees (i) to
immediately issue to the Parent debentures and debenture warrants in
amounts and on terms and conditions substantially the same as those
currently in force and effect relating to the Debentures and Debentures
Warrants, and (ii) to use reasonable efforts to facilitate any such
redemption.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction or waiver by
each of the Parties of the following conditions:
(a) this Agreement and the Merger shall have been approved by the
stockholders of the Company in accordance with the WBCA;
(b) the Registration Statements shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statements shall have been
issued by the SEC and remain in effect;
(c) no judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court
or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition shall be in effect which (i) has the effect of
making the consummation of the Merger or the other transaction contemplated
hereby illegal,
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(ii) materially restricts, prevents or prohibits consummation of the Merger
or any of the transactions contemplated hereby or (iii) would impair the
ability of Parent to own the outstanding shares of the Surviving
Corporation, or operate its businesses (including the businesses of the
Surviving Corporation), following the Effective Time (collectively,
"Restraints"); and there shall not be pending any suit, action or
proceeding by any Governmental Entity or third party which would have any
of the foregoing effects; provided, however, that each of the parties shall
have used their reasonable best efforts to prevent the entry of such
Restraints and to appeal as promptly as possible any such Restraints that
may be entered;
(d) the waiting period(s) under the HSR Act, if applicable, shall have
expired;
(e) no Governmental Entity, nor any federal or state court of
competent jurisdiction or arbitrator shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, judgment, injunctions or arbitration award or finding
(whether temporary, preliminary or permanent), in any case which is in
effect and which prevents or prohibits the consummation of the Merger or
any other transactions contemplated in this Agreement;
(f) each of Parent and the Company shall have received a written
opinion from its respective tax counsel (PricewaterhouseCoopers LLP and
Snow Xxxxxx Xxxxxx P.C., respectively), in form and substance reasonably
satisfactory to them, to the effect that the Merger will be treated for
federal income tax purposes as a tax-free reorganization within the meaning
of Section 368(a) of the Code and such opinions shall not have been
withdrawn. The issuance of such opinion shall be conditioned upon the
receipt by such tax counsel of customary representation letters from
Parent, the Company and Merger Sub in form and substance reasonably
satisfactory to such tax counsel;
(g) the Parent Shares to be issued pursuant to the Merger shall have
been duly approved for trading on the NASDAQ, subject to official notice of
issuance;
(h) Company and Xxxxxxx Xxxxxx shall have executed an employment
agreement substantially in the form of Exhibit C hereto; and
(i) Company and Xxxxx Xxxxxx shall have executed an employment
agreement substantially in the form of Exhibit D hereto.
7.2 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger also are subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by the Company to the extent
permitted by applicable law:
(a) the representations and warranties of Parent set forth in Section
5.2 that are qualified as to materiality or Material Adverse Effect shall
be true and correct, and such representations and warranties that are not
so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement, and as of the Effective Time with
the same force and effect as if made on and as of the Effective Time
(except to the extent expressly made as of an earlier date, in which case
as of such date), in each case except as permitted or contemplated by this
Agreement;
(b) Parent and its subsidiaries shall have performed or complied in
all material respects with its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the
Effective Time;
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(c) Parent shall have delivered to the Company a certificate of its
Chief Executive Officer and Chief Financial Officer to the effect that each
of the conditions specified in clauses (a), (b) and (d) of this Section 7.2
is satisfied;
(d) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which results in a Material Adverse
Effect on Parent;
(e) Parent shall have made available incentive compensation not less
than (i) $110,000 and (ii) options to purchase 37,000 shares of Parent
Shares, each in the aggregate, to be offered to specific key employees of
the Company determined by the Parent, after consultation with the Company's
president at such time of issuance or grant, and which shall be issued or
granted, as the case may be, based on performance, on terms and conditions
reasonably satisfactory to Parent.
