EXHIBIT 2.1
AGREEMENT
and
PLAN OF MERGER
by and among
TUMBLEWEED COMMUNICATIONS CORP.,
KEYHOLE ACQUISITION CORP.
and
WORLDTALK COMMUNICATIONS CORPORATION
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
18, 1999, by and among Tumbleweed Communications Corp., a Delaware
corporation ("Parent"), Keyhole Acquisition Corp., a Delaware corporation
and a direct wholly owned subsidiary of Parent ("Sub"), and Worldtalk
Communications Corporation, a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent and Sub have approved, and
deem it advisable and in the best interests of their respective
stockholders to consummate, a strategic business combination between the
Company and Parent upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of the Company, having determined that
such combination is desirable, has approved the transactions contemplated
by this Agreement and the Ancillary Agreements (as defined below);
WHEREAS, as a condition and inducement to Parent's and Sub's
willingness to enter into this Agreement and incur the obligations set
forth herein, concurrently with the execution and delivery of this
Agreement, (i) Parent and certain stockholders of the Company identified in
Schedule A hereto have entered into a Voting Agreement in the form of
Exhibit A hereto (the "Company Stockholders Agreements"), pursuant to
which, among other things, such stockholders agree to vote in favor of
approval and adoption of this Agreement; (ii) the Company and certain key
employees of the Company identified in Schedule B hereto have entered into
non-competition agreements (the "Non-Competition Agreements") in the form
of Exhibit B-1 hereto, and employment agreements (the "Employment
Agreements") in the form of Exhibit B-2 hereto, the effectiveness of which
are conditioned upon the consummation of the transactions contemplated
hereby; and (iii) Parent and the Company have entered into an Option
Agreement in the form of Exhibit C hereto (the "Option Agreement"),
pursuant to which, among other things, the Company grants to Parent an
option to purchase newly issued shares of Company Common Stock representing
19.9% of the total outstanding shares of Company Common Stock;
WHEREAS, as a condition and inducement to the Company's willingness to
enter into this Agreement and incur the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, (i) the
Company and certain stockholders of Parent identified in Schedule D hereto
have entered into a Voting Agreement in the form of Exhibit D hereto (the
"Parent Stockholders Agreements"), pursuant to which, among other things,
such stockholders agree to vote in favor of approval and adoption of this
Agreement (the Company Stockholders Agreements, the Parent Stockholders
Agreements, the Non-Competition Agreements, the Employment Agreements and
the Option Agreement are collectively referred to herein as the "Ancillary
Agreements");
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger (as defined in Section 1.1 hereof) shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the "Code"), and this Agreement is intended to be and is
adopted as a plan of reorganization within the meaning of Section 368 of
the Code; and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a "pooling of interests" in conformity with generally
accepted accounting principles, as described in Accounting Principles Board
Opinion No. 16 and the applicable rules and regulations of the SEC.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements, and other good and
valuable consideration, set forth herein and in the Ancillary Agreements,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), the
Company and Sub shall consummate a merger (the "Merger") pursuant to which
(a) Sub shall be merged with and into the Company and the separate
corporate existence of Sub shall thereupon cease, (b) the Company shall be
the successor or surviving corporation (the "Surviving Corporation") in the
Merger and shall continue to be governed by the laws of the State of
Delaware and (c) the separate corporate existence of the Company, with all
its rights, privileges, immunities, powers and franchises, shall continue
unaffected by the Merger.
Pursuant to the Merger, (a) the Certificate of Incorporation of Sub,
as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation, and (b)
the By-laws of Sub, as in effect immediately prior to the Effective Time,
shall be the By-laws of the Surviving Corporation until thereafter amended
as provided by law, such Certificate of Incorporation and such By-laws. The
Merger shall have the effects set forth in the Delaware General Corporation
Law (the "DGCL").
Section 1.2 Effective Time. Parent, Sub and the Company will cause a
certificate of merger (the "Certificate of Merger") in the form of Exhibit
E hereto, to be filed on the Closing Date (as defined in Section 1.3
hereof) (or on such other date as Parent and the Company may agree) with
the Secretary of State of the State of Delaware (the "Secretary of State")
as provided in the DGCL. The Merger shall become effective on the date on
which the Certificate of Merger pursuant to Section 251 of the DGCL and any
other documents necessary to effect the Merger in accordance with the DGCL
are duly filed with the Secretary of State (the "Merger Filing") or such
time as is agreed upon by the parties and specified in the Certificate of
Merger, and such time is hereinafter referred to as the "Effective Time."
Section 1.3 Closing. The closing of the Merger (the "Closing") will
take place at 8:00 a.m., Pacific Standard Time, on a date to be specified
by the parties, which shall be no later than the second business day after
satisfaction or waiver of all of the conditions set forth in Article VI
hereof (the "Closing Date"), at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, 000 Xxxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or
such other date or place as agreed to in writing by the parties hereto.
Section 1.4 Directors and Officers of the Surviving Corporation. The
directors and officers of the Sub at the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of
the Surviving Corporation until their successors shall have been duly
elected or appointed or qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's Certificate of
Incorporation and By-laws.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares.
(a) Each share of common stock, par value $.01 per share ("Company
Common Stock"), of the Company issued and outstanding immediately prior to
the Effective Time (other than any Shares to be canceled pursuant to
Section 2.1(c) hereof) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive 0.26 (the "Exchange Ratio") of a fully paid and nonassessable share
(the "Merger Consideration") of common stock, par value $.001 per share, of
Parent (the "Parent Common Stock").
(b) Each share of common stock, par value $.001 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Parent, be
converted into one fully paid and nonassessable share of common stock, par
value $.001 per share, of the Surviving Corporation.
(c) Any shares of Company Common Stock that are owned by Parent, Sub
or any other wholly owned Subsidiary (as defined in Section 3.1) of Parent
shall be canceled and retired and shall cease to exist and no Parent Common
Stock or other consideration shall be delivered in exchange therefor.
(d) On and after the Effective Time, holders of certificates (the
"Certificates"), which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock, shall cease to have any rights
as stockholders of the Company, except the right to receive, subject to
Section 2.5 hereof, the Merger Consideration (and cash in lieu of any
fractional share as contemplated by Section 2.3) for each share of Company
Common Stock held by them.
Section 2.2 Surrender of Certificates. At or promptly after the
Effective Time, Parent shall make available to Equiserve L.P., or a bank
reasonably acceptable to the Company (the "Exchange Agent"), in trust for
the benefit of the holders of shares of Company Common Stock for exchange
in accordance with this Article II, (i) cash in an amount sufficient to pay
cash in lieu of fractional shares pursuant to Section 2.3, and (ii)
certificates representing the aggregate number of shares of Parent Common
Stock issuable pursuant to Section 2.1 hereof. Promptly after the Effective
Time, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Parent Common
Stock and cash in lieu of fractional shares, if applicable. Upon surrender
of a Certificate or Certificates to the Exchange Agent, together with such
letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for
each share of Company Common Stock formerly represented by such Certificate
or Certificates, and the Certificate(s) so surrendered shall forthwith be
canceled. Until surrendered as contemplated by this Article II, from and
after the Effective Time each Certificate shall be deemed to represent only
the right to receive the Merger Consideration (and cash in lieu of any
fractional share as contemplated by Section 2.3) for each share of Company
Common Stock formerly represented by such Certificate, and shall not
evidence any interest in, or any right to exercise the rights of a
stockholder of, Parent. If a certificate representing Parent Common Stock
is to be issued or a cash payment in lieu of fractional share interests is
to be made to a person other than the one in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition to
such issuance or payment that such Certificate be properly endorsed (or
accompanied by an appropriate instrument of transfer) and accompanied by
evidence that any applicable stock transfer taxes have been paid or
provided for.
Section 2.3 No Fractional Shares. (a) No certificates representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder
of Parent. In lieu of such fractional shares, any holder of Company Common
Stock who would otherwise be entitled to receive a fraction of a share of
Parent Common Stock ( after aggregating all shares of Parent Common Stock
issuable to such holder) shall, upon surrender of such holder's Certificate
or Certificates, be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by
the closing price of a share of Parent Common Stock on Nasdaq Stock Market
on the date the Merger became effective.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall deliver the Merger Consideration, whether in the form
of Parent Common Stock or cash in lieu of fractional shares, or both to
each holder of a Certificate or Certificates which have been surrendered.
Section 2.4 No Dividends. No dividends or other distributions declared
or made after the Effective Time with respect to shares of Parent Common
Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Common
Stock represented thereby until the holder of such Certificate shall
surrender such Certificate. Dividends or other distributions with a record
date after the Effective Time payable in respect of shares of Parent Common
Stock held by the Exchange Agent shall be held in trust for the benefit of
such holders of unsurrendered Certificates. Following surrender of any
previously unsurrendered Certificate, there shall be paid to the holder of
the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the date of payment of any dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender, the amount of such
dividends or other distributions payable with respect to such whole shares
of Parent Common Stock.
Section 2.5 Return to Parent. Any shares of Parent Common Stock made
available to the Exchange Agent and any portion of the Shares Trust not
exchanged for Certificates within six months after the Effective Time and
any dividends and distributions held by the Exchange Agent for payment or
delivery to the holders of unsurrendered Certificates formerly representing
shares of Company Common Stock and unclaimed at the end of such six month
period shall be redelivered or repaid by the Exchange Agent to Parent,
after which time any holder of Certificates who has not theretofore
delivered or surrendered such Certificates to the Exchange Agent, subject
to applicable law, shall look as a general creditor only to Parent for
payment of the Merger Consideration, cash in lieu of fractional share
interests, and any such dividends or distributions with respect to its
shares of Parent Common Stock. Notwithstanding the foregoing, none of
Parent, the Exchange Agent, the Surviving Corporation or any other party
shall be liable to any holder of a Certificate formerly representing shares
of Company Common Stock for any Merger Consideration, cash in lieu of
fractional share interests or dividends or distributions properly delivered
to a public official pursuant to applicable property, escheat or similar
laws. If Certificates are not surrendered prior to two years after the
Effective Time, unclaimed Merger Consideration (or funds with respect to
fractional shares) payable with respect to such shares of Company Common
Stock shall, to the extent permitted by applicable law, become the property
of the Surviving Corporation, free and clear of all claims or interest of
any person previously entitled thereto.
Section 2.6 Company Option Plans. At the Effective Time, all options
(the "Company Options") then outstanding, whether or not vested and
exercisable, under the Company's 1992 Stock Option Plan, 1996 Equity
Incentive Plan, 1996 Directors Stock Option Plan and 1996 Employee Stock
Purchase Plan, in each case as amended (collectively, the "Company Option
Plans"), shall be assumed by Parent. Each Company Option assumed by Parent
other than Company Options issued pursuant to the Company 1996 Employee
Stock Purchase Plan shall be subject to, and exercisable upon, the same
terms and conditions as under the applicable Company Option Plan and the
applicable option agreement issued thereunder, except that (a) each assumed
Company Option shall be exercisable for, and represent the right to
acquire, that number of shares of Parent Common Stock (rounded down to the
nearest whole share) equal to (i) the number of shares of Company Common
Stock subject to such Company Option immediately prior to the Effective
Time multiplied by (ii) the Exchange Ratio; and (b) the option price per
share of Parent Common Stock subject to each assumed Company Option shall
be an amount equal to (i) the option price per share of Company Common
Stock subject to such Company Option in effect immediately prior to the
Effective Time divided by (ii) the Exchange Ratio (rounded up to the
nearest whole cent). The Company represents and warrants that each of the
foregoing actions may be taken and effected by the Company without the
consent of any holder of Company Options. Each assumed purchase right under
the Company 1996 Employee Stock Purchase Plan shall continue to have, and
be subject to, the terms and conditions set forth in the Company 1996
Employee Stock Purchase Plan and the documents governing the assumed
purchase right, except that the purchase price of such shares of Parent
Common Stock for each respective purchase date under each assumed purchase
right shall be the lower of (i) the quotient determined by dividing
eighty-five percent (85%) of the fair market value of Company Common Stock
on the offering date of each assumed offering period by the Exchange Ratio
or (ii) eighty-five percent (85%) of the fair market value of the Parent
Common Stock on each purchase date of each assumed offering period
occurring after the Effective Time (with the number of shares rounded to
the nearest whole share and the purchase price rounded to the nearest whole
cent). The assumed purchase rights shall be exercised at such times
following the Effective Time as set forth in the Company 1996 Employee
Stock Purchase Plan and each participant shall, accordingly, be issued
shares of Parent Common Stock at such times pursuant to the Company 1996
Employee Stock Purchase Plan. The Company 1996 Employee Stock Purchase Plan
shall terminate with the exercise of the last assumed purchase right, and
no additional purchase rights shall be granted under the Company Employee
Stock Purchase Plan following the Effective Time. Parent agrees that from
and after the Effective Time, employees of the Surviving Corporation may
participate in Parent's employee stock purchase plan, subject to the terms
and conditions of such plan.
The adjustment provided herein with respect to stock options shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
duration, vesting schedule, exercisability and other terms of each option
immediately after the Effective Time shall be the same as the corresponding
terms in effect immediately before the Effective Time, except that all
references to Company in the Company Option Plans (and the corresponding
references in the option agreement documenting such option) shall be deemed
to be references to Parent. Except as set forth in Section 3.2(d) of the
Disclosure Schedule (as defined in Article III hereof), vesting of Company
Options shall not be accelerated as a result of the Merger. Continuous
employment with the Company or its Subsidiaries shall be credited to the
optionee for purposes of determining the vesting of all assumed Company
Options after the Effective Time. As soon as reasonably practicable, but in
no event later than 30 days after the Effective Time, Parent will issue to
each holder of an assumed Company Option notice of the foregoing assumption
by Parent.
Parent shall file with the SEC, no later than ten business days after the
Effective Time, a Registration Statement on Form S-8 relating to the shares
of Parent Common Stock issuable with respect to the Company Options assumed
by Parent in accordance with this Section 2.6.
Section 2.7 Company Warrants. At the Effective Time, all warrants to
purchase Company Common Stock (the "Company Warrants") then outstanding,
whether or not exercisable, shall be assumed by Parent. Each Company
Warrant assumed by Parent shall be subject to, and exercisable upon, the
same terms and conditions as under the applicable warrant agreement issued
thereunder, except that (a) each assumed Company Warrant shall be
exercisable for, and represent the right to acquire, that number of shares
of Parent Common Stock (rounded down to the nearest whole share) equal to
(i) the number of shares of Company Common Stock subject to such Company
Warrant immediately prior to the Effective Time multiplied by (ii) the
Exchange Ratio; and (b) the exercise price per share of Parent Common Stock
subject to each assumed Company Warrant shall be an amount equal to (i) the
price per share of Company Common Stock subject to such Company Warrant in
effect immediately prior to the Effective Time divided by (ii) the Exchange
Ratio (rounded up to the nearest whole cent). The Company represents and
warrants that each of the foregoing actions may be taken and effected by
the Company without the consent of any holder of Company Warrants, except
for the warrant held by Comdisco, Inc. to purchase 2,250 shares of the
Company Common Stock at an exercise price of $18.10 per share pursuant to a
Warrant Agreement dated as of July 30, 1993.
