1
EXHIBIT 2.3
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
SYNOPSYS, INC.
OAK MERGER CORPORATION
AND
IKOS SYSTEMS, INC.
dated as of
July 2, 2001
2
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS..................................................................... 2
Section 1.1 Definitions.......................................................... 2
ARTICLE II THE MERGER..................................................................... 10
Section 2.1 The Merger........................................................... 10
Section 2.2 Closing; Effective Time.............................................. 10
Section 2.3 Effect of the Merger................................................. 10
Section 2.4 Certificate of Incorporation; Bylaws................................. 10
Section 2.5 Directors and Officers............................................... 10
Section 2.6 Effect on Capital Stock.............................................. 11
Section 2.7 Contingent Consideration............................................. 12
Section 2.8 Surrender of Certificates............................................ 15
Section 2.9 Termination of Exchange Fund......................................... 17
Section 2.10 No Further Ownership Rights in Company Common Stock.................. 17
Section 2.11 Lost, Stolen or Destroyed Certificates............................... 17
Section 2.12 Tax and Accounting Consequences...................................... 17
Section 2.13 Withholding Rights................................................... 18
Section 2.14 Taking of Necessary Action; Further Action........................... 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY..................................... 18
Section 3.1 Organization, Standing and Power..................................... 18
Section 3.2 Capital Structure.................................................... 19
Section 3.3 Authority; No Conflicts.............................................. 20
Section 3.4 SEC Documents; Financial Statements.................................. 21
Section 3.5 Absence of Certain Changes........................................... 22
Section 3.6 Absence of Undisclosed Liabilities................................... 22
Section 3.7 Litigation........................................................... 22
Section 3.8 Restrictions on Business Activities.................................. 23
Section 3.9 Governmental Authorization........................................... 23
Section 3.10 Title to Property.................................................... 23
Section 3.11 Intellectual Property................................................ 24
Section 3.12 Environmental Matters................................................ 26
Section 3.13 Taxes................................................................ 26
Section 3.14 Employee Benefit Plans............................................... 28
Section 3.15 Interested Party Transactions........................................ 31
Section 3.16 Certain Agreements Affected by the Merger............................ 31
Section 3.17 Employee Matters..................................................... 31
Section 3.18 Insurance............................................................ 33
Section 3.19 Compliance With Laws................................................. 33
Section 3.20 Registration Statement; Proxy Statement/Prospectus................... 34
Section 3.21 Vote Required........................................................ 34
Section 3.22 Voting Agreements; Irrevocable Proxies............................... 34
Section 3.23 Board Approval; Rights Plan; State Takeover Statutes................. 35
i.
3
Section 3.24 Brokers' and Finders' Fees; Opinion of Financial Adviser............. 35
Section 3.25 Customers and Suppliers; Backlog..................................... 35
Section 3.26 No Default........................................................... 35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................ 36
Section 4.1 Organization, Standing and Power..................................... 36
Section 4.2 Capital Structure.................................................... 36
Section 4.3 Authority............................................................ 36
Section 4.4 SEC Documents; Financial Statements.................................. 37
Section 4.5 Absence of Undisclosed Liabilities................................... 38
Section 4.6 Litigation........................................................... 38
Section 4.7 Registration Statement; Proxy Statement/Prospectus................... 38
Section 4.8 Board Approval....................................................... 39
Section 4.9 Broker's and Finders' Fees........................................... 39
Section 4.10 Tax Matters.......................................................... 39
Section 4.11 Parent Owned Shares of Company Common Stock.......................... 39
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME............................................. 39
Section 5.1 Conduct of Business of Company....................................... 39
Section 5.2 No Solicitation...................................................... 43
ARTICLE VI ADDITIONAL AGREEMENTS.......................................................... 45
Section 6.1 Proxy Statement/Prospectus; Registration Statement................... 45
Section 6.2 Meeting of Stockholders.............................................. 46
Section 6.3 Access to Information................................................ 46
Section 6.4 Confidentiality...................................................... 46
Section 6.5 Public Disclosure.................................................... 48
Section 6.6 Consents; Cooperation................................................ 48
Section 6.7 Legal Requirements................................................... 49
Section 6.8 Blue Sky Laws........................................................ 49
Section 6.9 Employee Benefit Plans............................................... 50
Section 6.10 Form S-8............................................................. 52
Section 6.11 Listing of Additional Shares......................................... 52
Section 6.12 Indemnification...................................................... 52
Section 6.13 Tax Treatment........................................................ 53
Section 6.14 Stockholder Litigation............................................... 53
Section 6.15 Employee Agreements.................................................. 53
Section 6.16 Injunctions or Restraints............................................ 53
Section 6.17 Certain Employee Actions............................................. 53
Section 6.18 Further Assurances................................................... 53
ARTICLE VII CONDITIONS TO THE MERGER...................................................... 54
Section 7.1 Conditions to Obligations of Each Party to Effect the Merger......... 54
Section 7.2 Additional Conditions to Obligations of the Company.................. 55
Section 7.3 Additional Conditions to the Obligations of Parent and Merger Sub.... 55
ii.
4
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................................ 57
Section 8.1 Termination.......................................................... 57
Section 8.2 Effect of Termination................................................ 59
Section 8.3 Expenses and Termination Fees........................................ 59
Section 8.4 Amendment............................................................ 60
Section 8.5 Extension; Waiver.................................................... 60
ARTICLE IX GENERAL PROVISIONS............................................................. 60
Section 9.1 Non-Survival at Effective Time....................................... 60
Section 9.2 Notices.............................................................. 60
Section 9.3 Interpretation....................................................... 61
Section 9.4 Counterparts......................................................... 62
Section 9.5 Entire Agreement; Nonassignability; Parties in Interest.............. 62
Section 9.6 Severability......................................................... 62
Section 9.7 Remedies Cumulative.................................................. 62
Section 9.8 Governing Law........................................................ 63
Section 9.9 Rules of Construction................................................ 63
iii.