7.3 Additional Conditions to the Obligations of Parent. The obligations
of Parent to consummate the Merger also are subject to the fulfillment at or
prior to the Effective Time of the following conditions, any or all of which may
be waived in whole or in part by Parent to the extent permitted by applicable
law:
(a) the representations and warranties of the Company set forth in
Section 5.1 that are qualified as to materiality or Material Adverse Effect
shall be true and correct, and such representations and warranties that are
not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement, and as of the Effective Time
with the same force and effect as if made on and as of the Effective Time
(except to the extent expressly made as of an earlier date, in which case
as of such date), in each case except as permitted or contemplated by this
Agreement;
(b) the Company shall have performed or complied in all material
respects with its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(c) the Company shall have delivered to Parent a certificate of its
Chief Executive Officer and Chief Financial Officer to the effect that each
of the conditions specified in clauses (a), (b) and (d) of this Section 7.3
is satisfied;
(d) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which results in a Material Adverse
Effect on the Company;
(e) Xxxxxxx Xxxxxx shall have entered into the Xxxxxx Employment
Agreement;
(f) Xxxxx Xxxxxx shall have entered into the Xxxxxx Employment
Agreement;
(g) Xxxxxxx Xxxxxx shall have entered into a Lock-Up Agreement
substantially in the form of Exhibit E hereto (a "Lock-Up Agreement");
(h) Xxxxx Xxxxxx shall have entered into a Lock-Up Agreement; and
(i) holders of Company Shares owing an aggregate percentage interest
of no more than five percent (5%) of the outstanding Company Shares on the
date of this Agreement shall have given written notice to the Company of
such stockholder's wish to assert their respective right to elect to
exercise its appraisal rights with respect to the Merger, as provided in
the WBCA.
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ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by the
mutual written consent of the Company and Parent.
8.2 Termination by either the Company or Parent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by action of the Board of Directors of either the Company or Parent if:
(a) the Merger shall not have been consummated by August 31, 2001;
provided, however, that the right to terminate this Agreement under this
Section 8.2(a) shall not be available to any Party whose failure to fulfill
any obligation under this Agreement or the Voting Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date; or
(b) if any Restraint shall be in effect and shall have become final
and nonappealable; provided, however, that the right to terminate this
Agreement -- under this Section 8.2(b) shall not be available to any Party
who fails to use reasonable best efforts to remove such Restraint before it
becomes final and nonappealable.
8.3 Termination by the Company. This Agreement may be terminated upon
written notice to Parent, and the Merger may be abandoned, at any time prior to
the Effective Time, by action of the Board of Directors of the Company, if (A)
Parent shall have breached or failed to perform any of the representations,
warranties, covenants or other agreements contained in this Agreement, or if any
representation or warranty of Parent shall have become untrue, in either case
such that (i) the condition set forth in Section 7.2(a) or (b) would not be
satisfied as of the time of such breach or as of such time as such
representation or warranty shall have become untrue and (ii) such breach or
failure to be true has not been or is incapable of being cured within twenty
(20) business days following receipt by Parent of notice of such breach or
failure to comply or (B) all of the Debentures shall not have been redeemed
within 90 days after the date of this Agreement unless such failure to redeem is
the result of the failure of the Company to make such redemption either (i) at a
time when it has or has been provided by any Person, including the Parent, the
resources therefor or (ii) in violation of Section 6.16.
8.4 Termination by Parent. This Agreement may be terminated upon written
notice to the Company, and the Merger may be abandoned, at any time prior to the
Effective Time, by action of the Board of Directors of Parent, if:
(a) the Company shall have breached or failed to perform any of the
representations, warranties, covenants or other agreements contained in
this Agreement, or if any representation or warranty of the Company shall
have become untrue, in either case such that (i) the condition set forth in
Section 7.3(a) or (b) would not be satisfied as of the time of such breach
or as of such time as such representation or warranty shall have become
untrue and (ii) such breach or failure to be true has not been or is
incapable of being cured within twenty (20) business days following receipt
by the breaching Party of notice of such breach or failure to comply; or
(b) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent its approval
or recommendation of the Merger or this Agreement, (ii) the Company shall
have failed to include in the Proxy Statement the recommendation of the
Board of Directors of the Company in favor of approval to the Merger and
this Agreement, (iii) the Board of Directors of the Company or any
committee thereof shall have recommended any Acquisition Proposal, (iv) the
Company or any of its officers or directors shall have entered into
discussions or negotiations in violation of Section 6.2,
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(v) the Company shall enter into an agreement to consummate a Company
Acquisition Transaction, (vi) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing or (vii)
any Company Acquisition Transaction is consummated.
8.5 Effect of Termination; Termination Fee.
(a) Except as set forth in this Section 8.5, in the event of
termination of this Agreement by either Parent or the Company as provided
in this Article VIII, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of the Parties or their
respective affiliates, officers, directors or stockholders except (x) with
respect to the payment of expenses pursuant to Section 9.1, (y) to the
extent that such termination results from the willful breach of a Party of
any of its representations or warranties, or any of its covenants or
agreements or (z) with respect to intentional or knowing misrepresentation
in connection with this Agreement or the transactions contemplated hereby.
(b) Company Termination Fee.