Section 2.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective
Time, certificates formerly representing shares of Company Common Stock are
presented to the Surviving Corporation, they shall be canceled and
exchanged for cash and/or certificates representing Parent Common Stock
pursuant to this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure schedule prepared and signed by
the Company and delivered to Parent simultaneously with the execution
hereof (the "Disclosure Schedule"), the Company represents and warrants to
Parent and Sub all of the statements contained in this Article III. Each
exception set forth in the Disclosure Schedule and each other response to
this Agreement set forth in the Disclosure Schedule is identified by
reference to, or has been grouped under a heading referring to, a specific
individual section of this Agreement and relates only to such section,
except to the extent that one portion of the Disclosure Schedule
specifically refers to another portion thereof, identifying such other
portion by section reference or similar specific cross reference.
Section 3.1 Organization. Each of the Company and its Subsidiaries is
a corporation or other entity duly organized, validly existing, duly
qualified or licensed to do business and in good standing under the laws of
the jurisdiction of its incorporation or organization and in each
jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary, and has all requisite corporate or
other power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority, and governmental approvals
would not have a material adverse effect on the Company and its
Subsidiaries. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding such partnerships
where such party or any Subsidiary of such party do not have a majority of
the voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, any reference to any event, change
or effect having a "material adverse effect" on or with respect to any
entity (or group of entities taken as a whole) means such event, change or
effect, individually or in the aggregate with such other events, changes,
or effects, which is materially adverse to the financial condition,
businesses, results of operations, assets, liabilities, properties or
prospects of such entity (or, if used with respect thereto, of such group
of entities taken as a whole), it being understood that none of the
following shall be deemed by itself or by themselves, either alone or in
combination, to constitute a material adverse effect: (i) a change in the
market price or trading volume of Company Common Stock or Parent Common
Stock, as the case may be, (ii) changes attributable to financial results
for the quarter ended December 31, 1999, (iii) conditions affecting the
economy of the United States of America as a whole, (iv) conditions
affecting generally the industry in which Parent or the Company, as
applicable, operates, or (v) changes after the date hereof in laws or
regulations applicable to Parent or the Company, as the case may be.
Section 3.1 of the Disclosure Schedule, sets forth a complete list of the
names, jurisdiction of incorporation or other formation and capitalization
of each of the Company's Subsidiaries and the jurisdictions in which the
Company and each of its Subsidiaries are qualified to do business.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Company Common Stock and 6,500,000 shares of preferred stock, par
value $.01 per share (the "Company Preferred Stock"). As of the date
hereof, (i) 14,519,246 shares of Company Common Stock were issued and
outstanding, (ii) no shares of Company Preferred Stock were issued and
outstanding, (iii) 2,627,068 shares of Company Common Stock were reserved
for issuance upon the exercise of outstanding Company Options pursuant to
the Company Option Plans and (iv) 1,693,916 shares of Company Common Stock
were reserved for issuance upon the exercise of outstanding Company
Warrants. All of the issued and outstanding shares of Company Common Stock
are validly issued, fully paid and nonassessable, were issued in compliance
with applicable law, and are not subject to any preemptive or similar
rights.
(b) Except as set forth in Section 3.2(b) of the Disclosure Schedule
and other than pursuant to the Option Agreement, there are not now, and at
the Effective Time there will not be, any (i) outstanding right,
subscription, warrant, call, option or other agreement or arrangement of
any kind (collectively, "Rights") to purchase or otherwise to receive from
the Company or any of its Subsidiaries any of the outstanding authorized
but unissued or treasury shares of the capital stock or any other security
of the Company or any of its Subsidiaries, (ii) outstanding security of any
kind convertible into or exchangeable for such capital stock or (iii)
voting trust or other agreement or understanding to which the Company or
any of its Subsidiaries is a party or is bound with respect to the voting
of the capital stock of the Company or any of its Subsidiaries.
(c) Each outstanding share of capital stock of each Subsidiary of the
Company is duly authorized, validly issued, fully paid and nonassessable
and each such share owned by the Company or any Subsidiary of the Company
is owned free and clear of any mortgage, pledge, assessment, security
interest, lease, sublease, lien, adverse claim, levy, charge, option, right
of others or restriction (whether on voting, sale, transfer, disposition or
otherwise) or other encumbrance of any kind, whether imposed by agreement,
understanding, law or equity, or any conditional sale contract, title
retention contract or other contract to give or to refrain from giving any
of the foregoing (collectively, "Liens").
(d) Section 3.2(d) of the Disclosure Schedule sets forth a listing of
(i) all outstanding Company Options as of the date hereof, which schedule
shows the portion of each Company Option which is then vested, the vesting
and acceleration provisions thereof, if any, the date upon which each
Company Option expires and whether or not such Company Option is intended
to qualify as an "incentive stock option" within the meaning of Section 422
of the Code; (ii) all outstanding Company Warrants as of the date hereof,
which schedule shows the portion of each Company Warrant which is
exercisable and the date upon which each Company Warrant expires; and (iii)
each outstanding Company Option and Company Warrant that will accelerate,
in whole or in part, pursuant to its terms as a result of the transactions
contemplated hereby, which schedule summarizes the terms of acceleration
pursuant to such Company Option, Company Warrant or Company Option Plan.
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute
and deliver this Agreement and the Ancillary Agreements to which it is a
party and, subject to obtaining approval and adoption of this Agreement by
the affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock (the "Company Stockholder Approval"), to consummate
the transactions contemplated hereby and thereby. The execution, delivery
and performance by the Company of this Agreement and the Ancillary
Agreements to which the Company is a party, and the consummation by it of
the transactions contemplated hereby and thereby, have been duly and
validly authorized by all necessary corporate action on the part of the
Company and, except for obtaining the Company Stockholder Approval, no
other corporate action on the part of the Company is necessary to authorize
the execution and delivery by the Company of this Agreement and the
Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby. Each of this Agreement and
the Ancillary Agreements to which it is a party have been duly executed and
delivered by the Company and, if applicable, the Company's stockholders and
affiliates and, assuming each of this Agreement and such Ancillary
Agreements constitutes a valid and binding obligation of the other parties
hereto and thereto, constitutes a valid and binding obligation of the
Company and such stockholders and affiliates enforceable against the
Company and such stockholders and affiliates in accordance with their
respective terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter
in effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(b) The Board of Directors of the Company (the "Company Board") has
duly and validly approved and taken all corporate action required to be
taken by such Company Board for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, and resolved
to recommend that the stockholders of the Company approve and adopt this
Agreement. The Company Stockholder Approval is the only vote of the holders
of any class or series of Company capital stock necessary to approve this
Agreement and to consummate the Merger. The Company has taken all actions
necessary with respect to the entering into of this Agreement and the
Ancillary Agreements to which it is a party, the consummation of the Merger
and the other transactions contemplated by this Agreement and the Ancillary
Agreements so as to render inapplicable to such transactions the
restrictions on business combinations contained in Section 203 of the DGCL.
Section 3.4 Consents and Approvals; No Violations. Except as disclosed
in Section 3.4 of the Disclosure Schedule and except for the Company
Stockholder Approval, the Merger Filing, and filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Securities Act and state blue
sky laws, neither the execution, delivery or performance of this Agreement
or any Ancillary Agreements by the Company nor the consummation by the
Company of the transactions contemplated hereby or thereby nor compliance
by the Company with any of the provisions hereof or thereof will (i)
conflict with or result in any breach of any provision of the certificate
of incorporation or by-laws or similar organizational documents of the
Company or of any of its Subsidiaries, (ii) require any filing with, or
permit, authorization, consent or approval of, any court, arbitral
tribunal, administrative agency or commission or other governmental or
other regulatory authority or agency (a "Governmental Entity"), (iii)
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or result in the
creation of any lien) under, any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound (a
"Company Agreement") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, except in the case of
clause (ii), (iii) or (iv) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or where
such violations, breaches or defaults would not, individually or in the
aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, and will not materially impair the ability
of the Company to consummate the transactions contemplated hereby or by the
Ancillary Agreements.
Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to Parent true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by
it and its Subsidiaries since April 11, 1996 under the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act") (as such
documents have been amended since the time of their filing, collectively,
the "Company SEC Documents"). As of their respective dates or, if amended,
as of the date of the last such amendment, the Company SEC Documents,
including, without limitation, any financial statements or schedules
included therein (the "Company Financial Statements") (a) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. The Company
SEC Documents include all the documents that the Company was required to
file with the SEC since April 11, 1996. The Company Financial Statements
have been prepared from, and are in accordance with, the books and records
of the Company and its consolidated Subsidiaries, comply in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and present fairly the
consolidated financial position and the consolidated results of operations
and cash flows of the Company and its consolidated Subsidiaries as at the
dates thereof or for the periods presented therein. The Company has not
received notice (written or oral) from and, to its knowledge, is not under
any review by any Governmental Entity in connection with its revenue
recognition policies and procedures. Without limiting the foregoing, for
any period after December 31, 1998, the Company has complied in all
material respects with Statement of Position 97-2 (Software Revenue
Recognition), as amended by Statement of Position 9804.
Section 3.6 Absence of Certain Changes. Except as and to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, since September 30, 1999, the Company and its Subsidiaries have
conducted their respective businesses and operations consistent with past
practice only in the ordinary and usual course. From September 30, 1999
through the date of this Agreement, there has not occurred (i) any events,
changes or effects (including the incurrence of any liabilities of any
nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests
of the Company or of any of its Subsidiaries; or (iii) any change by the
Company or any of its Subsidiaries in accounting principles or methods,
except insofar as may be required by a change in GAAP. Since September 30,
1999 neither the Company nor any of its Subsidiaries has taken any of the
actions prohibited by Section 5.1 hereof.
Section 3.7 No Undisclosed Liabilities. Except as set forth in Section
3.7 of the Disclosure Schedule, since September 30, 1999, neither the
Company nor any of its Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that (a) have, or would be reasonably likely to have, a material adverse
effect on the Company and its Subsidiaries or (b) (i) would be required to
be reflected or reserved against on a consolidated balance sheet of the
Company and its Subsidiaries (including the notes thereto) prepared in
accordance with GAAP as applied in preparing the consolidated balance sheet
of the Company and its Subsidiaries as of September 30, 1999 and (ii) were
outside the ordinary course of business and not immaterial in amount.
Section 3.7 of the Disclosure Schedule sets forth the amount of principal
and unpaid interest outstanding under each instrument evidencing
indebtedness of the Company and its Subsidiaries which will accelerate or
become due or result in a right of redemption or repurchase on the part of
the holder of such indebtedness (with or without due notice or lapse of
time) as a result of this Agreement, any of the Ancillary Agreements, the
Merger or the other transactions contemplated hereby or thereby.
Section 3.8 Information in Proxy Statement/Prospectus. The Proxy
Statement/Prospectus (as defined in Section 5.10 hereof) (or any amendment
thereof or supplement thereto) will not, at the date mailed to Company
stockholders or at the times of the Special Meetings (as defined in Section
5.9(b) hereof), 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, except that no representation is made by the
Company with respect to statements made therein based on information
supplied by Parent or Sub specifically for inclusion in the Proxy
Statement/Prospectus. None of the information supplied by the Company
specifically for inclusion in the Parent Registration Statement (as defined
in Section 5.10 hereof) will, at the date it becomes effective and at the
time of the Special Meetings, 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. The Proxy
Statement/Prospectus specifically, as to information supplied by the
Company for inclusion therein, will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 3.9 Employee Benefit Matters.
(a) All employee benefit plans and other incentive, compensation or
benefit agreements or arrangements covering any current or former employee
or director of, or consultant to, the Company or any Subsidiary are listed
in Section 3.9 of the Disclosure Schedule (the "Company Benefit Plans").
True and complete copies of the Company Benefit Plans, trusts and reports
and summaries required under the Code or the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), have been provided to the
Purchaser. Except as set forth in Section 4.11(a) of the Disclosure
Schedule, each Company Benefit Plan has been administered and maintained in
all material respects in compliance with its terms and with all applicable
laws, including, but not limited to, ERISA and the Code. Each Company
Benefit Plan intended to be qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service (the "IRS") to be
so qualified and to the knowledge of the Company no event has occurred that
could reasonably be expected to adversely affect the qualified status of
such Company Benefit Plan. Neither the Company nor any of its Subsidiaries
has incurred (and to the knowledge of the Company no transaction has
occurred which could reasonably be expected to give rise to) any liability
or penalty under Section 4975 of the Code or Section 502(i) of ERISA with
respect to any Company Benefit Plan. To the knowledge of the Company, there
are no pending, nor has the Company or any of its Subsidiaries received
notice of any threatened, claims against or otherwise involving any of the
Company Benefit Plans. No Company Benefit Plan is under audit or
investigation by the IRS, the Department of Labor or the Pension Benefit
Guaranty Corporation, and to the knowledge of the Company, no such audit or
investigation is pending or threatened. All material contributions and
other payments required to be made as of the date of this Agreement to, or
pursuant to, the Company Benefit Plans have been made or accrued for in the
Company Financial Statements. Neither the Company nor any entity under
"common control" with the Company within the meaning of Section 4001 of
ERISA has at any time contributed to, or been required to contribute to,
any "pension plan" (as defined in Section 3(2) of ERISA) that is subject to
Title IV of ERISA or Section 412 of the Code, including, without
limitation, any "multi-employer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA), and neither the Company nor any such entity has at
any time incurred or could reasonably expect to incur any liability under
Title IV of ERISA.
(b) The consummation of the Transactions will not (either alone or
upon the occurrence of any additional or subsequent events) (i) constitute
an event under any Company Benefit Plan, employment or severance agreement,
trust, loan or other compensation or benefits agreement or arrangement that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase
in benefits or obligation to fund benefits with respect to any current or
former employee, officer, director, agent or consultant of the Company or
any Subsidiary, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of the Company or the Purchaser to
amend or terminate any Company Benefit Plan and receive the full amount of
any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will
or may be made by the Company, any of its Subsidiaries, the Purchaser or
any of their respective affiliates with respect to any employee, officer or
director of the Company or its Subsidiaries will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code and no amount of any such payment or benefit will fail to be
deductible by the Company by reason of Section 162(m) of the Code.