5
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
Schedule 6.9(g)
Schedule 6.15(a)
Schedule 6.15(b)
Schedule 6.15(c)
Schedule 6.15(d)
Schedule 7.3(c)
Schedule 7.3(f)
Schedule 7.3(g)
EXHIBITS
Exhibit A - Form of Voting Agreement
Exhibit B - Form of Certificate of Merger
Exhibit C - Form of Certificate of Incorporation of the Surviving Corporation
Exhibit D Form of Employee Agreement for employees of the Company listed on
Schedule 6.15(a)
Exhibit E - Form of Employee Agreement for employees of the Company listed on
Schedule 6.15(b)
Exhibit F - Form of Amendment to Severance Agreement for employees of the
Company listed on Schedule 6.15(c)
Exhibit G - Form of Amendment to Severance Agreement for employees of the
Company listed on Schedule 6.15(d)
iv.
6
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement") is made and entered into as of July 2, 2001, by and among Synopsys,
Inc., a Delaware corporation ("Parent"), Oak Merger Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Parent, and IKOS
Systems, Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS the Boards of Directors of the Company, Parent and Merger
Sub believe it is in the best interests of their respective corporations and the
stockholders of their respective corporations that the Company and Merger Sub
combine into a single corporation through the statutory merger of Merger Sub
with and into the Company (the "Merger") and, in furtherance thereof, have
approved the Merger;
WHEREAS by virtue of the Merger, the outstanding shares of Company
Common Stock, $0.01 par value ("Company Common Stock"), shall be converted into
the right to receive shares of Parent Common Stock, $0.01 par value ("Parent
Common Stock"), at the rate set forth herein;
WHEREAS the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and other agreements in connection with
the Merger;
WHEREAS the parties intend, by executing this Agreement (a) to
adopt a plan of reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"); (b) to cause the
Merger to qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code; and (c) for the Merger to be accounted for as a
purchase; and
WHEREAS concurrently with the execution of this Agreement and as
an inducement to Parent and Merger Sub to enter into this Agreement, certain
stockholders of the Company have on the date hereof entered into voting
agreements in substantially the form attached hereto as Exhibit A (the "Voting
Agreements") to vote the shares of Company Common Stock owned by such persons in
favor of adoption of this Agreement and approval of the Merger.
NOW, THEREFORE, in consideration of the premises, and the
representations, warranties, covenants, agreements and additional agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
7
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following
capitalized terms shall have the meanings indicated below:
"Agreement" has the meaning ascribed to it in the forepart of this
Agreement.
"Antitrust Laws" has the meaning ascribed to it in Section 6.6(b).
"Authorized Fully Diluted Shares" means the sum of (a) the number
of shares of Company Common Stock outstanding as of June 15, 2001, (b) the
Authorized Option Shares, and (c) the number of shares of Company Common Stock
that become issuable prior to the Closing Date under the Company ESPP.
"Authorized Option Shares" means the sum of (a) the number of
options granted under the Company Stock Option Plans which are outstanding as of
June 15, 2001; (b) the number of shares of Company Common Stock remaining
available for grant under the Company Stock Option Plans as of June 15, 2001;
and (c) such number of additional shares of Company Common Stock (if any) that
are made available for issuance under the 1995 Stock Option Plan on October 1,
2001 pursuant to Section 4.1 thereof if the Closing Date is after October 1,
2001.
"Average Parent Stock Price" means the average last sale price per
share of the Parent Common Stock on the Nasdaq Stock Market as reported in The
Wall Street Journal (or, if either party disputes the accuracy of the prices
therein reported, another mutually agreeable authoritative source) for the ten
(10) full trading-day period ending on the fifth (5th) full trading day prior to
the Closing Date (e.g., if the Closing Date falls on a Sunday, the ten (10)
trading day period used to calculate the Average Parent Stock Price on such date
would end on, and include, the previous Monday, assuming that Monday through
Friday are full trading days).
"Backlog" as of June 30, 2001 or June 30, 2002, means (a) the
dollar amount of all non-cancelable orders for products and services that (i)
are not discounted in excess of historical discounts consistent with past
practice, (ii) satisfy all criteria of the Company's orders acceptance policy as
it existed on June 6, 2001, as amended by the Company with Parent's consent
prior to the date of this Agreement (but excluding any orders for which an
exception to the order acceptance policy was approved by an officer of the
Company, regardless of whether the orders acceptance policy grants such officer
authority to make such exceptions), and (iii) have not been invoiced, plus (b)
all deferred revenue, as reflected in audited financial statements prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated and consistent with the Company's annual fiscal year-end audited
financial statements, attributable to products and services that have been
invoiced; provided, however, that (AA), for the avoidance of doubt, items that
are included in the above clause (a) of this paragraph shall not be included in
the above clause (b) of this paragraph, (BB) in the case of hardware and
software, such products must have a scheduled ship date within six (6) months of
the applicable Backlog date (i.e. June 30, 2001 or June 30, 2002, as the case
may be) and (CC) in the case of software maintenance and support, consulting and
training, such services must be scheduled to be performed within six (6) months
of such date.
2
8
"Bonus Plan" has the meaning ascribed to it in Section 6.9(g)
"CERCLA" has the meaning ascribed to it in Section 3.12(b).
"Certificate of Incorporation" has the meaning ascribed to it in
Section 3.1.
"Certificate of Merger" has the meaning ascribed to it in Section
2.2.
"Closing" has the meaning ascribed to it in Section 2.2.
"Closing Date" has the meaning ascribed to it in Section 2.2.
"COBRA" has the meaning ascribed to it in Section 3.14(d).