(i) If this Agreement is terminated by the Company for any reason
other than as set forth in Sections 8.2 or 8.3 or any actions related
thereto, or if this Agreement is terminated by Parent pursuant to
Section 8.4, then the Company shall pay Parent a fee equal to the
greater of (A) in the event that any Company Acquisition Transaction is
consummated, 50% of the difference between (1) the fair market value of
all consideration, including cash and/or securities, received from a
Third Party for the Company Shares in any Company Acquisition
Transaction and (2) $12,000,000, or (B) $2,000,000 (the "Company
Termination Fee").
(ii) The Company Termination Fee shall be payable by wire transfer
of immediately available funds upon such termination of this Agreement.
(c) Parent Termination Fee. If this Agreement is terminated by Parent
for any reason other than as set forth in Sections 8.2 or 8.4, or if this
Agreement is terminated by the Company by reason of Section 8.3, then
Parent shall pay Company a fee equal to $2,000,000 (the "Parent Termination
Fee").
(d) Each Party acknowledges that the agreements contained in Sections
8.5(b) and (c) are an integral part of the transactions contemplated by
this Agreement, and that without these agreements, the other Party would
not enter into this Agreement, and accordingly, if either (i) the Company
fails to pay the Company Termination Fee when due pursuant to Section
8.5(b), or (ii) the Parent fails to pay the Parent Termination Fee when due
pursuant to Section 8.5(c), then such amount shall be payable with interest
at the prime rate announced by Citibank, N.A. in effect from the date such
payment was required to be made to the date of payment. If the
non-terminating Party commences suit which results in a judgment against
the terminating Party for payment pursuant to Sections 8.5(b) or (c), then
the terminating Party shall pay the non-terminating Party its costs and
expenses (including reasonable attorneys' fees and expenses) in connection
with such suit.
(e) Sole Remedy. If this Agreement is terminated under circumstances
in which either the Company is entitled to receive the Parent Termination
Fee, or the Parent is entitled to receive the Company Termination Fee, then
the payment of such Company Termination Fee, or Parent Termination Fee, as
applicable, shall be the sole and exclusive remedy available, except in the
event of (x) a willful breach by one Party of any provision of this
Agreement, or (y) the intentional or knowing misrepresentation by one Party
in connection with this Agreement or the transactions contemplated hereby,
in which event the other Party shall have all rights, powers
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and remedies against such Party which may be available at law or in equity.
All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not
alternative, and the exercise of any such right, power or remedy by any
Party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such Party.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Payment of Expenses. Whether or not the Merger shall be consummated,
each Party shall pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby, provided that the Surviving Corporation shall pay any and
all property or transfer taxes imposed on the Surviving Corporation. The filing
fee and the cost of printing the S-4 Registration Statement and the Proxy
Statement and the filing fee for the required filing under the HSR Act, if any,
shall be borne equally by the Company and Parent. The filing fee and the cost of
printing the S-3 Registration Statement shall be borne solely by the Parent.
9.2 Non-Survival of Representations and Warranties. The representations
and warranties made herein shall not survive beyond the Effective Time or a
termination of this Agreement, except to the extent a willful breach of such
representation or intentional or knowing misrepresentation formed the basis for
such termination. This Section 9.2 shall not limit any covenant or agreement of
the Parties which by its terms contemplates performance after the Effective
Time.
9.3 Modification or Amendment. Subject to the applicable provisions of
the DGCL and WBCA, at any time prior to the Effective Time, the parties hereto,
by resolution of their respective Board of Directors, may modify or amend this
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective Parties; provided, however, that after the approval
of the Merger by the requisite approval of the Company's stockholders, no
amendment which requires further stockholder approval shall be made without such
approval of such stockholders.
9.4 Waiver of Conditions. The conditions to each of the Parties'
obligations to consummate the Merger are for the sole benefit of such Party and
may be waived by such Party in whole or in part to the extent permitted by
applicable law.
9.5 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
9.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
9.7 Notices. Any notice, request, instruction or other document to be
given hereunder by any Party to the other Parties shall be deemed delivered upon
actual receipt and shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, reputable overnight courier, or
by facsimile transmission (with a confirming copy sent by reputable overnight
courier), as follows:
(a) if to Parent or Merger Sub, to:
PLATO Learning, Inc.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxx
Facsimile: (000)000-0000
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with a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile: (000)000-0000
(b) if to the Company, to:
Wasatch Interactive Learning Corporation
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000)000-0000
with a copy to:
Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
Facsimile: (000)000-0000
or to such other Persons or addresses as may be designated in writing by the
Party to receive such notice.