(c) Neither the Company nor any of its Subsidiaries (i) maintains or
contributes to any Company Benefit Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any employee upon or with respect to periods following
his retirement or termination of employment, except as may be required by
Section 4980B of the Code; or (ii) has ever represented, promised or
contracted (whether in oral or written form) to any employee (either
individually or to employees as a group) that such employee(s) would be
provided with life insurance, medical, severance or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by Section 4980B of the Code. All amounts of deferred
compensation benefits under any Company Benefit Plan have been properly
accrued for in the Financial Statements.
(d) With respect to each Company Benefit Plan which is an "employee
welfare benefit plan" within the meaning of Section 3(1) of ERISA, all
material claims incurred (including claims incurred but not reported) by
employees thereunder for which the Company is, or will become, liable are
(i) insured pursuant to a contract of insurance whereby the insurance
company bears any risk of loss with respect to such claims; (ii) covered
under a contract with a health maintenance organization (an "HMO") pursuant
to which the HMO bears the liability for such claims, or (iii) reflected as
a liability in Section 3.9(d) of the Disclosure Schedule.
Section 3.10 Litigation; Compliance with Law.
(a) Except for the suits disclosed in the Company SEC Documents filed
prior to the date of this Agreement, there is no suit, claim, action,
proceeding, arbitration or investigation pending or, to the knowledge of
the Company, threatened against or affecting, the Company or any of its
Subsidiaries which, individually or in the aggregate, is reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
Company and its Subsidiaries, or materially impair the ability of the
Company to consummate the Merger or the other transactions contemplated
hereby or by the Ancillary Agreements. The foregoing includes, without
limitation, actions pending or, to the knowledge of the Company, threatened
(or any basis therefor known to the Company) involving the prior employment
of any of the Company's or any of its Subsidiaries' employees, their use in
connection with the Company's or any of its Subsidiaries' business of any
information, techniques, patents, patent applications, copyrights, trade
secrets, inventions, technology, know-how, Software (as defined in Section
3.17(j)) or other intellectual property rights allegedly proprietary to any
of their former employers, or their obligations under any agreements with
prior employers.
(b) The Company and its Subsidiaries have complied in a timely manner
and in all material respects, with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any
court or Governmental Entity relating to any of the property owned, leased
or used by them, or applicable to their business, including, but not
limited to, (1) the Foreign Corrupt Practices Act of 1977 and any other
laws regarding use of funds for political activity or commercial bribery
and (2) laws relating to equal employment opportunity, discrimination,
occupational safety and health, environmental, interstate commerce and
antitrust.
Section 3.11 No Default. The business of the Company and each of its
Subsidiaries has not been and is not being conducted in default or
violation of any term, condition or provision of (i) its respective
certificate of incorporation or bylaws or similar organizational documents,
(ii) any Company Agreement or (iii) any federal, state, local or foreign
law, statute, regulation, rule, ordinance, judgment, decree, order, writ,
injunction, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company or any of
its Subsidiaries or relating to any of the property owned, leased or used
by them, or applicable to their business, excluding from the foregoing
clauses (ii) and (iii), defaults or violations that would not, individually
or in the aggregate, have a material adverse effect on the Company and its
Subsidiaries or materially impair the ability of the Company to consummate
the Merger or the other transactions contemplated hereby or by the
Ancillary Agreements. As of the date of this Agreement, no investigation or
review by any Governmental Entity or other entity with respect to the
Company or any of its Subsidiaries is pending or, to the knowledge of the
Company, threatened, nor has any Governmental Entity or other entity
indicated an intention to conduct the same, other than, in each case, those
the outcome of which, as far as reasonably can be foreseen, in the future
will not, individually or in the aggregate, have a material adverse effect
on the Company and its Subsidiaries.
Section 3.12 Taxes.
(a) Except as set forth in Section 3.12 of the Disclosure Schedule,
the Company and each of its Subsidiaries has timely filed (or has had
timely filed on its behalf) with the appropriate Tax Authorities all Tax
Returns required to be filed by the Company and each of its Subsidiaries,
and such Tax Returns are true, correct, and complete in all material
respects.
(b) The Company and each of its Subsidiaries has paid, or where
payment is not yet due, has established an adequate accrual in accordance
with GAAP for the payment of, all Taxes for all periods ending through the
date hereof.
(c) There are no liens for Taxes upon any property or assets of the
Company or any of its Subsidiaries, except for liens for Taxes not yet due
and for which adequate reserves have been established in accordance with
GAAP.
(d) No federal, state, local or foreign Audits are presently pending
with regard to any Taxes or Tax Returns of the Company and its Subsidiaries
and to the knowledge of the Company, no such Audit is threatened.
(e) Except as set forth in Section 3.12(e) of the Disclosure Schedule,
the Tax Returns of the Company and each of its Subsidiaries have not been
examined by the applicable Tax Authority (or the applicable statutes of
limitation for the assessment of Taxes for such periods have expired), and
for any year that a Tax Return was examined, no material adjustments were
asserted as a result of such examination which have not been resolved and
fully paid, and no issue has been raised by any Tax Authority in any Audit
of the Company or any of its Subsidiaries that, if raised with respect to
any other period not so audited, could be expected to result in a proposed
deficiency for any such period not so audited.
(f) There are no outstanding requests, agreements, consents or waivers
to extend the statutory period of limitations applicable to the assessment
of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.
(g) Neither the Company nor any of its Subsidiaries is a party to any
agreement providing for the allocation, indemnification, or sharing of
Taxes.
(h) Neither the Company nor any of its Subsidiaries has been a member
of any "affiliated group" (as defined in section 1504(a) of the Code) and
is not subject to Treas. Reg. 1.1502-6 for any period.
(i) Neither the Company nor any of its Subsidiaries is or has been a
U.S. real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code.
(j) "Audit" means any audit, assessment, or other examination relating
to Taxes by any Tax Authority or any judicial or administrative proceedings
relating to Taxes. "Tax" or "Taxes" means all federal, state, local, and
foreign taxes, and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax,
or penalties applicable thereto, imposed by any Tax Authority. "Tax
Authority" means the IRS and any other domestic or foreign governmental
authority responsible for the administration of any Taxes. "Tax Returns"
mean all federal, state, local, and foreign tax returns, declarations,
statements, reports, schedules, forms, and information returns and any
amendments thereto.
Section 3.13 Contracts. Each Company Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a
material adverse effect on the Company and its Subsidiaries, and there are
no defaults thereunder, except those defaults that would not have a
material adverse effect on the Company and its Subsidiaries. Section 3.13
of the Disclosure Schedule sets forth a true and complete list of (i) all
Company Agreements entered into by the Company, or any of its Subsidiaries
and all amendments to any Company Agreement, included as exhibits to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 and (ii) all non-competition agreements imposing restrictions on the
ability of the Company or any of its Subsidiaries to conduct business in
any jurisdiction or territory.
Section 3.14 Assets; Real Property. The Company and its Subsidiaries
have all assets, properties, rights and contracts necessary to permit the
Company and its Subsidiaries to conduct their business as it is currently
being conducted, except where the failure to have such assets, properties,
rights and contracts would not have a material adverse effect on the
Company and its Subsidiaries. The Company SEC Documents accurately identify
all material real property or material interests in material real property
owned by the Company and its Subsidiaries (the "Real Property"). The
Company or its Subsidiaries has good and marketable title to the real
property owned by them, free and clear of all liens, charges, security
interests, options, claims, mortgages, pledges, easements, rights-of-way or
other encumbrances and restrictions of any nature whatsoever, except as
described in Section 3.14 of the Disclosure Schedule and those that do not
adversely affect the value of such real property.
Section 3.15 Environmental Matters. Except as disclosed in the Company
SEC Documents filed prior to the date of this Agreement, (a) the Company
and its Subsidiaries are in compliance in all material respects with
federal, state, local and foreign laws and regulations relating to
pollution, protection or preservation of human health or the environment,
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of toxic or hazardous
substances, materials or wastes, petroleum and petroleum products, asbestos
or asbestos-containing materials, polychlorinated biphenyls, radon, or lead
or lead-based paints or materials ("Materials of Environmental Concern"),
or otherwise relating to the generation, storage, containment (whether
above ground or underground), disposal, transport or handling of Materials
of Environmental Concern, or the preservation of the environment or
mitigation of adverse effects thereon (collectively, "Environmental Laws"),
and including, but not limited to, compliance with any permits or other
governmental authorizations or the terms and conditions thereof; (b)
neither the Company nor any of its Subsidiaries has received any
communication or notice, whether from a governmental authority or
otherwise, alleging any violation of or noncompliance with any
Environmental Laws by any of the Company or its Subsidiaries or for which
the any of them is responsible, and there is no pending or threatened
claim, action, investigation or notice by any person or entity alleging
potential liability for investigatory, cleanup or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to (i) the presence, or release into
the environment, of any Materials of Environmental Concern at any location
owned or operated by the Company or its Subsidiaries, now or in the past,
or (ii) any violation, or alleged violation, of any Environmental Law
(collectively, "Environmental Claims"), except where such Environmental
Claims would not have a material adverse effect or otherwise require
disclosure in the Company SEC Documents; and (c) to the knowledge of the
Company, there are no past or present facts or circumstances that could
form the basis of any Environmental Claim against the Company or its
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or its Subsidiaries have retained or
assumed either contractually or by operation of law, except where such
Environmental Claim, if made, would not have a material adverse effect or
otherwise require disclosure in the Company SEC Documents. All permits and
other governmental authorizations currently held or required to be held by
the Company and its Subsidiaries pursuant to any Environmental Laws are
identified in Section 3.15 of the Disclosure Schedule. The Company has
provided to Parent all assessments, reports, data, results of
investigations or audits, and other information that is in the possession
of or reasonably available to the Company regarding environmental matters
pertaining to the environmental condition of the business of the Company
and its Subsidiaries, or the compliance (or noncompliance) by the Company
or its Subsidiaries with any Environmental Laws.
Section 3.16 Product Liability. Except as described in Section 3.16 of
the Disclosure Schedule, there are not presently pending or, to the
knowledge of the Company, threatened any civil, criminal or administrative
actions, suits, demands, claims, hearings, notices of violation,
investigations, proceedings or demand letters relating to any alleged
hazard or alleged defect in design, manufacture, materials or workmanship,
including any failure to warn or alleged breach of express or implied
warranty or representation, relating to any product manufactured,
distributed or sold by or on behalf of the Company and its Subsidiaries,
which if adversely determined, would reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries. Neither the
Company nor any of its Subsidiaries has extended to its customers any
written nonuniform product warranties, indemnifications or guarantees.
Section 3.17 Intellectual Property.
(a) The Company or its Subsidiaries own or have a valid right to use
all trademarks, service marks, trade names, Internet domain names, designs,
slogans, and general intangibles of like nature, together with all goodwill
related to the foregoing (collectively, "Trademarks"); patents; copyrights
(including any registrations, renewals and applications for any of the
foregoing); Software; technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models,
and methodologies (collectively, "Trade Secrets," and together with the
foregoing, the "Intellectual Property") used in or necessary for the
conduct of the Company and each Subsidiaries' business as currently
conducted or contemplated to be conducted and described in the Company SEC
Documents.
(b) Section 3.17(b)(1) of the Disclosure Schedule sets forth, for the
Intellectual Property owned by the Company or its Subsidiaries, a complete
and accurate list of all U.S. and foreign (1) patents and patent
applications; (2) Trademark registrations (including Internet domain
registrations) and applications and material unregistered Trademarks; (3)
copyright registrations and applications, including those in Software,
indicating for each, the applicable jurisdiction, registration number (or
application number), and date issued (or date filed). Section 3.17(b)(2)
sets forth a complete and accurate list of all license agreements granting
any right to use or practice any rights under any Intellectual Property,
whether the Company or any of its Subsidiaries is the licensee or licensor
thereunder, and any written settlements relating to any Intellectual
Property to which the Company or any of its Subsidiaries is a party or
otherwise bound (collectively, the "License Agreements"), indicating for
each the title, the parties and the date executed.
(c) The Intellectual Property owned by the Company or any of its
Subsidiaries is free and clear of all Liens, and the Company or a
Subsidiary of the Company, as noted in Section 3.17(c) of the Disclosure
Schedule is listed in the records of the appropriate United States, state
or foreign agency as the sole owner of record for each application and
registration listed in Section 3.17(c) of the Disclosure Schedule.
(d) Except as set forth in Section 3.17(d) of the Disclosure Schedule,
the Intellectual Property owned by the Company or any Subsidiary and, to
the best of the Company's knowledge, any Intellectual Property used by the
Company, is valid and subsisting, in full force and effect, and has not
been canceled, expired, or abandoned. There is no pending or, to the
knowledge of the Company, threatened opposition, interference or
cancellation proceeding before any court or registration authority in any
jurisdiction against the registrations listed in Section 3.19(d) of the
Disclosure Schedule, or, to the best of the Company 's knowledge, against
any Intellectual Property licensed to the Company or its Subsidiaries.
(e) The conduct of the Company's and its Subsidiaries' business as
currently conducted or planned to be conducted and described in the Company
SEC Documents does not infringe upon any Intellectual Property rights owned
or controlled by any third party (either directly or indirectly such as
through contributory infringement or inducement to infringe). Except as set
forth in Section 3.17(e) of the Disclosure Schedule, there are no claims or
suits pending or, to the knowledge of the Company, threatened, and neither
the Company nor any of its Subsidiaries has received any notice of a third
party claim or suit (1) alleging that its activities or the conduct of its
businesses infringes upon, violates, or constitutes the unauthorized use of
the Intellectual Property rights of any third party or (2) challenging the
ownership, use, validity or enforceability of any Intellectual Property.
(f) Except as set forth in Section 3.17(f) of the Disclosure Schedule,
there are no settlements, forebearances to xxx, consents, judgments, or
orders or similar obligations which (1) restrict the Company's or its
Subsidiaries' rights to use any Intellectual Property, (2) restrict the
Company's or its Subsidiaries' business in order to accommodate a third
party's Intellectual Property or (3) permit third parties to use any
Intellectual Property owned or controlled by the Company or any of its
Subsidiaries. The Company or its Subsidiaries has not licensed or
sublicensed its rights in any material Intellectual Property other than
pursuant to the License Agreements, and no royalties, honoraria or other
fees are payable by the Company or its Subsidiaries for the use of or right
to use any Intellectual Property, except pursuant to the License
Agreements. The License Agreements are valid and binding obligations of all
parties thereto, enforceable in accordance with their terms, and there
exists no event or condition which will result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a
default by the Company or, to the knowledge of the Company, any other party
under any such License Agreement.
(g) The Company and each of its Subsidiaries take reasonable measures
to protect the confidentiality of Trade Secrets, including requiring its
employees and independent contractors having access thereto to execute
written non-disclosure agreements. To the knowledge of the Company, no
Trade Secret has been disclosed or authorized to be disclosed to any third
party other than pursuant to a non-disclosure agreement that adequately
protects the Company and the applicable Subsidiary's proprietary interests
in and to such Trade Secrets. Neither the Company nor, to the knowledge of
the Company, any other party to any non-disclosure agreement relating to
the Company's Trade Secrets is in breach or default thereof.