"Company" has the meaning ascribed to it in the forepart to this
Agreement.
"Company Authorizations" has the meaning ascribed to it in Section
3.9.
"Company Balance Sheet" has the meaning ascribed to it in Section
3.6.
"Company Balance Sheet Date" has the meaning ascribed to it in
Section 3.5.
"Company Certificates" has the meaning ascribed to it in Section
2.8(c).
"Company Common Stock" has the meaning ascribed to it in the
Recitals to this Agreement.
"Company Disclosure Schedule" has the meaning ascribed to it in
the forepart of Article III.
"Company Employee Plans" has the meaning ascribed to it in Section
3.14(a).
"Company ESPP" has the meaning ascribed to it in Section 3.2.
"Company Financial Statements" has the meaning ascribed to it in
Section 3.4.
"Company Material Adverse Effect" means any event, matter, change,
condition, circumstance or effect that is materially adverse to the business,
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, operations or results of operations of the Company (or,
after the Effective Time, the Surviving Corporation) and its Subsidiaries,
taking the Company (or, after the Effective Time, the Surviving Corporation)
together with its Subsidiaries as a whole; provided, however, that none of the
following, in and of themselves, either alone or in combination, shall
constitute a Company Material Adverse Effect: (a) a decrease in the trading
price of Company Common Stock; (b) any event, matter, change, condition,
circumstance or effect which the Company successfully bears the burden of
proving results from changes affecting any of the industries or economies in
which the Company operates as a whole (which changes do not materially and
disproportionately affect the Company); (c) any adverse event, matter, change,
condition, circumstance or effect which the Company successfully bears the
burden of proving is directly and primarily caused by the
3
9
announcement or pendency of the Merger; (d) any adverse event, matter, change,
condition, circumstance or effect which the Company successfully bears the
burden of proving is directly and primarily caused by the taking of any action
expressly required by this Agreement; (e) any adverse event, matter, change,
condition, circumstance or effect which the Company successfully bears the
burden of proving is directly and primarily caused by any matter for which
Parent has agreed (other than in this Agreement) to indemnify the Company; or
(f) a failure in and of itself of results of operations of the Company and its
Subsidiaries (on a consolidated basis) to meet internal projections or forecasts
or published revenue or earnings predictions for any fiscal quarterly or annual
period of the Company after the date hereof and prior to the Closing Date, but
not either the underlying causes of such failure or the consequences of such
failure.
"Company Representatives" has the meaning ascribed to it in
Section 5.2.
"Company SEC Documents" has the meaning ascribed to it in Section
3.4.
"Company Stock Option Plans" has the meaning ascribed to it in
Section 2.6(c).
"Company Stockholders Meeting" has the meaning ascribed to it in
Section 3.20.
"Competing Bidder" has the meaning ascribed to it in Section 5.2.
"Confidential Information" has the meaning ascribed to it in
Section 3.11(g).
"Confidentiality Agreement" means the Confidentiality Agreement,
dated as of April 30, 2001, between the Company and Parent.
"Contingent Consideration" has the meaning ascribed to it in
Section 2.7(a).
"Contingent Price Adjustment" has the meaning ascribed to it in
Section 2.7(b).
"Continuing Employees" has the meaning ascribed to it in Section
6.9(d).
"CPA Firm" has the meaning ascribed to it in Section 2.7(d).
"DGCL" has the meaning ascribed to it in Section 2.1.
"Dilution Adjustment" has the meaning ascribed to it in Section
2.7(c).
"Effective Time" has the meaning ascribed to it in Section 2.2.
"Environmental and Safety Laws" has the meaning ascribed to it in
Section 3.12(a).
"ERISA Affiliate" has the meaning ascribed to it in Section
3.14(a).
"ERISA" has the meaning ascribed to it in Section 3.14(a).
"Exchange Act" has the meaning ascribed to it in Section 3.4.
4
10
"Exchange Ratio" has the meaning ascribed to it in Section 2.6(a).
"Facilities" has the meaning ascribed to it in Section 3.12(a).
"Final Date" has the meaning ascribed to it in Section 8.1(b).
"Foreign Plan" has the meaning ascribed to it in Section 3.14(j).
"Fully Diluted Shares" means the number of shares of capital stock
of the Company issued and outstanding immediately prior to the Effective Time on
a fully converted basis, including all outstanding shares of capital stock and
the maximum potential number of shares of capital stock issuable pursuant to
options, warrants, convertible or exchangeable securities, subscriptions, and
agreements or commitments to issue shares of capital stock which are outstanding
immediately prior to the Effective Time.
"GAAP" has the meaning ascribed to it in Section 3.4.
"Governmental Entity" has the meaning ascribed to it in Section
3.3.
"Hazardous Materials" has the meaning ascribed to it in Section
3.12(a).
"HSR Act" has the meaning ascribed to it in Section 3.3.
"Indemnified Parties" has the meaning ascribed to it in Section
6.12.
"Intellectual Property" has the meaning ascribed to it in Section
3.11(a).
"Internal Revenue Code" has the meaning ascribed to it in the
Recitals to this Agreement.
"Knowledge" with respect to a party means such party's actual
knowledge after reasonable inquiry of officers, directors, vice presidents,
persons of higher authority than, or equivalent authority to, a vice president,
and all persons directly reporting to any of the foregoing.
"Merger" has the meaning ascribed to it in the Recitals to this
Agreement.
"Merger Sub" has the meaning ascribed to it in the forepart of
this Agreement.
"Merger Sub Common Stock" has the meaning ascribed to it in
Section 2.6(d).
"NASD" has the meaning ascribed to it in Section 3.3.
"Xxxxxxx Letter" has the meaning ascribed to it in the definition
of Transaction Expenses.