9.8 Entire Agreement; Assignment. This Agreement, including the
Disclosure Schedules and the Exhibits attached hereto, (i) constitutes the
entire agreement among the Parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the Parties or any of them with respect to the subject matter hereof, and
(ii) shall not be assigned by operation of law or otherwise.
9.9 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article IV hereof,
is intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the provisions of Section 6.8 shall inure to the benefit
of and be enforceable by the Indemnified Parties.
9.10 Certain Definitions. As used herein the following terms shall have
the following meanings and, unless the context otherwise requires, use of the
singular form shall include the plural and any gender shall be deemed to include
both genders:
(a) "Debentures" means those certain 7% convertible debentures due
March, 2003 of the Company in the aggregate principal amount of $4,000,000.
(b) "Debenture Warrants" means those certain warrants issued March 16,
2000 to purchase 196,078 shares of Company Shares issued in connection with
the Debentures.
(c) "ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
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(x) "Governmental Entity" means the United States or any
supranational, national, state, municipal, local or foreign government, or
any instrumentality, division, subdivision, court, agency, department or
authority of any thereof or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority.
(e) "Knowledge" with respect to a Party hereto shall mean the actual
knowledge of any of the executive officers of such Party.
(f) "Material Adverse Effect" shall mean, with respect to any Person,
any change, circumstance, event or effect that individually or in the
aggregate with all other changes, circumstances, events or effects (i) is
or is reasonably likely to be materially adverse to the business,
operations, financial condition, results of operations or prospects of such
Person and its subsidiaries taken as a whole or (ii) will, or would be
reasonably likely to, prevent or materially impair such Person's ability to
consummate the Merger or the other transactions contemplated by this
Agreement.
(g) "Parent Share Market Value" means the volume-weighted average of
the closing prices of the Parent Shares on the NASDAQ National Market
System on each of the 5 trading days ending on (and including) the date
immediately prior to the Closing Date.
(h) "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated association, corporation, subsidiary,
entity or Governmental Entity.
(i) "Plan Affiliate" means any corporation, trade or business that is
a member of a controlled group of corporations, a group of trades or
businesses under common control, or an affiliated service group, as
described in Sections 414(b), (c), (m) and (o) of the Code, which the
Company is also a member.
(j) "Significant Tax Agreement" is any agreement to which any Party or
any subsidiary of any Party is a party under which such Party or such
subsidiary could reasonably be expected to be liable to another party under
such agreement in an amount in excess of $25,000 in respect of Taxes
payable by such other party to any taxing authority.
(k) "Software" means all computer software and subsequent versions
thereof, including but not limited to, source code, firmware, development
tools, object code, objects, comments, screens, user interfaces, report
formats, templates, menus, buttons and icons, and all files, recording
data, materials manuals, design notes and other items and documentation
related thereto or associated therewith and all media which any of the
foregoing is recorded.
(l) "subsidiary" shall mean, when used with reference to any entity,
any entity fifty percent (50%) or more of the outstanding voting securities
or interests of which are owned directly or indirectly by such former
entity.
(m) "Tax" or "Taxes" refers to any and all federal, state, local and
foreign, taxes, assessments and other governmental charges, duties,
impositions and liabilities relating to taxes, including taxes based upon
or measured by gross receipts, net or gross income, capital gains, profits,
license, capital, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, goods and
services, excise, severance, stamp, premium, windfall profits, customs,
duties, property or other taxes, together with all interest, penalties and
additions imposed with respect to such amounts and including any liability
for taxes of a predecessor entity.
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9.11 Obligations of Subsidiary. Whenever this Agreement requires any
subsidiary of a Party to take any action, such requirement shall be deemed to
include an undertaking on the part of such Party to cause such subsidiary to
take such action.
9.12 Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
9.13 Specific Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any Party may
have under this Agreement or otherwise.
9.14 Trial by Jury. Each of the Parties hereto hereby irrevocably and
unconditionally waives any right it may have to trial by jury in connection with
any litigation arising out of or relating to this Agreement, the Voting
Agreement or Merger or any of the other transactions contemplated hereby or
thereby.
9.15 Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Parties hereto and shall be effective as of
the date first herein above written.
PLATO LEARNING, INC.
By: /s/ XXXX XXXXXX
----------------------------------
Name: Xxxx Xxxxxx
Title: President and Chief
Executive Officer
WILC ACQUISITION CORPORATION
By: /s/ XXXX XXXXXX
----------------------------------
Name: Xxxx Xxxxxx
Title: President and Chief
Executive Officer
WASATCH INTERACTIVE LEARNING
CORPORATION
By: /s/ XXXXXXX XXXXXX
----------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
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