(h) To the knowledge of the Company, no third party is
misappropriating, infringing, diluting, or violating any Intellectual
Property owned by the Company or any of its Subsidiaries and, except as set
forth in Section 3.17(h) of the Disclosure Schedule, no such claims have
been brought against any third party by the Company or any of its
Subsidiaries.
(i) Except as set forth in Section 3.17(i) of the Disclosure Schedule,
the consummation of the transactions contemplated hereby will not result in
the loss or impairment of the Company or any of its Subsidiaries' right to
own or use any of the Intellectual Property, nor will require the consent
of any governmental authority or third party in respect of any such
Intellectual Property.
(j) Section 3.17(j) of the Disclosure Schedule lists all Software
(other than off-the-shelf software applications programs having an
acquisition price of less than $25,000) which are owned, licensed, leased,
or otherwise used by the Company or any of its Subsidiaries, and identifies
which of such Software is owned, licensed, leased, or otherwise used, as
the case may be. Section 3.17(j) of the Disclosure Schedule lists all
Software sold, licensed, leased or otherwise distributed by the Company or
any of its Subsidiaries to any third party, and identifies which Software
is sold, licensed, leased, or otherwise distributed as the case may be.
With respect to the Software set forth in Section 3.17(j) of the Disclosure
Schedule which the Company or any of its Subsidiaries purports to own, such
Software was either developed (1) by employees of the Company or any of its
Subsidiaries within the scope of their employment; or (2) by independent
contractors who have assigned their rights to the Company or any of its
Subsidiaries pursuant to written agreements. For purposes of this Section
3.17, "Software" means any and all (v) computer programs, including any and
all software implementations of algorithms, models and methodologies,
whether in source code or object code, (w) databases and compilations,
including any and all data and collections of data, whether machine
readable or otherwise, (x) descriptions, flow-charts and other work product
used to design, plan, organize and develop any of the foregoing, (y) the
technology supporting any Internet site(s) operated by or on behalf of the
Company or any of its Subsidiaries, and (z) all documentation, including
user manuals and training materials, relating to any of the foregoing.
(k) Any Software that the Company or any of its Subsidiaries licenses
and maintains pursuant to contracts with third parties ("Licensed
Software") in order to enable such Software to process accurately
(including calculating, comparing and sequencing) in all material respects
date data from, into and between the twentieth and twenty-first centuries,
including leap year calculations ("Millennial Date Data"). All such
Licensed Software processes Millennial Date Data without material errors or
omissions and without materially affecting functionality when used in
accordance with the product documentation provided by the Company therefor
and provided that all other software and all hardware and firmware used in
combination with such Licensed Software properly exchanges date data with
it. To the knowledge of the Company, neither the Company nor any of its
Subsidiaries has made any representation or warranty to any third party
that imposes any liability (whether or not accrued, contingent or
otherwise) on the Company or any of its Subsidiaries greater than the
preceding representation.
(l) The Company and its Subsidiaries are in the process of, and have
substantially completed obtaining, written representations or assurances
from each third party that (A) provides or will provide Millennial Date
Data to the Company or its Subsidiaries, (B) processes or will process
Millennial Date Data for the Company or its Subsidiaries or (C) otherwise
provides or will provide any material product or service to the Company or
its Subsidiaries that is dependent upon any Software, microcode, chip or
hardware system or component, including any electronic or electronically
controlled system or component (a "System") that processes any Millennial
Date Data, stating that all of such Systems that are used for, or on behalf
of, the Company or its Subsidiaries will process Millennial Date Data
without materially affecting the supply of such product or service to the
Company or its Subsidiaries after December 31, 1999.
Section 3.18 Proprietary Rights and Confidentiality Agreements. Each
current and former employee and officer of the Company and its Subsidiaries
has executed a Proprietary Rights and Confidentiality Agreement or similar
such agreement, in substantially the form previously provided to Parent.
The Company is not aware that any of the current or former employees of the
Company or any of its Subsidiaries is in violation thereof.
Section 3.19 Insurance. The Company and each of its Subsidiaries has
policies of insurance and bonds of the type and in amounts customarily
carried by persons conducting businesses or owning assets similar to those
of the Company and its Subsidiaries. There is no material claim pending
under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have
been paid and the Company and its Subsidiaries are otherwise in compliance
in all material respects with the terms of such policies and bonds. The
Company has not been notified of any threatened termination of, or material
premium increase with respect to, any of such policies.
Section 3.20 Suppliers and Customers. Since September 30, 1999, no
material licensor, vendor, supplier, licensee or customer of the Company or
any of its Subsidiaries has canceled or otherwise modified its relationship
with the Company or its Subsidiaries and, to the Company's knowledge, (a)
no such person has any intention to do so, and (b) the consummation of the
transactions contemplated hereby will not adversely affect any of such
relationships.
Section 3.21 Labor Matters.
(a) Except as set forth in Section 3.21(a) of the Disclosure Schedule,
(i) the Company and its Subsidiaries are in compliance with all applicable
laws respecting employment and employment practices, terms and conditions
of employment, health and safety, and wages and hours; (ii) neither the
Company nor any of its Subsidiaries has received written notice of any
charge or complaint against the Company or any of its Subsidiaries pending
before the Equal Employment Opportunity Commission, the National Labor
Relations Board, or any other government agency or court or other tribunal
regarding an unlawful employment practice; (iii) neither the Company nor
any of its Subsidiaries is a party to any collective bargaining agreement
and there is no labor strike, slowdown or stoppage actually pending or, to
the knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries; (iv) neither the Company nor any of its
Subsidiaries has received notice that any representation petition
respecting the employees of the Company or any of its Subsidiaries has been
filed with the National Labor Relations Board, and, to the knowledge of the
Company, there has been no labor union prior to the date hereof organizing
any employees of the Company or any of its Subsidiaries into one or more
collective bargaining units; (v) there are no complaints, lawsuits,
arbitrations or other proceedings pending, or to the knowledge of the
Company, threatened by or on behalf of any present or former employee of
the Company or any of its Subsidiaries alleging breach of any express or
implied contract of employment; (vi) to the knowledge of the Company, no
federal, state, or local agency responsible for the enforcement of labor or
employment laws intends to conduct an investigation with respect to or
relating to the Company or any of its Subsidiaries and no such
investigation is in progress; (vii) there are no personnel arrangements,
understandings, policies, rules or procedures (whether written or oral)
applicable to employees of the Company or any of its Subsidiaries other
than those set forth in Section 3.21(a) of the Disclosure Schedule, true,
correct and complete copies of which have heretofore been delivered to
Parent; and (viii) there are no employment contracts, severance agreements,
confidentiality agreements (other than standard employee non-disclosure
agreements as contemplated by Section 3.21(vii)) or any other agreements
(whether written or oral) with any employees of the Company or any
Subsidiary thereto.
(b) The Company and its Subsidiaries are and have been in substantial
compliance with all notice and other requirements under the Worker
Adjustment and Retaining Notification Act ("WARN") or similar state
statute. Except as set forth in Section 3.21(b) of the Disclosure Schedule,
none of the employees of the Company or any of its Subsidiaries have
suffered an "employment loss" (as defined in WARN) during the ninety-day
period prior to the execution of this Agreement.
(c) Neither the Company nor any of its Subsidiaries is bound by any
contract, arrangement, understanding, policy, rule or procedure (whether
written or oral) that restricts its ability to terminate the employment of
any of its employees at any time without payment or other liability.
Section 3.22 Accounts Receivable. Subject to any reserves set forth in
the balance sheet of the Company included in the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999, as filed with the
SEC prior to the date of this Agreement (the "Company Balance Sheet"), the
accounts receivable shown in the Company Balance Sheet arose in the
ordinary course of business; were not, as of the date of the Company
Balance Sheet, subject to any material discount, contingency, claim of
offset or recoupment or counterclaim; and represented, as of the date of
the Company Balance Sheet, bona fide claims against debtors for sales,
leases, licenses and other charges. All accounts receivable of the Company
and its Subsidiaries arising after the date of the Company Balance Sheet
through the date of this Agreement arose in the ordinary course of business
and, as of the date of this Agreement, are not subject to any material
discount, contingency, claim of offset or recoupment or counterclaim,
except for normal reserves consistent with past practice. The amount
carried for doubtful accounts and allowances disclosed in the Company
Balance Sheet is believed by the Company as of the date of this Agreement
to be sufficient to provide for any losses which may be sustained or
realization of the accounts receivable shown in the Company Balance Sheet.
Section 3.23 Transactions with Affiliates. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement or as disclosed in Section 3.23 of the Disclosure Schedule, since
September 30, 1999, there have been no transactions, agreements,
arrangements or understandings between the Company and its affiliates that
would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
Section 3.24 Opinion of Financial Advisor. The Company has received
the written opinion of Xxxxx Xxxxx Xxxxxx & Company, LLC, dated the date
hereof, to the effect that, as of such date, the consideration to be
received by the stockholders of the Company in the Merger is fair to such
stockholders from a financial point of view, a signed copy of which opinion
has been delivered to Parent.
Section 3.25 Brokers or Finders. The Company represents, as to itself,
its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person, other than Xxxxx Xxxxx
Xxxxxx & Company, LLC is or will be entitled to any brokers' or finder's
fee or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, and the Company agrees to
indemnify and hold Parent and Sub harmless from and against any and all
claims, liabilities or obligations with respect to any other commissions or
similar fees in connection with any of the transactions contemplated by
this Agreement which are asserted by any person on the basis of any act or
statement alleged to have been made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of
all agreements between the Company and Xxxxx Xxxxx Xxxxxx & Company, LLC
pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereby.
Section 3.26 Accounting Matters; Reorganization. None of the Company,
any of its Subsidiaries or, to the knowledge of the Company, any of their
respective directors, officers or stockholders, has taken any action which
would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code. Each of the
representations made by the Company to its accountants relating to
treatment of the Merger as a "pooling of interests" for accounting purposes
are true and correct in all respects. Each of the representations made and
to be made by the Company to KPMG LLP in connection with KPMG LLP's
issuance of the letter referred to in Section 5.17(c) hereof are or will
be, as the case may be, true and correct in all respects.
Section 3.27 State Takeover Statutes. To the knowledge of the Company,
no state takeover statute (other than Section 203 of the DGCL, which is
inapplicable) is applicable to the Merger or the transactions contemplated
by this agreement and the Ancillary Agreements.
Section 3.28 Full Disclosure. The Company has not knowingly failed to
disclose to Parent any facts material to the Company's business, results of
operations, assets, liabilities, financial condition or prospects. No
representation or warranty by the Company in this Agreement and no
statement by the Company contained in any document (including the Company
Financial Statements), schedule or certificate furnished or to be furnished
by the Company to Parent pursuant to the terms hereof, the Option Agreement
or in connection with the transactions contemplated hereby or thereby,
contains as of the date hereof or will contain as of the Effective Time,
any untrue statements of a material fact or omit or will omit to state any
material fact necessary, in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
Section 3.29 Registration and Preemptive Rights. Prior to the date
hereof, each of (i) that certain Securities Purchase Agreement (the
"Securities Purchase Agreement"), dated as of July 7, 1999, by and among
the Company and certain persons listed on a schedule thereto, (ii) that
certain Registration Rights Agreement, dated as of July 7, 1999, by and
among the Company and the other signatories thereto, and (iii) that certain
Third Amended and Restated Registration Rights Agreement, as amended, dated
as of March 3, 1995, by and among the Company and the other signatories
thereto, has been terminated in accordance with its terms, such termination
to be effective as of the Effective Time and to be subject to consummation
of the Merger. In addition, each party (other than the Company) to the
Securities Purchase Agreement has retroactively waived all rights such
party has, may have had or may in the future have had pursuant to the
Securities Purchase Agreement, such waiver to be effective as of the
Effective Time and to be subject to consummation of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority, and governmental approvals
would not have a material adverse effect on Parent and its Subsidiaries.
Parent and each of its Subsidiaries is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good standing would not,
in the aggregate, have a material adverse effect on Parent and its
Subsidiaries.
Section 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of 100,000,000
shares of Parent Common Stock and 10,000,000 shares of preferred stock, par
value $.001 per share (the "Parent Preferred Stock"). As of the date
hereof, (i) 21,589,233 shares of Parent Common Stock were issued and
outstanding, (ii) no shares of Parent Preferred Stock were issued and
outstanding, and (iii) 3,590,812 shares of Parent Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
shares of Parent Common Stock pursuant to employee stock option plans of
Parent and all other employee benefit plans of Parent. All of the issued
and outstanding shares of Parent Common Stock are validly issued, fully
paid and nonassessable and are not subject to any preemptive or similar
rights.
(b) Except as disclosed in this Section 4.2, as of the date of this
Agreement, there is no outstanding (i) Right to purchase or otherwise to
receive from Parent or any of its Subsidiaries any of the outstanding
authorized but unissued or treasury shares of the capital stock of Parent
or any of its Subsidiaries, (ii) security of any kind convertible into or
exchangeable for such capital stock and (iii) voting trust or other
agreement or understanding to which Parent or any of its Subsidiaries is a
party or is bound with respect to the voting of the capital stock of Parent
or any of its Subsidiaries.
Section 4.3 Authorization; Validity of Agreement; Necessary Action.
(a) Each of Parent and Sub has full corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it
is a party and, subject to obtaining approval by the affirmative vote of
the holders of a majority of the outstanding shares of Parent Common Stock
of the issuance of Parent Common Stock in connection with the Merger (the
"Parent Stockholder Approval"), to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this
Agreement and the Ancillary Agreements to which each of Parent and Sub,
respectively, is a party and the consummation by Parent and Sub of the
Merger and of the other transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the
part of Parent and Sub, respectively, and, subject to obtaining the Parent
Stockholder Approval, no other corporate actions on the part of Parent and
Sub are necessary to authorize the execution and delivery of this Agreement
or such Ancillary Agreements and the consummation by each of them of the
transactions contemplated hereby and thereby. Each of this Agreement and
the Ancillary Agreements to which each of Parent and Sub, respectively, is
a party has been duly executed and delivered by Parent or Sub, as the case
may be, and if applicable, the Parent's stockholders and affiliates,
assuming each of this Agreement and such Ancillary Agreements constitutes a
valid and binding obligation of the other parties hereto and thereto,
constitutes a valid and binding obligation of Parent or Sub, as the case
may be, and Parents stockholders and affiliates enforceable against Parent,
Sub or Parent's stockholders and affiliates, as the case may be, in
accordance with their respective terms, in accordance with its respective
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The shares of Parent Common
Stock to be issued pursuant to the Merger, upon receipt of the Parent
Stockholder Approval, when issued in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(b) The Boards of Directors of Parent and Sub each have duly and
validly approved and taken all corporate action required to be taken by
such Board of Directors for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements to which Parent
or Sub, as the case may be, is a party. The Parent Stockholder Approval is
the only vote of the holders of any class or series of Parent capital stock
necessary to approve the Agreement. As of the date hereof, the stockholders
of Parent who have executed the Parent Stockholder Agreements collectively
own shares of Parent Common Stock representing, in the aggregate, voting
power sufficient to effect the Parent Stockholder Approval.