"Net Backlog" means the difference resulting from (i) the dollar
value of Backlog as of June 30, 2002 less (ii) the dollar value of Backlog as of
June 30, 2001; provided, however, that Net Backlog shall be limited to the
following amounts for the following levels of Revenue:
5
11
Revenue Limit on Net Backlog
------- --------------------
Less than $50 million $0
Between $50 million and $60 million $1 million
Between $60 million and $70 million $3 million
Between $70 million and $80 million $5 million
Between $80 million and $90 million $8 million
Over $90 million $10 million
"Order" has the meaning ascribed to it in Section 6.6(b).
"Parent" has the meaning ascribed to it in the forepart to this
Agreement.
"Parent Balance Sheet" has the meaning ascribed to it in Section
4.5.
"Parent Common Stock" has the meaning ascribed to it in the
Recitals to this Agreement.
"Parent Confidential Information" has the meaning ascribed to it
in Section 6.4(b).
"Parent Disclosure Schedule" has the meaning ascribed to it in the
forepart of Article IV.
"Parent Financial Statements" has the meaning ascribed to it in
Section 4.4.
"Parent Material Adverse Effect" means any event, matter, change,
condition, circumstance or effect that is materially adverse to the business,
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, operations or results of operations of Parent and its
Subsidiaries, taking Parent together with its Subsidiaries as a whole; provided,
however, that none of the following, in and of themselves, either alone or in
combination, shall constitute a Parent Material Adverse Effect: (a) a decrease
in the trading price of Parent Common Stock; (b) any event, matter, change,
condition, circumstance or effect which Parent successfully bears the burden of
proving results from changes affecting any of the industries or economies in
which Parent operates as a whole (which changes do not materially and
disproportionately affect Parent); (c) any adverse event, matter, change,
condition, circumstance or effect which Parent successfully bears the burden of
proving is directly and primarily caused by the announcement or pendency of the
Merger; (d) any adverse event, matter, change, condition, circumstance or effect
which Parent successfully bears the burden of proving is directly and primarily
caused by the taking of any action expressly required by this Agreement; (e) any
adverse event, matter, change, condition, circumstance or effect which Parent
successfully bears the burden of proving is directly and primarily caused by any
matter for which Parent has agreed (other than in this Agreement) to indemnify
the Company; or (f) a failure in and of itself of results of operations of the
Parent and its Subsidiaries (on a consolidated basis) to meet internal
projections or forecasts or published revenue or earnings predictions for any
fiscal quarterly or annual period of the Parent after the date hereof and prior
to the Closing Date, but not either the underlying causes of such failure or the
consequences of such failure.
6
12
"Parent SEC Documents" has the meaning ascribed to it in Section
4.4.
"PBT" means the Company's profit or loss before tax for the period
of July 1, 2001 through June 30, 2002, inclusive, excluding amounts paid or
accrued pursuant to the Bonus Plan, the PBT Exclusion Items, each of the
foregoing as reflected in audited financial statements prepared in accordance
with GAAP applied on a consistent basis throughout the period indicated and
consistent with the Company's annual fiscal year-end audited financial
statements.
"PBT Adjustment" has the meaning ascribed to it in Section
2.7(b)(ii).
"PBT Exclusion Items" means the following items which shall be
excluded in the calculation of PBT: (i) the following amounts to the extent that
in the aggregate they exceed five hundred thousand dollars ($500,000): (a) any
net reduction or reversal in balance sheet reserves between the date of this
Agreement and June 30, 2002 and (b) to the extent the settlement is different
from the recorded reserve for French VAT exposure at March 31, 2001, any
reversal of that reserve to income or any additional expense incurred on
settlement; (ii) any revenue recorded under the 3Dfx settlement including any
refund of associated sales taxes or other taxes; (iii) legal fees and related
expenses directly related to the litigation identified in Section 3.7 of the
Company Disclosure Schedule, and any cash received on settlement thereof; (iv)
tax or other refunds received related to events occurring in the prior year; (v)
expenses incurred and settlement amounts received by the Company for matters for
which indemnification by Parent is provided pursuant to the letter between
Parent and the Company dated as of the date hereof relating to indemnification
for certain claims; (vi) gains or revenue resulting from the Company's selling,
leasing, licensing or otherwise disposing of or encumbering any of its
properties or assets other than sales of products in the ordinary course of
business consistent with the Company's past practice; and (vii) Transaction
Expenses.
"PCBs" has the meaning ascribed to it in Section 3.12(b).
"Property" has the meaning ascribed to it in Section 3.12(a).
"Proxy Statement" has the meaning ascribed to it in Section 3.20.
"Quickturn" has the meaning ascribed to it in Section 7.3(e).
"Quickturn Non-Compete" has the meaning ascribed to it in Section
7.3(e).
"Recommendation" has the meaning ascribed to it in Section 8.1(e).
"Registration Statement" has the meaning ascribed to it in Section
3.20.
"Repurchase Options" has the meaning ascribed to it in Section
6.9(b).
"Revenue" means the Company's revenue for the period July 1, 2001
through June 30, 2002, inclusive, as reflected in audited financial statements
prepared in accordance with GAAP applied on a consistent basis throughout the
period indicated and consistent with the Company's annual fiscal year-end
audited financial statements as of September 30, 2001.
7
13
"Revenue Adjustment" has the meaning ascribed to it in Section
2.7(b)(ii).
"Revenue Plus Net Backlog Adjustment" has the meaning ascribed to
in Section 2.7(b)(ii).
"SEC" has the meaning ascribed to it in Section 3.3.
"Securities Act" has the meaning ascribed to it in Section 3.2.
"Subsidiary" and "Subsidiaries" mean, with respect to any person,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such person or any other subsidiary of such person is a general
partner (excluding partnerships, the general partnership interests of which held
by such person or any subsidiary of such person 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 person or by one or more of its
subsidiaries.
"Superior Proposal" has the meaning ascribed to it in Section 5.2.
"Surviving Corporation" has the meaning ascribed to it in Section
2.1.
"Takeover Proposal" means any agreement, offer or proposal for, or
any indication of interest, written or oral, in (A) a merger, reorganization,
share exchange, consolidation, or other business combination involving the
Company or any of its Subsidiaries, which would result in the holders of the
Company's Common Stock immediately prior to the consummation of such transaction
holding less than eighty five percent (85%) of the outstanding shares of any
class of capital stock or voting power of the surviving, resulting or acquiring
entity immediately following the consummation of such transaction; or (B) a
tender offer for securities of the Company, which, if successful, would result
in the tender offeror, either alone or as part of a group, holding beneficial
ownership of fifteen percent (15%) or more of the outstanding shares of any
class of capital stock or voting power of the Company immediately following the
consummation of such tender offer; (C) the acquisition of fifteen percent (15%)
or more of the outstanding shares of any class of capital stock or voting power
of the Company; or (D) the acquisition of fifteen percent (15%) or more of the
assets of the Company and its Subsidiaries (either on the basis of book value or
fair market value, calculated in each case on a consolidated basis), other than,
in each case, the transactions contemplated by this Agreement. For purposes of
this definition, the terms "person", "group" and "beneficial ownership" have the
meanings ascribed to them in the Securities Exchange Act of 1934, as amended and
the rules and regulations of the SEC thereunder.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means
(i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Tax Authority; (ii)
8
14
any liability for the payment of any amounts of the type described in clause (i)
as a result of being a member of an affiliated, consolidated, combined or
unitary group for any Taxable period; and (iii) any liability for the payment of
any amounts of the type described in clause (i) or clause (ii) as a result of
being a transferee of or successor to any person or as a result of any express
or implied obligation to indemnify any other person, including pursuant to any
Tax sharing or Tax allocation agreement.
"Tax Authority" means any Governmental Entity responsible for the
imposition of any Tax (domestic or foreign).
"Tax Return" means any return, statement, report or form
(including estimated Tax returns and reports, withholding Tax returns and
reports and information reports and returns) required to be filed with respect
to Taxes.
"Third Party Intellectual Property Rights" has the meaning
ascribed to it in Section 3.11(b).
"Transaction Expenses" means the actual, reasonable, documented
fees, costs and expenses incurred by the Company and payable to Xxxxxxx & Co. as
financial advisor to the Company pursuant to its letter agreement with the
Company dated as of June 28, 2000 (the "Xxxxxxx Letter"), Xxxx Xxxx Xxxx &
Freidenrich LLP as outside legal counsel to the Company, and the Company's
outside accountants, in each case in connection with the negotiations leading to
this Agreement, the negotiation and documentation of this Agreement (including
due diligence in connection therewith), the performance of the Company's
obligations under this Agreement, and the consummation of the Merger and the
other transactions contemplated by this Agreement, and expenses incurred in
connection with printing the Company's proxy materials and the Registration
Statement, registration and filing fees in connection with the Registration
Statement, the proxy materials and the listing of additional shares, and fees,
costs and expenses associated with complying with applicable Blue Sky securities
laws in connection with the Merger and filing fees under the HSR Act. Fees,
costs and expenses incurred by the Company in connection with legal, accounting
and financial advisory work in the ordinary course of business shall not
constitute Transaction Expenses, even though they may be incurred after the date
hereof or during the pendency of this Agreement.
"Trigger Event" means the acquisition by any person or group
(other than a stockholder who is party to an enforceable Voting Agreement) of
beneficial ownership of securities representing fifteen percent (15%) or more of
the outstanding shares of any class of capital stock or voting power of the
Company, or the commencement or public announcement of a tender or exchange
offer, other publicly announced initiative or open market purchase program
following the successful consummation of which such person or group would have
beneficial ownership of securities representing fifteen percent (15%) or more of
the outstanding shares of any class of capital stock or voting power of the
Company. For purposes of this definition, the terms "person", "group" and
"beneficial ownership" have the meanings ascribed to them in the Securities
Exchange Act of 1934 as amended and the rules and regulations of the SEC
thereunder.
9
15
"Voting Agreements" has the meaning ascribed to it in the Recitals
to this Agreement.
"WARN" has the meaning ascribed to it in Section 3.17(g).
ARTICLE II
THE MERGER
Section 2.1 The Merger. At the Effective Time (as defined in
Section 2.2) and upon the terms and subject to the conditions set forth in this
Agreement and the applicable provisions of the General Corporation Law of the
State of Delaware (the "DGCL"), Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
Section 2.2 Closing; Effective Time. The closing of the Merger
(the "Closing") shall take place as soon as reasonably practicable (and in any
event not later than two business days) after the satisfaction or waiver of each
of the conditions set forth in Article VII hereof or at such other time as the
parties hereto agree (the "Closing Date"). The Closing shall take place at the
offices of Xxxxxxx, Phleger & Xxxxxxxx LLP, Two Embarcadero Place, 0000 Xxxx
Xxxx, Xxxx Xxxx, Xxxxxxxxxx, 00000, or at such other location as the parties
hereto agree. As part of the Closing, the parties hereto shall cause the Merger
to be consummated by filing a certificate of merger in the form attached hereto
as Exhibit B (the "Certificate of Merger") with the Secretary of State of the
State of Delaware, in accordance with the relevant provisions of the DGCL (the
time of the filing of such document, or such later time as may be agreed to by
the parties and specified in the Certificate of Merger in accordance with
Section 103(d) of the DGCL, being the "Effective Time").
Section 2.3 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, without revision or impairment, and
debts, liabilities and duties of the Company and Merger Sub shall be the debts,
liabilities and duties of the Surviving Corporation.