Section 4.4 Consents and Approvals; No Violations. Except for the
Parent Stockholder Approval, the Merger Filing and filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the HSR Act, the Exchange Act, the Securities
Act, and state blue sky laws, neither the execution, delivery or
performance of this Agreement or any Ancillary Agreements by Parent and Sub
nor the consummation by Parent and Sub of the transactions contemplated
hereby or thereby nor compliance by Parent and Sub with any of the
provisions hereof or thereof will (i) conflict with or result in any breach
of any provision of the respective certificates of incorporation or by-laws
of Parent, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, license, lease, contract, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, except in the case of clauses (ii), (iii) and (iv) where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings, or where such violations, breaches or defaults would
not, individually or in the aggregate, have a material adverse effect on
Parent and will not materially impair the ability of Parent or Sub to
consummate the transactions contemplated hereby or by the Ancillary
Agreements.
Section 4.5 Information in Proxy Statement/Prospectus. The
Registration Statement (or any amendment thereof or supplement thereto)
will not, at the date it becomes effective and at the times of the Special
Meetings, 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, except that no representation is made by Parent
or Sub with respect to statements made therein based on information
supplied by the Company for inclusion in the Registration Statement. None
of the information supplied by Parent or Sub for inclusion or incorporation
by reference in the Proxy Statement/Prospectus, at the date mailed to
stockholders and at the time of the Special Meetings, will 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. The Registration Statement, as to information supplied by
Parent or Sub, will comply in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder.
Section 4.6 SEC Reports and Financial Statements. Parent has filed
with the SEC, and has heretofore made available to the Company true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since August 5,
1999 under the Exchange Act or the Securities Act (as such documents have
been amended since the time of their filing, collectively, the "Parent SEC
Documents"). As of their respective dates or, if amended, as of the date of
the last such amendment, the Parent SEC Documents, including, without
limitation, any financial statements or schedules included therein (a) did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act or the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC
thereunder. The Parent SEC Documents include all the documents that Parent
was required to file with the SEC since August 5, 1999. Each of the
consolidated financial statements included in the Parent SEC Documents have
been prepared from, and are in accordance with, the books and records of
Parent and its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q of the SEC) and
present fairly the consolidated financial position and the consolidated
results of operations and cash flows of Certificate of Incorporation and
its consolidated Subsidiaries as at the dates thereof or for the periods
presented therein. Parent has not received notice (written or oral) from
and, to its knowledge, is not under any review by any Governmental Entity
in connection with its revenue recognition policies and procedures. Without
limiting the foregoing, for any period after December 31, 1998, Parent has
complied in all material respects with State of Position 97-2 (Software
Revenue Recognition), as amended by Statement of Position 98-4.
Section 4.7 Absence of Certain Changes. Except as and to the extent
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, since September 30, 1999, Parent and its Subsidiaries have
conducted their respective businesses and operations in all material
respects consistent with past practice only in the ordinary and usual
course. From September 30, 1999 through the date of this Agreement, there
has not occurred (i) any events, changes or effects (including the
incurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) having or, which would be reasonably likely to
have, individually or in the aggregate, a material adverse effect on Parent
and its Subsidiaries; (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of Parent or of any of its Subsidiaries
other than regular quarterly cash dividends or dividends paid by wholly
owned Subsidiaries; or (iii) any change by Parent or any of its
Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP. Since September 30, 1999 neither Parent nor
any of its Subsidiaries has taken any of the actions prohibited by Section
5.2 hereof.
Section 4.8 Litigation; Compliance with Law.
(a) Except for the suits disclosed in the Parent SEC Documents filed
prior to the date of this Agreement, there is no suit, claim, action,
proceeding, arbitration or investigation pending or, to the knowledge of
Parent, threatened against or affecting, Parent or any of its Subsidiaries
which, individually or in the aggregate, is reasonably likely, individually
or in the aggregate, to have a material adverse effect on Parent and its
Subsidiaries, or materially impair the ability of Parent to consummate the
Merger or the other transactions contemplated hereby or by the Ancillary
Agreements. The foregoing includes, without limitation, actions pending or,
to the knowledge of Parent, threatened (or any basis therefor known to
Parent) involving the prior employment of any of Parent's or any of its
Subsidiaries' employees, their use in connection with Parent's or any of
its Subsidiaries' business of any information, techniques, patents, patent
applications, copyrights, trade secrets, inventions, technology, know-how,
software or other intellectual property rights allegedly proprietary to any
of their former employers, or their obligations under any agreements with
prior employers.
(b) Parent and its Subsidiaries have complied in a timely manner and
in all material respects, with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any
court or Governmental Entity relating to any of the property owned, leased
or used by them, or applicable to their business, including, but not
limited to, (1) the Foreign Corrupt Practices Act of 1977 and any other
laws regarding use of funds for political activity or commercial bribery
and (2) laws relating to equal employment opportunity, discrimination,
occupational safety and health, environmental, interstate commerce and
antitrust.
Section 4.9 Opinion of Financial Advisor. Parent has received the
written opinion of Credit Suisse First Boston, dated the date hereof, to
the effect that, as of such date, the Merger Consideration to be paid by
Parent in the Merger is fair from a financial point of view to Parent, a
signed copy of which opinion has been delivered to the Company.
Section 4.10 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or person, other than Credit Suisse First
Boston, is or will be entitled to any brokers' or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, and Parent agrees to indemnify and hold the
Company harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses
asserted by any person on the basis of any act or statement alleged to have
been made by or on behalf of such party.
Section 4.11 Accounting Matters; Reorganization. None of Parent, any
of its Subsidiaries or, to the knowledge of Parent, any of their respective
directors, officers or stockholders, has taken any action which would
prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code. Each of the representations made
by Parent to KPMG LLP relating to treatment of the Merger as a "pooling of
interests" for accounting purposes are true and correct in all respects.
Each of the representations made and to be made by Parent to KPMG LLP in
connection with KPMG LLP's issuance of the letter referred to in Section
5.17(c) hereof are or will be, as the case may be, true and correct in all
respects.
Section 4.12 Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, has engaged
in no other business activities and has conducted its operations only as
contemplated by this Agreement.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, except (i) as expressly provided in this Agreement or (ii)
with the prior written consent of Parent, after the date hereof and prior
to the Effective Time:
(a) the business of the Company and its Subsidiaries will be conducted
in the ordinary and customary course consistent with past practice and each
of the Company and its Subsidiaries shall use its best efforts to preserve
its business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock, or any outstanding capital
stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall (i) amend
its certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock; (iii) issue, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of the Company or its
Subsidiaries, other than issuances pursuant to the exercise of Company
Options outstanding on the date hereof, in accordance with their present
terms and the grant of options to purchase Company Common Stock to new
non-executive level employees consistent with past practices; (iv)
transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber
any material assets other than in the ordinary and usual course of business
and consistent with past practice; or (v) redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall (i) grant
any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any of its officers, directors,
employees, agents or consultants (other than increases for non-executive
level employees in the ordinary course of not more than 10%); (ii) adopt or
enter into any new plan, policy, agreement or arrangement that would
constitute a Company Benefit Plan, or amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to become
payable under any existing Company Benefit Plan; (iii) enter into any, or
amend any existing, employment or severance agreement with or, except in
accordance with the existing written policies of the Company previously
delivered to Parent, grant any severance or termination pay to any officer,
director or employee of the Company or any of its Subsidiaries; or (iv)
make any loans to any of its officers, directors, employees, agents or
consultants or make any changes in its existing borrowing or lending
arrangements for or on behalf of any of such persons, whether contingent on
the Merger or otherwise;
(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of the Company Agreements or waive, release or
assign any material rights or claims, except in the ordinary course of
business and consistent with past practice;
(f) the Company and its Subsidiaries shall use commercially reasonable
efforts to prevent any material insurance policy naming it as a beneficiary
or a loss payable payee to be canceled or terminated without notice to
Parent, except in the ordinary course of business and consistent with past
practice; (g) neither the Company nor any of its Subsidiaries shall license
or otherwise transfer, dispose of, permit to lapse or otherwise fail to
preserve any of the Company's or any of its Subsidiaries' Intellectual
Property Rights, or dispose of or disclose to any person who has not
entered into a confidentiality agreement any trade secret, formula, process
or know-how not theretofore a matter of public knowledge, except in the
ordinary course of business and consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall cancel any
debts or waive, release or relinquish any contract rights or other rights
of substantial value, except settlements of accounts receivable in the
ordinary course of business and consistent with past practice;
(i) neither the Company nor any of its Subsidiaries shall: (i) incur
or assume any long-term debt except for amounts set forth in the Company's
budget previously delivered to Parent and, except in the ordinary course of
business consistent with past practice, incur or assume any short-term
indebtedness in amounts not consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business and consistent with past
practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned Subsidiaries
of the Company or customary advances to employees for travel and business
expenses in the ordinary course of business and consistent with past
practice); or (iv) enter into any material commitment or transaction
(including, but not limited to, any borrowing, capital expenditure or
purchase, sale or lease of assets) other than capital expenditures pursuant
to the Company's capital expenditures budget previously delivered to Parent
and other capital expenditures that do not exceed $50,000 in the aggregate
since September 30, 1999;
(j) neither the Company nor any of it s Subsidiaries shall (i) change
any of the accounting principles used by it unless required by GAAP; (ii)
take or allow to be taken any action which would jeopardize the treatment
of Parent's business combination with the Company as a pooling of interests
for accounting purposes; or (iii) take or allow to be taken any action
which would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code;
(k) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations (i) in the ordinary course of business and consistent with past
practice, or claims, liabilities or obligations reflected or reserved
against in, or contemplated by, the consolidated financial statements (or
the notes thereto) of the Company and its consolidated Subsidiaries, (ii)
incurred in the ordinary course of business and consistent with past
practice or (iii) which are legally required to be paid, discharged or
satisfied (provided that if such claims, liabilities or obligations
referred to in this clause (iii) are legally required to be paid and are
also not otherwise payable in accordance with clauses (i) or (ii) above,
the Company will notify Parent in writing if such claims, liabilities or
obligations exceed, individually or in the aggregate, $50,000 in value,
reasonably in advance of their payment);
(l) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or
any of its Subsidiaries or any agreement relating to an Alternative
Transaction (as defined in Section 5.7(a) hereof);
(m) neither the Company nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any respect at, or
as of any time prior to, the Effective Time;
(n) neither the Company nor any of its Subsidiaries will voluntarily
make or agree to make any changes in Tax accounting methods, waive or
consent to the extension of any statute of limitations with respect to
Taxes, or consent to any assessment of Taxes, or settle any judicial or
administrative proceeding affecting Taxes; and
(o) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
Section 5.2 Interim Operations of Parent. Parent covenants and agrees
that, except (i) as expressly provided in this Agreement, or (ii) with the
prior written consent of the Company, after the date hereof and prior to
the Effective Time:
(a) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock;
(b) Parent shall not: (i) amend its certificate of incorporation or
by-laws; or (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock other than regular quarterly cash dividends consistent with past
practice;
(c) neither Parent nor any of its Subsidiaries shall (i) change any of
the accounting principles used by it unless required by GAAP; (ii) take or
allow to be taken any action which would jeopardize the treatment of
Parent's business combination with the Company as a pooling of interests
for accounting purposes; or (iii) take or allow to be taken any action
which would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code;
(d) neither Parent nor any of its Subsidiaries will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of Parent or any of
its Subsidiaries or any agreement relating to a Competing Proposal (as
defined in Section 5.8 hereof);
(e) neither Parent nor any of its Subsidiaries will take, or agree to
commit to take, any action that would make any representation or warranty
of Parent and Sub contained herein inaccurate in any respect at, or as of
any time prior to, the Effective Time; and
(f) neither Parent nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
Section 5.3 Access to Information. The Company shall (and shall cause
each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of
Parent, access, during normal business hours, during the period prior to
the Effective Time, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records and, during such period, the Company
shall (and shall cause each of its Subsidiaries to) furnish promptly to
Parent (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request. Unless otherwise required by law, until the Effective Time, Parent
will hold, and cause its officers, employees, accountants, counsel,
financing sources and other representatives to hold, any such information
which is nonpublic in confidence in accordance with the provisions of the
Mutual Non-Disclosure Agreement between the Company and Parent, dated as of
August 18, 1999 (the "Confidentiality Agreement").
Section 5.4 HSR Act Filings.
(a) Each of Parent and the Company shall, to the extent applicable,
(i) make or cause to be made any filings required of such party or any of
its Subsidiaries or affiliates under the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and in any
event within ten business days after the date of this Agreement, (ii)
comply at the earliest practicable date with any request under the HSR Act
for additional information, documents, or other materials received by such
party or any of its Subsidiaries from the Federal Trade Commission or the
Department of Justice (either, an "HSR Authority") or any other
Governmental Entity in respect of such filings or such transactions, and
(iii) cooperate with the other party in connection with any such filing
(including, with respect to the party making a filing, providing copies of
all such documents to the nonfiling party and its advisors prior to filing
and, if requested, to accept all reasonable changes suggested in connection
therewith) and in connection with resolving any investigation or other
inquiry of any such agency or other Governmental Entity under any Antitrust
Laws (as defined in Section 5.4(b) hereof) with respect to any such filing
or any such transaction. Each party shall use its reasonable best efforts
to furnish to each other all information required for any application or
another filing to be made pursuant to any applicable law in connection with
the Merger and the other transactions contemplated by this Agreement. Each
party shall promptly inform the other party of any communication with, and
any proposed understanding, undertaking, or agreement with, any
Governmental Entity regarding any such filings or any such transaction.
(b) Each of Parent and the Company shall use its reasonable best
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign statutes, rules, regulations, orders, decrees,
administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Antitrust
Law, each of Parent and the Company shall cooperate and use its reasonable
best efforts vigorously to contest and resist any such action or
proceeding, including any legislative, administrative or judicial action,
and to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent,
that is in effect and that prohibits, prevents, or restricts consummation
of the Merger or any other transactions contemplated by this Agreement, and
vigorously to pursue all available avenues of administrative and judicial
appeal and all available legislative action, unless by mutual agreement
Parent and the Company decide that litigation is not in their respective
best interest. Parent shall be entitled to direct any proceedings or
negotiations with any Governmental Entity relating to any of the foregoing
described in this Section 5.4, provided that it shall afford the Company a
reasonable opportunity to participate therein. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in this Section
5.4 shall limit a party's right to terminate this Agreement pursuant to
Section 7.1, so long as such party has up to then complied in all material
respects with its obligations under this Section 5.4. Each of Parent and
the Company shall use its reasonable best efforts to take such action as
may be required to cause the expiration of any notice period under the HSR
Act or other Antitrust Laws with respect to such transactions as promptly
as possible after the execution of this Agreement.
(c) Notwithstanding this Section 5.4 or any other provision of this
Agreement or any of the Ancillary Agreements, neither Parent nor Sub shall
be required, whether before or after the Effective Time, to hold separate
(including by trust or otherwise) or divest any of its business or assets
or any of the businesses or assets of the Company, or enter into any
consent decree or other agreement that would restrict Parent or the Company
in the conduct of its respective businesses as heretofore conducted.
Section 5.5 Other Consents and Approvals. Each of the Company, Parent
and Sub will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to this
Agreement and the transactions contemplated hereby (which actions shall
include, without limitation, furnishing all information in connection with
approvals of or filings with any Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them or any of their Subsidiaries in
connection with this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby. Each of the Company, Parent
and Sub will, and will cause its respective Subsidiaries to, take all
reasonable actions necessary to obtain any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public
or private third party required to be obtained or made by Parent, Sub, the
Company or any of their Subsidiaries in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement or the
Ancillary Agreements (collectively, the "Requisite Regulatory Approvals").
Section 5.6 Employment Agreements. Prior to the Closing, the Company
shall, upon Parent's request, extend offers of employment, to be effective
as of the Effective Time and to be subject to consummation of the Merger,
to certain key employees of the Company identified by Parent, in each case
on terms to be proposed by Parent, subject to execution of Parent's
standard form of offer letter, in the form of Exhibit B-2 hereto, and
non-disclosure agreement, in the form of Exhibit F hereto, the
effectiveness of which offer letters and non-disclosure agreements shall be
conditioned upon the consummation of the transactions consummated hereby.
Section 5.7 No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its Subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
the consummation of which would constitute an Alternative Transaction or
(ii) participate in any negotiations regarding any Alternative Transaction;
provided, however, that if, at any time prior to the adoption of this
Agreement by the holders of the Company Common Stock, the Company Board
determines in good faith, after receipt of advice from outside counsel,
that such action is required for the Company Board to comply with its
fiduciary obligations to the Company's stockholders under applicable law,
the Company may, in response to any such proposal that was not solicited by
it or which did not otherwise result from a breach of this Section 5.7(a),
and subject to compliance with Section 5.7(c) hereof, (A) furnish
information with respect to the Company and its Subsidiaries to any person
pursuant to a customary confidentiality agreement containing terms as to
confidentiality no less restrictive than the Confidentiality Agreement and
(B) participate in negotiations regarding such proposal. For purposes of
this Agreement "Alternative Transaction" means any of (i) a transaction or
series of transactions pursuant to which any person (or group of persons)
other than the Company and its Subsidiaries and other than Parent and its
Subsidiaries (a "Third Party") acquires or would acquire, directly or
indirectly, beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of more than 20% of the outstanding shares of the Company,
whether from the Company or pursuant to a tender offer or exchange offer or
otherwise, (ii) any acquisition or proposed acquisition of the Company or
any of its significant Subsidiaries by a merger or other business
combination whether or not the Company or any of its significant
Subsidiaries is the entity surviving any such merger or business
combination) or (iii) any other transaction pursuant to which any Third
Party acquires or would acquire, directly or indirectly, control of assets
(including for this purpose the outstanding equity securities of
Subsidiaries of the Company and any entity surviving any merger or
combination including any of them) of the Company or any of its
Subsidiaries for consideration equal to 20% or more of the fair market
value of all of the outstanding shares of the Company Common Stock on the
date prior to the date hereof.
(b) Neither the Company Board nor any committee thereof shall (i)
except as expressly permitted by this Section 5.7, withdraw, qualify or
modify, or propose publicly to withdraw, qualify or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve
or recommend, or propose publicly to approve or recommend, any Alternative
Transaction, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
(each, a "Acquisition Agreement") related to any Alternative Transaction.
Notwithstanding the foregoing, in the event that prior to the adoption of
this Agreement by the holders of the Company Common Stock the Company Board
determines in good faith, after it has received a Superior Proposal (as
defined below) and after receipt of advice from outside counsel, that such
actions is required for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under applicable law, the Company
Board may (subject to this and the following sentences) inform the Company
stockholders that it no longer believes that the Merger or this Agreement
is advisable and no longer recommends approval of the Merger or this
Agreement and/or approves or recommends a Superior Proposal (a "Subsequent
Determination"), but only at a time that is after the fifth business day
following Parent's receipt of written notice advising Parent that the
Company Board has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal, identifying the person
making such Superior Proposal and stating that it intends to make a
Subsequent Determination. After providing such notice, the Company shall
provide a reasonable opportunity to Parent to make such adjustments in the
terms and conditions of this Agreement as would enable the Company to
proceed with its original recommendation to stockholders without making a
Subsequent Determination; provided, however, that any such adjustments
shall be at the discretion of the parties at such time. For purposes of
this Agreement, a "Superior Proposal" means any proposal (on its most
recently amended or modified terms, if amended or modified) made by a Third
Party to enter into an Alternative Transaction on terms which the Company
Board determines in its good faith judgment (after receiving the advice of
a financial advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger taking into account
all relevant factors (including whether, in the good faith judgment of the
Company Board, after obtaining advice from a financial advisor of
nationally recognized reputation, the Third Party is reasonably able to
finance the transaction, and any proposed changes to this Agreement that
may have been proposed by Parent in response to such Alternative
Transaction). Notwithstanding any other provision of this Agreement, the
Company shall submit this Agreement to its stockholders whether or not the
Company Board makes a Subsequent Determination.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.7, the Company shall promptly
advise Parent orally and in writing of any request for information or of
any proposal in connection with an Alternative Transaction, the material
terms and conditions of such request or proposal and the identity of the
person making such request or proposal. The Company will keep Parent
reasonably informed of the status and details (including amendments or
proposed amendments) of any such request or proposal on a current basis.
(d) Nothing contained in this Section 5.7 shall prohibit the Company
from (i) taking and disclosing to its stockholders a position contemplated
by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii)
from making any disclosure to its stockholders if, in the good faith
judgment of the Company Board, after receipt of advice from outside
counsel, failure so to disclose would violate its fiduciary duties to the
Company's stockholders under applicable law.
Section 5.8 No Solicitation by Parent. Parent shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any of
its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any
of its Subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any competing
or alternative proposal for Parent to acquire a third party, the
consummation of which would delay, interfere with or adversely affect the
consummation of the Merger (a "Competing Proposal"), or (ii) participate in
any negotiations regarding any Competing Proposal; provided, however, that
if, at any time prior to the adoption of this Agreement by the holders of
the Parent Common Stock, the Parent Board determines in good faith, after
receipt of advice from outside counsel, that such action is required for
the Parent Board to comply with its fiduciary obligations to Parent's
stockholders under applicable law, Parent may, in response to any such
proposal that was not solicited by it or which did not otherwise result
from a breach of this Section 5.8, (A) furnish information with respect to
Parent and its Subsidiaries to any person pursuant to a customary
confidentiality agreement containing terms as to confidentiality no less
restrictive than the Confidentiality Agreement and (B) participate in
negotiations regarding such proposal.
In addition, Parent shall promptly advise the Company orally and in
writing of any request for information or of any proposal in connection
with a Competing Proposal, the material terms and conditions of such
request or proposal and the identity of the person making such request or
proposal. Parent will keep the Company reasonably informed of the status
and details (including amendments or proposed amendments) of any such
request or proposal on a current basis.
Section 5.9 Stockholders' Meetings. (a) In order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in
accordance with applicable law, duly call, give notice of, convene and hold
a special meeting of its stockholders (the "Company Special Meeting"), as
soon as practicable after the Registration Statement is declared effective,
for the purpose of considering and voting upon this Agreement. The Company
shall include in the Proxy Statement/Prospectus the unanimous
recommendation of the Company Board that stockholders of the Company vote
in favor of the adoption of this Agreement. Nothing contained in the
preceding sentence shall prohibit the Company from (i) taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 or
14e-2 promulgated under the Exchange Act or (ii) from making any disclosure
to its stockholders if, in the good faith judgment of the Company Board,
after receipt of advice from outside counsel, failure so to disclose would
violate its fiduciary duties to the Company's stockholders under applicable
law.
(b) If required in order to consummate the Merger, Parent, acting
through its Board of Directors (the "Parent Board"), shall, in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Parent Special Meeting" and, together
with the Company Special Meeting, the "Special Meetings"), as soon as
practicable after the Registration Statement is declared effective, for the
purpose of considering and voting upon the issuance of shares of Parent
Common Stock in the Merger in accordance with the rules of the Nasdaq Stock
Market. Parent shall include in the Proxy Statement/Prospectus the
recommendation of the Parent Board that stockholders of Parent vote in
favor of such issuance of shares of Parent Common Stock in the Merger.
Nothing contained in the preceding sentence shall prohibit Parent from (i)
taking and disclosing to its stockholders a position contemplated by Rule
14d-9 or 14e-2 promulgated under the Exchange Act or (ii) from making any
disclosure to its stockholders if, in the good faith judgment of the Parent
Board, after receipt of advice from outside counsel, failure so to disclose
would violate its fiduciary duties to Parent's stockholders under
applicable law.
(c) Parent and the Company shall use all reasonable efforts to hold
the Parent Special Meeting and the Company Special Meeting on the same date
and as soon as reasonably practicable after the date hereof.
Section 5.10 Proxy Statement/Prospectus; Registration Statement.
(a) Parent and the Company shall use commercially reasonable efforts
to prepare and file with the SEC, as promptly as practicable after the
execution of this Agreement, a joint proxy statement relating to the
Company Special Meeting and the Parent Special Meeting to be held in
connection with the Transactions (together with any amendments thereof or
supplements thereto, the "Proxy Statement/Prospectus"). Parent shall use
commercially reasonable efforts to prepare and file with the SEC, as
promptly as practicable after the execution of this Agreement, a
registration statement on Form S-4 (together with all amendments thereto,
the "Parent Registration Statement"), in which the Proxy
Statement/Prospectus shall be included as a prospectus, in connection with
the registration under the Securities Act of the shares of Parent Common
Stock and warrants to purchase shares of Parent Common Stock to be issued
pursuant to the Merger. Each of Parent and the Company (i) shall cause the
Proxy Statement/Prospectus and the Parent Registration Statement to comply
as to form in all material respects with the applicable provision of the
Securities Act, the Exchange Act and the rules and regulations thereunder,
(ii) shall use all reasonable efforts to have or cause the Parent
Registration Statement to become effective as promptly as practicable, and
(iii) shall take any and all action required under any applicable Federal
or state securities laws in connection with the issuance of shares of
Parent Common Stock pursuant to the Merger. Parent and the Company shall
furnish to the other all information concerning Parent and the Company as
the other may reasonably request in connection with the preparation of the
documents referred to herein. As promptly as practicable after the Parent
Registration Statement shall have become effective, each of Parent and the
Company shall deliver the Proxy Statement/Prospectus to its respective
stockholders.
(b) The information supplied by each of Parent and the Company for
inclusion in the Parent Registration Statement and the Proxy
Statement/Prospectus shall not (i) at the time the Parent Registration
Statement is declared effective, (ii) at the time the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of Parent or the Company, (iii) at the
time of the Company Special Meeting, (iv) at the time of the Parent Special
Meeting, or (v) 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. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company, any Subsidiary of the Company,
Parent, any Subsidiary of Parent, or their respective officers or
directors, should be discovered by such party which should be set forth in
an amendment or a supplement to the Parent Registration Statement or the
Proxy Statement/Prospectus, such party shall promptly inform the other
thereof and take appropriate action in respect thereof.
Section 5.11 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable, whether under
applicable laws and regulations or otherwise, or to remove any injunctions
or other impediments or delays, legal or otherwise, to consummate and make
effective the Merger and the other transactions contemplated by this
Agreement and the Ancillary Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out
the purposes of this Agreement or the Ancillary Agreements, the proper
officers and directors of the Company and Parent shall use all reasonable
efforts to take, or cause to be taken, all such necessary actions.
Section 5.12 Publicity. So long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall
issue or cause the publication of any press release or other announcement
with respect to the Merger, this Agreement, the Ancillary Agreements, or
the other transactions contemplated hereby or thereby without the prior
consultation of the other party, except as may be required by law or by any
listing agreement with a national securities exchange. Without limiting the
foregoing, so long as this Agreement is in effect, the Company shall not
issue or cause the publication of any press release or other announcement
without the prior consent of Parent, which consent shall not be
unreasonably withheld.
Section 5.13 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Effective Time and (ii) any material failure of
the Company or Parent, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or under any Ancillary Agreement; provided, however, that the
delivery of any notice pursuant to this Section 5.13 shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
Section 5.14 Directors' and Officers' Insurance and Indemnification.
Parent agrees that at all times after the Effective Time, it shall
indemnify, or shall cause the Company (or the Surviving Corporation if
after the Effective Time) and its Subsidiaries to indemnify, each person
who is now, or has been at any time prior to the date hereof, a director or
officer of the Company or of any of the Company's Subsidiaries, successors
and assigns (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the same extent and in the same manner as is now
provided in the respective certificates of incorporation or by-laws or in
the indemnity agreements, copies of which agreements have been previously
provided to Parent, of the Company and such Subsidiaries or otherwise in
effect on the date hereof, with respect to any claim, liability, loss,
damage, cost or expense (whenever asserted or claimed) ("Indemnified
Liability") based in whole or in part on, or arising in whole or in part
out of, any matter existing or occurring at or prior to the Effective Time.
Parent shall, and shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, maintain in effect for not less than six
years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company and its
Subsidiaries on the date hereof (provided that Parent may substitute
therefor policies having at least the same coverage and containing terms
and conditions which are no less advantageous to the persons currently
covered by such policies as insured) with respect to matters existing or
occurring at or prior to the Effective Time; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 150% of the per annum rate of premium currently paid by the
Company and its Subsidiaries for such insurance on the date of this
Agreement, which amount is set forth in Section 5.14 of the Disclosure
Schedule, then Parent shall cause the Company (or the Surviving Corporation
if after the Effective Time) to, and the Company (or the Surviving
Corporation if after the Effective Time) shall, provide the maximum
coverage that shall then be available at an annual premium equal to 150% of
such rate. Without limiting the foregoing, in the event any Indemnified
Party becomes involved in any capacity in any action, proceeding or
investigation based in whole or in part on, or arising in whole or in part
out of, any matter, including the transactions contemplated hereby,
existing or occurring at or prior to the Effective Time, then to the extent
permitted by law Parent shall, or shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, periodically advance to such
Indemnified Party its legal and other expenses (including the cost of any
investigation and preparation incurred in connection therewith), subject to
the provision by such Indemnified Party of an undertaking to reimburse the
amounts so advanced in the event of a final determination by a court of
competent jurisdiction that such Indemnified Party is not entitled thereto.