Section 2.4 Certificate of Incorporation; Bylaws. At the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be
amended in its entirety to read as set forth in Exhibit C hereto. From and after
the Effective Time, Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended in accordance with the DGCL, the Certificate of Incorporation
of the Surviving Corporation and such Bylaws.
Section 2.5 Directors and Officers. From and after the Effective
Time, the directors and officers of Merger Sub immediately prior to the
Effective Time shall be the
10
16
directors and officers of the Surviving Corporation, in each case until their
successors are elected or appointed and qualified or until their earlier
resignation or removal.
Section 2.6 Effect on Capital Stock. By virtue of the Merger and
without any action on the part of Merger Sub, the Company or the holders of any
of the following securities:
(a) Conversion of Company Common Stock. At the Effective
Time, subject to Section 2.6(f), each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Common Stock to be canceled pursuant to Section 2.6(b)) shall be
automatically converted into the right to receive that number of shares (or a
fraction of a share, as the case may be) of Parent Common Stock (the "Exchange
Ratio") equal to the quotient obtained by dividing (i) the sum of six dollars
($6) per share and the Contingent Consideration, if any, calculated in
accordance with Section 2.7, by (ii) the Average Parent Stock Price;
(b) Cancellation of Company Common Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Common Stock that are
owned by the Company as treasury stock and each share of Company Common Stock
owned by Parent or any direct or indirect wholly owned Subsidiary of Parent or
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof or any other consideration paid or
issued therefore.
(c) Company Stock Option Plans; Company ESPP. At the
Effective Time, the Company's 1995 Stock Option Plan, 1995 Outside Directors
Stock Option Plan, 2000 Nonstatutory Stock Option Plan, Virtual Machine Works
1994 Incentive Stock Option Plan and the non-plan options to purchase Company
Common Stock set forth in Section 2.6(c) of the Company Disclosure Schedule
(collectively the "Company Stock Option Plans") and all options to purchase
Company Common Stock then outstanding under the Company Stock Option Plans shall
be assumed by Parent in accordance with Section 6.9. The Company ESPP (as
defined in Section 3.2) shall be terminated in accordance with Section 6.9(c).
(d) Capital Stock of Merger Sub. At the Effective Time,
each share of common stock, $0.01 par value, of Merger Sub ("Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation, and the
Surviving Corporation shall be a wholly owned Subsidiary of Parent. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall
be adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Common Stock
occurring after the date hereof and prior to the Effective Time so as to provide
holders of Company Common Stock and Parent the same economic effect as
contemplated by this Agreement prior to such stock split, reverse split, stock
dividend, reorganization, recapitalization, like change or increase.
11
17
(f) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the Average Parent Stock Price.
Section 2.7 Contingent Consideration.
(a) Contingent Consideration.
The "Contingent Consideration", if any, equals (i) the Contingent
Price Adjustment, if any, calculated pursuant to Section 2.7(b) less (ii) the
Dilution Adjustment calculated pursuant to Section 2.7(c). In no event shall any
person who immediately prior to the Effective Time was a holder of capital stock
of the Company be required to repay or return any consideration which such
holder receives or which such holder has the right to receive, as a result of
the determination of the Contingent Consideration hereunder, and for such
purposes, the calculation of the Contingent Consideration in accordance with the
procedures set forth in Section 2.7(d) shall be final and binding on all parties
to this Agreement and on the holders of Company capital stock and options.
(b) Contingent Price Adjustment. The "Contingent Price Adjustment"
shall be calculated as follows:
(i) If the Closing Date is prior to June 30, 2002, the
Contingent Price Adjustment shall equal nine dollars ($9) per share of Company
Common Stock and the second paragraph of Section 2.7(d) shall not apply;
provided, that the Closing may not occur prior to June 30, 2002 without the
agreement of both Parent and the Company.
(ii) If the Closing Date is on or after June 30, 2002, the
Contingent Price Adjustment shall equal an amount per share of Company Common
Stock equal to either the Revenue Plus Net Backlog Adjustment or the PBT
Adjustment, whichever produces a lower dollar per share value, except that if
the PBT Adjustment produces a lower dollar per share value than the Revenue Plus
Net Backlog Adjustment but the same or higher dollar per share value than the
Revenue Adjustment, the Contingent Price Adjustment shall equal the Revenue Plus
Net Backlog Adjustment.