Promptly after receipt by an Indemnified Party of notice of the assertion
(an "Assertion") of any claim or the commencement of any action against him
in respect to which indemnity or reimbursement may be sought against
Parent, the Company, the Surviving Corporation or a Subsidiary of the
Company or the Surviving Corporation ("Indemnitors") hereunder, such
Indemnified Party shall notify any Indemnitor in writing of the Assertion,
but the failure to so notify any Indemnitor shall not relieve any
Indemnitor of any liability it may have to such Indemnified Party hereunder
except where such failure shall have materially prejudiced Indemnitor in
defending against such Assertion. Indemnitors shall be entitled to
participate in and, to the extent Indemnitors elect by written notice to
such Indemnified Party within 30 days after receipt by any Indemnitor of
notice of such Assertion, to assume, the defense of such Assertion, at
their own expense, with counsel chosen by Indemnitors and reasonably
satisfactory to such Indemnified Party. Notwithstanding that Indemnitors
shall have elected by such written notice to assume the defense of any
Assertion, such Indemnified Party shall have the right to participate in
the investigation and defense thereof, with separate counsel chosen by such
Indemnified Party, but, until there is a conflict between the positions of
the Indemnified Party and the Indemnitors, the fees and expenses of such
counsel shall be paid by such Indemnified Party. No Indemnified Party shall
settle any Assertion without the prior written consent of Parent, which
consent may not be unreasonably withheld, nor shall Parent settle any
Assertion without either (i) the written consent of all Indemnified Parties
against whom such Assertion was made, or (ii) obtaining a general release
from the party making the Assertion for all Indemnified Parties as a
condition of such settlement. The provisions of this Section 5.14 are
intended for the benefit of, and shall be enforceable by, the respective
Indemnified Parties.
Section 5.15 Affiliate Agreements. The Company has previously
delivered to Parent a list setting forth the names of all persons who are
expected to be, at the time of the Special Meetings, in the Company's
reasonable judgment, "affiliates" of the Company for purposes of Rule 145
under the Securities Act or under applicable SEC accounting releases with
respect to pooling of interests accounting treatment. The Company shall
furnish such information and documents as Parent may reasonably request for
the purpose of reviewing such list. The Company shall use its reasonable
best efforts to cause each person who is identified as an "affiliate" in
the list furnished pursuant to this Section 5.15 to execute a written
agreement as soon as practicable after the date hereof, but in no event
later than the day preceding the filing of the Registration Statement, in
substantially the form of Exhibit G hereto. Parent has previously delivered
to the Company a list setting forth the names of all persons who are
expected to be, at the time of the Special Meetings, in Parent's reasonable
judgment, "affiliates" of Parent under applicable SEC accounting releases
with respect to pooling of interests accounting treatment. Parent shall
furnish such information and documents as the Company may reasonably
request for the purpose of reviewing such list. Parent shall use its
reasonable best efforts to cause each person who is identified as its
"affiliate" hereunder to execute a written agreement as soon as practicable
after the date hereof, but in no event later than the day preceding the
filing of the Registration Statement, in substantially the form of Exhibit
G hereto.
Section 5.16 Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (i) with respect to the timing of the Parent
Special Meeting and the Company Special Meeting and shall use their
reasonable best efforts to hold such meetings on the same day, (ii) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents approvals or
waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by
this Agreement and the Ancillary Agreements, and (iii) in seeking any such
actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith and timely seeking
to obtain any such actions, consents approvals or waivers. Subject to the
terms and conditions of this Agreement, Parent and the Company will each
use its reasonable best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after the
Registration Statement is filed, and Parent and the Company shall, subject
to applicable law, confer on a regular and frequent basis with one or more
representatives of one another to report operational matters of
significance to the Merger and the general status of ongoing operations
insofar as relevant to the Merger, provided that the parties will not
confer on any matter to the extent inconsistent with law.
Section 5.17 Letters of Accountants.
(a) Parent shall use all reasonable efforts to cause to be delivered
to the Company a comfort letter of KPMG LLP, Parent's independent auditors,
dated within two business days before the date on which the Registration
Statement shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement, which letter shall be brought down to the Effective Time.
(b) The Company shall use all reasonable best efforts to cause to be
delivered to Parent a comfort letter of KPMG LLP, the Company's independent
auditors, dated within two business days before the date on which the
Registration Statement shall become effective and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement, which letter shall be brought down to the Effective Time.
(c) The Company shall use all reasonable best efforts to cause to be
delivered to Parent a letter from its independent accountants, dated the
Closing Date, in form and substance reasonably satisfactory to the Company
and Parent, stating that such independent accountants concur with the
conclusion of Parent's management that the Merger will qualify as a pooling
of interest transaction under Accounting Principles Board Opinion No. 16
and applicable SEC regulations, if the Merger is consummated in accordance
with this Agreement. Parent shall use all reasonable best efforts to cause
to be delivered to the Company a letter from its independent accountants,
dated the Closing Date, in form and substance reasonably satisfactory to
the Company and Parent, stating that such independent accountants concur
with the conclusion of the Company's management that the Merger will
qualify as a pooling of interests transaction under Accounting Principles
Board Opinion No. 16 and applicable SEC regulations, if the Merger is
consummated in accordance with this Agreement.
Section 5.18 Consents of Accountants. Parent and the Company will each
use reasonable best efforts to cause to be delivered to each other consents
from their respective independent auditors, dated the date on which the
Registration Statement shall become effective, in form reasonably
satisfactory to the recipient and customary in scope and substance for
consents delivered by independent public accountants in connection with
registration statements on Form S-4 under the Securities Act.
Section 5.19 Subsequent Financial Statements. The Company shall
consult with Parent prior to making publicly available its financial
results for any period after the date of this Agreement and prior to filing
any Company SEC Documents after the date of this Agreement, it being
understood that Parent shall have no liability by reason of such
consultation.
Section 5.20 Accounting and Tax Treatment. Each of Parent, Sub, the
Company and their respective Subsidiaries shall take all actions reasonably
necessary (a) to ensure that each of Parent and the Company is a "poolable
entity" eligible to participate in a transaction to be accounted for as a
pooling of interests for accounting purposes and (b) to cause the Merger to
qualify as a reorganization within the meaning of Section 368(a) of the
Code (including, without limitation, by providing to a requesting party,
customary representations contained in the certificates referred to in
Section 6.2(g) and 6.3(e)).
Section 5.21 Nasdaq Qualification. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the
Merger to be qualified for inclusion in the Nasdaq Stock Market, subject to
official notice of issuance, as of or prior to the Effective Time.
Section 5.22 Employee Plans and Arrangements. As soon as practicable
after the execution of this Agreement, the Company and Parent shall confer
and work together in good faith to agree upon mutually acceptable employee
benefit and compensation arrangements (and amend or terminate Company
employee plans immediately prior to the Effective Time, if appropriate).
Parent shall use commercially reasonable efforts to ensure that continuous
employment with the Company or its Subsidiaries shall be credited to
Company employees who become Parent employees or become Continuing
Employees for all purposes of eligibility and vesting of benefits but not
for purposes of accrual of benefits. Parent shall take commercially
reasonable steps to (a) cause to be waived all limitations as to
preexisting condition limitations, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the
employees of the Company and its Subsidiaries under any welfare benefit
plans that such employees are eligible to participate in after the
Effective Time, other than limitations, exclusions or waiting periods that
are already in effect with respect to such employees and that have not been
satisfied as of the Effective Time under any welfare benefit plan
maintained for such employees immediately prior to the Effective Time and
(b) provide each employee of the Company and its Subsidiaries with credit
for any co-payments and deductibles paid during the plan year commencing
immediately prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Effective Time for such
plan year. For purposes of this Section 5.22, "Continuing Employee" means
any employee of the Company who continues as an employee of the Surviving
Corporation or Parent after the Effective Time.
Section 5.23 Registration Rights. Parent shall use all reasonable
efforts to provide to the stockholders of the Company listed in Schedule
5.23 hereto, effective upon the Effective Time, substantially the same
registration rights with respect to the Parent Common Stock they receive as
Merger Consideration to which "Holders" are entitled under Section 3 of the
Amended and Restated Investors' Rights Agreement of Parent dated as of
February 26, 1999 with respect to "Registrable Securities" (as those terms
are defined in such agreement); provided, however, that no such stockholder
shall be entitled, directly or indirectly, to initiate or create any
obligation on the part of Parent to file a Registration Statement (as
defined in such agreement).
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Obligations of Each Party. The
obligations of the Company, on the one hand, and Parent and Sub, on the
other hand, to consummate the Merger are subject to the satisfaction (or,
if permissible, waiver by the party for whose benefit such conditions
exist) of the following conditions:
(a) any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by any HSR Authority challenging or seeking to
enjoin the consummation of this transaction, which action shall have not
been withdrawn or terminated;
(b) the Company shall have received the Company Stockholder Approval;
(c) Parent shall have received the Parent Stockholder Approval;
(d) no court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, restraining or prohibiting (collectively, "Restraints") the
consummation of the Merger or the effective operation of the business of
the Company and its respective Subsidiaries after the Effective Time;
(e) all Requisite Regulatory Approvals shall have been obtained but
excluding any Requisite Regulatory Approval the failure to obtain which
would not have a material adverse effect on Parent, Sub, the Company or,
after the Effective Time, the Surviving Corporation;
(f) the shares of Parent Common Stock to be issued in the Merger shall
have been qualified for inclusion in Nasdaq Stock Market; and
(g) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the SEC.
Section 6.2 Conditions to the Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) the representations and warranties of the Company shall have been
true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need
only be true and accurate as of such date) as of the Effective Time as if
made at and as of such time, except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), does not have, and is not likely to have, individually
or in the aggregate, a material adverse effect on the Company and its
Subsidiaries taken as a whole; provided, that the representations and
warranties set forth in Sections 3.2 and 3.3 shall be true and correct in
all respects;
(b) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time;
(c) each of the Ancillary Agreements shall be valid, in full force and
effect and complied with in all material respects;
(d) since the date of this Agreement, there shall not have occurred
any event, change or effect having, or which could be reasonably likely to
have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries;
(e) Parent shall have received an opinion of Fenwick & West LLP,
substantially in the form attached as Exhibit H-1 hereto and otherwise
reasonably satisfactory in form and substance to Parent, addressed to
Parent and dated the Closing Date;
(f) Parent shall have received an opinion of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, in form and substance reasonably satisfactory to
Parent, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing as of the Effective
Time, for federal income tax purposes, the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code. In
rendering such opinion, Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP may
receive and rely upon representations contained in certificates of Parent,
the Company and others;
(g) The Company shall have furnished Parent with a certificate dated
the Closing Date signed on behalf of it by the Chairman of the Board of
Directors of the Company and the President and Chief Financial Officer of
the Company to the effect that the conditions set forth in Sections 6.2(a)
through (d) have been satisfied; and
(h) The Company shall deliver to Parent a certification, in form and
substance reasonably satisfactory to Parent, that neither the Company nor
any of its Subsidiaries is or has been a U.S. real property holding company
(as defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
Section 6.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction (or waiver by the Company) of the following further
conditions:
(a) the representations and warranties of Parent and Sub shall have
been true and accurate both when made and (except for those representations
and warranties that address matters only as of a particular date which need
only be true and accurate as of such date) as of the Effective Time as if
made at and as of such time, except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein), does not have, and is not likely to have, individually
or in the aggregate, a material adverse effect on Parent and its
Subsidiaries taken as a whole; provided, that the representations and
warranties set forth in Sections 4.2 and 4.3 shall be true and correct in
all respects;
(b) Each of Parent and Sub shall have performed in all material
respects all of the respective obligations hereunder required to be
performed by Parent or Sub, as the case may be, at or prior to the
Effective Time;
(c) Since the date of this Agreement, there shall not have occurred
any event, change or effect having, or which could be reasonably likely to
have, individually or in the aggregate, a material adverse effect on Parent
and its Subsidiaries, taken as a whole;
(d) The Company shall have received an opinion of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, substantially in the form attached as Exhibit
H-2 hereto and otherwise reasonably satisfactory in form and substance to
the Company, addressed to the Company and dated the Closing Date;
(e) The Company shall have received an opinion of Fenwick & West LLP,
in form and substance reasonably satisfactory to the Company, dated the
Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code. In rendering such
opinion, Fenwick & West LLP may receive and rely upon representations
contained in certificates of the Company, Parent and others; and
(f) Parent shall have furnished the Company with a certificate dated
the Closing Date signed on behalf of it by the President of Parent to the
effect that the conditions set forth in Sections 6.3(a) through (c) have
been satisfied.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Effective Time, and (except in the case of 7.1(e) or 7.1(f)) whether before
or after the Parent Stockholder Approval or the Company Stockholder
Approval:
(a) by mutual written consent of the Company and Parent, if the Board
of Directors of each so determines by a vote of a majority of its entire
Board;
(b) by either the Company Board or the Parent Board:
(i) if the Merger shall not have been consummated by June 30,
2000, unless the Company Board or Parent Board, as the case may be,
has expressly restricted in writing its right to terminate this
Agreement pursuant to this Section 7.1(b)(i); provided, however, that
the right to terminate this Agreement pursuant to this Section
7.1(b)(i) shall not be available to any party whose failure to perform
any of its obligations under this Agreement results in the failure of
the Merger to be consummated by such time;
(ii) if the Parent Stockholder Approval shall not have been
obtained at the Parent Special Meeting duly convened therefor or at
any adjournment or postponement thereof;
(iii) if the Company Stockholder Approval shall not have been
obtained at the Company Special Meeting duly convened therefor or at
any adjournment or postponement thereof; or
(iv) if any Restraint having any of the effects set forth in
Section 6.1(d) shall be in effect and shall have become final and
nonappealable, or if any Governmental Entity that must grant a
Requisite Regulatory Approval has denied approval of the Merger and
such denial has become final and nonappealable; provided, however,
that the party seeking to terminate this Agreement pursuant to this
Section 7.1(b)(iv) shall have used commercially reasonable efforts to
prevent the entry of and to remove such Restraint or to obtain such
Requisite Regulatory Approval, as the case may be;
(c) by the Company Board (provided that the Company is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), if Parent shall have materially breached or
failed to perform any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth in
Section 6.3(a) or (b), and (B) is incapable of being cured by Parent or is
not cured within 30 days of written notice thereof;
(d) by the Parent Board (provided that Parent is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), if the Company shall have materially breached or failed
to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set
forth in Section 6.2(a) or (b), and (B) is incapable of being cured by the
Company or is not cured within 30 days of written notice thereof;
(e) by the Company Board, at any time prior to the Parent Special
Meeting, if the Parent Board shall have (A) failed to include in the Proxy
Statement/Prospectus to the stockholders of Parent its recommendation
without modification or qualification that such stockholders approve this
Agreement and the transactions contemplated hereby, (B) failed to reaffirm
such recommendation upon the Company's request, (C) subsequently withdrawn
such recommendation or (D) modified or qualified such recommendation in a
manner adverse to the interests of the Company; and
(f) by the Parent Board, at any time prior to the Company Special
Meeting, if the Company Board shall have (A) failed to include in the Proxy
Statement/Prospectus to the stockholders of the Company its recommendation
without modification or qualification that such stockholders approve this
Agreement and the transaction contemplated hereby, (B) failed to reaffirm
such recommendation upon Parent's request, (C) subsequently withdrawn such
recommendation or (D) modified or qualified such recommendation in a manner
adverse to the interests of Parent.