(A) The "Revenue Plus Net Backlog Adjustment" shall
be calculated using Revenue plus Net Backlog as provided in the following table
using either (aa) Revenue plus the absolute value of Net Backlog if Net Backlog
is positive or (bb) Revenue minus the absolute value of Net Backlog if Net
Backlog is negative and shall equal the dollar per share value that results from
the formula in the applicable right-hand column of the table (such formula is
located in the row that contains the applicable Revenue plus Net Backlog in the
left-hand column of the table):
12
18
Revenue plus Net Backlog ("RB") Revenue Plus Net Backlog Adjustment
------------------------------- -----------------------------------
(millions)
RB (greater than or equal to) $100 $14
$90 (less than or equal to) RB (less than) $100 $14 - $((100 - RB)/10) *2
$80 (less than or equal to) RB (less than) $90 $12 - $((90 - RB)/10) *3
$70 (less than or equal to) RB (less than) $80 $9 - $((80 - RB)/10) *3
$60 (less than or equal to) RB (less than) $70 $6 -- $((70 - RB)/10) *3
$50 (less than or equal to) RB (less than) $60 $3 - $((60 - RB)/10) *3
RB (less than) $50 $0
The "Revenue Adjustment" shall be calculated using
Revenue as provided in the following table and shall equal the
dollar per share value that results from the formula in the
applicable right-hand column of the table (such formula is located
in the row that contains the applicable Revenue in the left-hand
column of the table):
Revenue ("R") Revenue Adjustment
------------- ------------------
(millions)
R (greater than or equal to) $100 $14
$90 (less than or equal to) R (less than) $100 $14 - $((100 - R)/10) *2
$80 (less than or equal to) R (less than) $90 $12 - $((90 - R)/10) *3
$70 (less than or equal to) R (less than) $80 $9 - $((80 - R)/10) *3
$60 (less than or equal to) R (less than) 70 $6 -- $((70 - R)/10) *3
$50 (less than or equal to) R (less than) 60 $3 -- $((60 - R)/10) *3
R (less than) $50 $0
(B) The "PBT Adjustment" shall be calculated using
PBT as provided in the following table and shall equal the dollar per share
value that results from the formula in the applicable right-hand column of the
table (such formula is located in the row that contains the applicable PBT in
the left-hand column of the table):
PBT PBT Adjustment
--- --------------
(millions)
PBT (greater than or equal to) $18 $14
$14 (less than or equal to) PBT (less than) $18 $14 - $((18 - PBT)/4) *2
$8 (less than or equal to) PBT (less than) $14 $12 - $((14 - PBT)/6) *3
$0 (less than or equal to) PBT (less than) $8 $9 - $((8 - PBT)/8) *3
$(5) (less than or equal to) PBT (less than) $0 $6 - $((0-PBT)/5) *3
$(10) (less than or equal to) PBT (less than) $(5) $3 - $((-5 - PBT)/5) *3
PBT (less than) $(10) $0
13
19
(c) Dilution Adjustment. The "Dilution Adjustment" shall be
determined by dividing (i) the product obtained from multiplying (x) the excess
of the number of Fully Diluted Shares over the Authorized Fully Diluted Shares
and (y) the sum of six dollars ($6) plus the Contingent Price Adjustment by (ii)
the Fully Diluted Shares.
(d) Calculation of Contingent Consideration.
As soon as practicable after June 30, 2001 but in no event later
than July 21, 2001, Ernst & Young LLP shall audit the Company in order to
calculate the Backlog as of June 30, 2001. As soon as practicable after June 30,
2001 but in no event later than July 21, 2001, Ernst & Young LLP and the Company
shall provide to Parent and KPMG LLP all supporting materials and information
(including all audit and tax working papers of the Company and Ernst & Young
LLP) necessary or appropriate for Parent and KPMG LLP to calculate the Backlog
as of June 30, 2001. As soon as practicable after the parties have completed
their respective calculations of the Backlog as of June 30, 2001, but in no
event later than July 28, 2001, if such calculations differ, Parent, KPMG LLP,
the Company, and Ernst & Young LLP shall seek in good faith to resolve such
differences in order to agree on a calculation of the Backlog as of June 30,
2001. If Parent and the Company are unable to resolve such differences by July
31, 2001, Parent and the Company shall revise their respective calculations so
that each such revised calculation identifies the differences remaining between
the two such calculations. No later than August 5, 2001, Parent and the Company
shall submit such revised calculations to PriceWaterhouseCoopers (or Deloitte &
Touche if PriceWaterhouseCoopers does not agree to provide services pursuant to
this paragraph or has a material relationship with either of the parties) (the
"CPA Firm"). Acting as experts and not as arbitrators, and based solely on its
independent review and analysis of the revised calculations (without review,
analysis or audit of the data underlying such calculations), the CPA Firm shall
determine the Backlog as of June 30, 2001, based on its determination of which
calculation (Parent's calculation or the Company's calculation) better
approximates the Backlog as of June 30, 2001; provided that to make such
determination the CPA Firm shall choose, without any modification, either the
Company's calculation of the Backlog as of June 30, 2001, taken as a whole as
submitted in its entirety to the CPA Firm by the Company, or Parent's
calculation of Backlog as of June 30, 2001, taken as a whole as submitted in its
entirety to the CPA Firm by Parent. The Company and Parent shall direct the CPA
Firm to use its best efforts to render such determination no later than August
10, 2001. Such determination shall be final, conclusive and binding upon the
Company and Parent. Fifty percent (50%) of the fees of the CPA Firm billed to
the parties shall be paid by Parent, and the other fifty percent (50%) of such
fees shall be paid from the Contingent Consideration, if any. To the extent such
Contingent Consideration is insufficient to pay such fees, Parent shall pay the
remainder.
As soon as practicable after June 30, 2002 but in no event later
than August 5, 2002 (unless the Closing Date has occurred prior to June 30,
2002, in which case, as provided in Section 2.7(b)(i), this second paragraph of
Section 2.7(d) shall not apply), Ernst & Young LLP shall audit the Company in
order to calculate the Backlog as of June 30, 2002, the Contingent Price
Adjustment, and the Dilution Adjustment. As soon as practicable after June 30,
2002 but in no event later than August 5, 2002, Ernst & Young LLP and the
Company shall provide to
14
20
Parent and KPMG LLP all supporting materials and information (including all
audit and tax working papers of the Company and Ernst & Young LLP) necessary or
appropriate for Parent and KPMG LLP to calculate the Backlog as of June 30,
2002, the Contingent Price Adjustment, and the Dilution Adjustment. As soon as
practicable after the parties have completed their respective calculations of
the Backlog as of June 30, 2002, the Contingent Price Adjustment, and the
Dilution Adjustment but in no event later than August 12, 2002, if any of such
calculations differ, Parent, KPMG LLP, the Company, and Ernst & Young LLP shall
seek in good faith to resolve such differences in order to agree on a
calculation of the Backlog as of June 30, 2002, the Contingent Price Adjustment,
and the Dilution Adjustment. If Parent and the Company are unable to resolve
such differences by August 15, 2002, Parent and the Company shall revise their
respective calculations so that each such revised calculation identifies the
differences remaining between the two such calculations. No later than August
19, 2002, Parent and the Company shall submit such revised calculations to the
CPA Firm. Acting as experts and not as arbitrators, and based solely on its
independent review and analysis of the revised calculations (without review,
analysis or audit of the data underlying such calculations), the CPA Firm shall
determine the Backlog as of June 30, 2002, the Contingent Price Adjustment, and
the Dilution Adjustment, based on its determination of which calculation
(Parent's calculation or the Company's calculation) better approximates the
Backlog as of June 30, 2002, the Contingent Price Adjustment, and the Dilution
Adjustment; provided that to make such determination the CPA Firm shall choose,
without any modification, either the Company's calculations of the Backlog as of
June 30, 2002, the Contingent Price Adjustment, and the Dilution Adjustment,
taken as a whole as submitted in their entirety to the CPA Firm by the Company,
or Parent's calculations of Backlog as of June 30, 2002, Contingent Price
Adjustment, and Dilution Adjustment, taken as a whole as submitted in their
entirety to the CPA Firm by Parent. The Company and Parent shall direct the CPA
Firm to use its best efforts to render such determination no later than August
26, 2002, respectively. Such determination shall be final, conclusive and
binding upon the Company and Parent. Fifty percent (50%) of the fees of the CPA
Firm billed to the parties shall be paid by Parent, and the other fifty percent
(50%) of such fees shall be paid from the Contingent Consideration, if any. To
the extent such Contingent Consideration is insufficient to pay such fees,
Parent shall pay the remainder.