Section 7.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 7.1 hereof, and subject to the provisions of Section 8.1 hereof,
this Agreement shall forthwith become void and there shall be no liability
on the part of any of the parties, except (i) as set forth in this Section
7.2, Section 8.1 and in the last sentence of Section 5.3, and (ii) nothing
herein shall relieve any party from liability for any breach hereof.
(b) The Company shall pay to Parent a fee of $4.0 million, plus an
amount equal to all of the costs and expenses incurred by Parent in
connection with this Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby, upon the
earliest to occur of the following events:
(i) the termination of this Agreement by Parent pursuant to
Section 7.1(f);
(ii) the termination of this Agreement by the Company or Parent
pursuant to Section 7.1(b)(iii); or
(iii) the termination of this Agreement by Parent pursuant to
Section 7.1(d) and, in the case of each of clauses (i), (ii) and (iii)
above, if the Company subsequently enters into or consummates an
Alternative Transaction within twelve (12) months of such termination.
(c) The fee, costs and expenses payable pursuant to Section 7.2(b)
hereof shall be paid on the date of the consummation of the Alternative
Transaction giving rise to such fee. Parent will provide to the Company
reasonable documentation in respect of the costs and expenses payable
pursuant to Section 7.2(b) hereof.
(d) Notwithstanding anything to the contrary in this Section 7.2, the
payments provided for in this Section 7.2 shall not be deemed to be
Parent's or Sub's exclusive remedy, and Parent and Sub shall have the right
to pursue any remedies available to them at law or in equity.
Section 7.3 Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties at any time before or after the
Parent Stockholder Approval or the Company Stockholder Approval; provided,
however, that after any such approval, there may not be, without further
approval of such the stockholders of Parent (in the case of the Parent
Stockholder Approval) and the stockholders of the Company (in the case of
the Company Stockholder Approval), any amendment of this Agreement that
changes the amount or the form of the consideration to be delivered to the
holders of Company Common Stock hereunder, or which by law otherwise
expressly requires the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto and duly approved by the parties'
respective Boards of Directors or a duly designated committee thereof.
Section 7.4 Extension; Waiver. At any time prior to the Effective
Time, a party may, subject to the proviso of Section 7.3 (and for this
purpose treating any waiver referred to below as an amendment), (a) extend
the time for the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. Any extension or waiver given in compliance with
this Section 7.4 or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as otherwise contemplated by
this Agreement, including Section 7.2 hereof, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this
Agreement, the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby, including all legal,
accounting and financial advisory fees and expenses ("Third Party
Expenses"), shall be paid by the party incurring such expenses, except that
(i) those costs and expenses incurred in connection with filing, printing
and mailing the Registration Statement and the Proxy Statement/Prospectus
(including filing fees related thereto) shall be shared equally by Parent
and the Company and (ii) the Company shall cause that portion of its Third
Party Expenses which constitute legal, accounting and financial advisory
fees and expenses to be invoiced or estimated and capped at or before the
Closing and not to exceed, in the aggregate, $850,000, plus the fees and
expenses required to be paid to Xxxxx Xxxxx Xxxxxx & Company, LLC in
connection with the Merger pursuant to that certain engagement letter,
dated November 4, 1999, between the Company and Xxxxx Xxxxx Xxxxxx &
Company, LLC. If the Merger is consummated, Parent shall be responsible for
such Third Party Expenses of the Company.
Section 8.2 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall
survive the Effective Time.
Section 8.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service,
such as FedEx, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Tumbleweed Communications Corp.
000 Xxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx - Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and
(b) if to the Company, to:
Worldtalk Communications Corporation
0000 Xxx Xxxxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: [Xxxxx Xxxxxx]
Telephone No.: [000-000-0000]
Facsimile No.: [000-000-0000]
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Section 8.4 Interpretation. When a reference is made in this Agreement
to an Article or Section, such reference shall be to an Article or Section
of this Agreement, as the case may be, unless otherwise indicated. Whenever
the words "include," "includes" or "including" are used in this Agreement
they shall be deemed to be followed by the words "without limitation." The
phrase "made available" in this Agreement shall mean that the information
referred to has been made available if requested by the party to whom such
information is to be made available. The phrases "the date of this
Agreement", "the date hereof," and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to November 18, 1999.
As used in this Agreement, the term "affiliate(s)" shall have the meaning
set forth in Rule l2b-2 of the Exchange Act. The headings and table of
contents contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation hereof.
Section 8.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart.
Section 8.6 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement, the Ancillary Agreements and the Confidentiality
Agreement (including the documents and the instruments referred to herein
and therein): (a) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in
Section 5.14 hereof, are not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Section 8.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
Section 8.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 8.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder
to Parent or to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
Tumbleweed Communications Corp.
By ______________________________________________
Name:
Title:
Worldtalk Communications Corporation
By ______________________________________________
Name:
Title:
Keyhole Acquisition Corp.
By ______________________________________________
Name:
Title:
TABLE OF CONTENTS
ARTICLE I
MERGER........................................................................2
Section 1.1 The Merger..........................................2
Section 1.2 Effective Time......................................3
Section 1.3 Closing.............................................3
Section 1.4 Directors and Officers of the Surviving Corporation.3
ARTICLE II
CONVERSION OF SHARES..........................................................4
Section 2.1 Conversion of Shares................................4
Section 2.2 Surrender of Certificates...........................4
Section 2.3 No Fractional Shares................................5
Section 2.4 No Dividends........................................6
Section 2.5 Return to Parent....................................6
Section 2.6 Company Option Plans................................7
Section 2.7 Company Warrants....................................8
Section 2.8 Stock Transfer Books................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY.....................................9
Section 3.1 Organization........................................9
Section 3.2 Capitalization.....................................10
Section 3.3 Corporate Authorization; Validity of Agreement;
Company Action.....................................12
Section 3.4 Consents and Approvals; No Violations..............13
Section 3.5 SEC Reports and Financial Statements...............14
Section 3.6 Absence of Certain Changes.........................14
Section 3.7 No Undisclosed Liabilities.........................15
Section 3.8 Information in Proxy Statement/Prospectus..........15
Section 3.9 Employee Benefit Matters...........................16
Section 3.10 Litigation; Compliance with Law....................18
Section 3.11 No Default.........................................19
Section 3.12 Taxes..............................................19
Section 3.13 Contracts..........................................21
Section 3.14 Assets; Real Property..............................21
Section 3.15 Environmental Matters..............................21
Section 3.16 Product Liability..................................23
Section 3.17 Intellectual Property..............................23
Section 3.18 Proprietary Rights and Confidentiality Agreements..27
Section 3.19 Insurance..........................................27
Section 3.20 Suppliers and Customers............................27
Section 3.21 Labor Matters......................................27
Section 3.22 Accounts Receivable................................29
Section 3.23 Transactions with Affiliates.......................29
Section 3.24 Opinion of Financial Advisor.......................29
Section 3.25 Brokers or Finders.................................29
Section 3.26 Accounting Matters; Reorganization.................30
Section 3.27 State Takeover Statutes............................30
Section 3.28 Full Disclosure....................................30
Section 3.29 Registration and Preemptive Rights.................31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.............................31
Section 4.1 Organization.......................................31
Section 4.2 Capitalization.....................................31
Section 4.3 Authorization; Validity of Agreement; Necessary
Action.............................................32
Section 4.4 Consents and Approvals; No Violations..............33
Section 4.5 Information in Proxy Statement/Prospectus..........34
Section 4.6 SEC Reports and Financial Statements...............34
Section 4.7 Absence of Certain Changes.........................35
Section 4.8 Litigation; Compliance with Law....................36
Section 4.10 Brokers or Finders.................................36
Section 4.11 Accounting Matters; Reorganization.................37
Section 4.12 Operations of Sub..................................37
ARTICLE V
COVENANTS....................................................................37
Section 5.1 Interim Operations of the Company..................37
Section 5.2 Interim Operations of Parent.......................41
Section 5.3 Access to Information..............................41
Section 5.4 HSR Act Filings....................................42
Section 5.5 Other Consents and Approvals.......................44
Section 5.6 Employment Agreements..............................44
Section 5.7 No Solicitation by the Company.....................44
Section 5.8 No Solicitation by Parent..........................47
Section 5.9 Stockholders' Meetings.............................48
Section 5.10 Proxy Statement/Prospectus; Registration Statement.49
Section 5.11 Additional Agreements..............................50
Section 5.12 Publicity..........................................50
Section 5.13 Notification of Certain Matters....................50
Section 5.14 Directors' and Officers' Insurance and
Indemnification....................................51
Section 5.15 Affiliate Agreements...............................52
Section 5.16 Cooperation........................................53
Section 5.17 Letters of Accountants.............................53
Section 5.18 Consents of Accountants............................54
Section 5.19 Subsequent Financial Statements....................54
Section 5.20 Accounting and Tax Treatment.......................55
Section 5.21 Nasdaq Qualification...............................55
Section 5.22 Employee Plans and Arrangements....................55
Section 5.23 Registration Rights................................56
ARTICLE VI
CONDITIONS...................................................................56
Section 6.1 Conditions to the Obligations of Each Party........56
Section 6.2 Conditions to the Obligations of Parent and Sub....57
Section 6.3 Conditions to the Obligations of the Company.......58
ARTICLE VII
TERMINATION..................................................................60
Section 7.1 Termination........................................60
Section 7.2 Effect of Termination..............................62
Section 7.3 Amendment..........................................63
Section 7.4 Extension; Waiver..................................63
ARTICLE VIII
MISCELLANEOUS................................................................63
Section 8.1 Fees and Expenses..................................63
Section 8.2 Nonsurvival of Representations and Warranties......64
Section 8.3 Notices............................................64
Section 8.4 Interpretation.....................................65
Section 8.5 Counterparts.......................................65
Section 8.6 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership................................66
Section 8.7 Severability.......................................66
Section 8.8 Governing Law......................................66
Section 8.9 Assignment.........................................66
Exhibits
INDEX OF DEFINED TERMS
Acquisition Agreement................................................5.7(b)
Agreement..........................................................Preamble
Alternative Transaction..............................................5.7(a)
Ancillary Agreements...............................................Recitals
Antitrust Laws ......................................................5.4(b)
Assertion..............................................................5.14
Audit...............................................................3.12(j)
Certificate of Merger...................................................1.2
Certificates.........................................................2.1(d)
Closing.................................................................1.3
Closing Date............................................................1.3
Code...............................................................Recitals
Company............................................................Preamble
Company Agreement.......................................................3.4
Company Balance Sheet..................................................3.22
Company Benefit Plans................................................3.9(a)
Company Board........................................................3.3(b)
Company Common Stock.................................................2.1(a)
Company Financial Statements............................................3.5
Company Option Plans....................................................2.6
Company Options.........................................................2.6
Company Preferred Stock..............................................3.2(a)
Company SEC Documents...................................................3.5
Company Special Meeting..............................................5.9(a)
Company Stockholder Approval.........................................3.3(a)
Company Stockholders Agreements ...................................Recitals
Company Warrants .......................................................2.7
Competing Proposal .....................................................5.8
Confidentiality Agreement...............................................5.3
DGCL....................................................................1.1
Disclosure Schedule.............................................Article III
Effective Time..........................................................1.2
Employment Agreements..............................................Recitals
Environmental Claims...................................................3.15
Environmental Laws.....................................................3.15
ERISA................................................................3.9(a)
Excess Shares .......................................................2.3(b)
Exchange Act............................................................3.4
Exchange Agent..........................................................2.2
Exchange Ratio.......................................................2.1(a)
GAAP....................................................................3.5
Governmental Entity.....................................................3.4
HMO..................................................................3.9(d)
HSR Act ................................................................3.4
HSR Authority .......................................................5.4(a)
Indemnified Liability..................................................5.14
Indemnified Parties....................................................5.14
Indemnified Party......................................................5.14
Indemnitors ...........................................................5.14
Intellectual Property...............................................3.17(a)
IRS..................................................................3.9(a)
License Agreements..................................................3.17(b)
Licensed Software...................................................3.17(k)
Liens................................................................3.2(c)
material adverse effect.................................................3.1
Materials of Environmental Concern.....................................3.15
Merger..................................................................1.1
Merger Consideration.................................................2.1(a)
Merger Filing...........................................................1.2
Millennial Date Data................................................3.17(k)
Non-Competition Agreements ........................................Recitals
Option Agreement ..................................................Recitals
Parent.............................................................Preamble
Parent Board.........................................................5.9(b)
Parent Common Stock..................................................2.1(a)
Parent Preferred Stock...............................................4.2(a)
Parent Registration Statement.......................................5.10(a)
Parent SEC Documents....................................................4.6
Parent Special Meeting...............................................5.9(b)
Parent Stockholder Approval..........................................4.3(a)
Parent Stockholders Agreement .....................................Recitals
Proxy Statement/Prospectus..........................................5.10(a)
Real Property..........................................................3.14
Requisite Regulatory Approvals..........................................5.5
Restraints...........................................................6.1(d)
Rights ..............................................................3.2(b)
SEC.....................................................................3.5
Secretary of State......................................................1.2
Securities Act..........................................................3.5
Shares Trust ........................................................2.3(c)
Software............................................................3.17(j)
Special Meetings.....................................................5.9(b)
Sub ...............................................................Preamble
Subsequent Determination ............................................5.7(b)
Subsidiary..............................................................3.1
Superior Proposal ...................................................5.7(b)
Surviving Corporation...................................................1.1
System..............................................................3.17(l)
Tax ................................................................3.12(j)
Tax Authority ......................................................3.12(j)
Tax Returns ........................................................3.12(j)
Taxes ..............................................................3.12(j)
Third Party..........................................................5.7(a)
Third Party Expenses.................................................8.1(a)
Trade Secrets.......................................................3.17(a)
Trademarks..........................................................3.17(a)
WARN Act............................................................3.21(b)