Section 2.8 Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly after
the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article II, through such reasonable procedures
as Parent may adopt, (i) the shares of Parent Common Stock issuable pursuant to
Section 2.6(a) in exchange for shares of Company Common Stock outstanding
immediately prior to the Effective Time (provided that delivery of any shares
that are subject to vesting and/or repurchase rights in favor of the Company
shall be in book entry form until such vesting and/or repurchase rights lapse)
and (ii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares pursuant to Section 2.6(f).
(c) Exchange Procedures. As soon as reasonably practicable
after the Effective Time, subject to Section 2.7, the Surviving Corporation
shall cause to be mailed to
15
21
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
(the "Company Certificates"), whose shares were converted into the right to
receive shares of Parent Common Stock (and cash in lieu of fractional shares)
pursuant to Section 2.6(a) (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon receipt of the Company Certificates by the
Exchange Agent, and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Company Certificates in exchange for certificates (or book
entries in the case of shares that are subject to vesting and/or repurchase
rights in favor of the Company) representing shares of Parent Common Stock (and
cash in lieu of fractional shares). Upon surrender of a Company Certificate for
cancellation to the Exchange Agent (or to such other agent or agents as may be
appointed by Parent), together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the Company
Certificate so surrendered shall forthwith be canceled and the holder of such
Company Certificate shall be sent in exchange therefor a certificate or
certificates (or book entry in the case of shares that are subject to vesting
and/or repurchase rights) representing the number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to Section
2.6(a) and cash payment in lieu of fractional shares which such holder has the
right to receive pursuant to Section 2.6(f). Until so surrendered, each
outstanding Company Certificate that will be deemed from and after the Effective
Time to represent only the right to receive the merger consideration
contemplated by Section 2.6(a) upon surrender of such Company Certificate.
Notwithstanding any other provision of this Agreement, no interest will be paid
or will accrue on any cash payable to holders of Company Certificates pursuant
to the provisions of this Article II.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Company Certificate with respect to the shares of Parent Common
Stock which the holder thereof has the right to receive until the holder of
record of such Company Certificate shall surrender such Company Certificate.
Subject to applicable law, following surrender of any such Company Certificate,
there shall be paid to the record holder of the Parent Common Stock certificates
issued in exchange therefor, without interest, the amount of any such dividends
or other distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 2.8(d)) with respect to such
shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares
of Parent Common Stock is to be issued in a name other than that in which the
Company Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Company Certificate so surrendered
will be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent designated
by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock in any name other than that of the
registered holder of the Company Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary
in this Section 2.8, none of the Exchange Agent, the Surviving Corporation,
Parent or any party hereto shall be
16
22
liable to any person for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any Company
Certificate has not been surrendered prior to five (5) years after the Effective
Time (or immediately prior to such earlier date on which the merger
consideration contemplated by Section 2.6 in respect of such Company Certificate
would otherwise escheat to or become the property of any Governmental Entity),
any amounts payable in respect of such Company Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any person previously entitled
thereto.
Section 2.9 Termination of Exchange Fund. Any portion of funds
(including any interest earned thereon) or certificates for shares of Parent
Common Stock held by the Exchange Agent which have not been delivered to holders
of Company Certificates pursuant to this Article II within seven (7) months
after the Effective Time shall promptly be paid or delivered, as appropriate, to
Parent, and thereafter holders of Company Certificates who have not theretofore
complied with the exchange procedures set forth in and contemplated by Section
2.8 shall thereafter look only to Parent (subject to abandoned property, escheat
and similar laws) for their claim for shares of Parent Common Stock and, only as
general creditors thereof, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions (with a record date after the
Effective Time) with respect to Parent Common Stock to which they are entitled.
Section 2.10 No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Company Certificate is presented to the Surviving Corporation for any
reason, it shall be canceled and exchanged as provided in this Article II.
Section 2.11 Lost, Stolen or Destroyed Certificates. In the event
any Company Certificate shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Company
Certificate, upon the making of an affidavit of that fact by the holder thereof,
such shares of Parent Common Stock (and cash in lieu of fractional shares) as
may be required pursuant to Section 2.6; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Company Certificate to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent, the Surviving Corporation or the Exchange Agent with
respect to the Company Certificate alleged to have been lost, stolen or
destroyed.
Section 2.12 Tax and Accounting Consequences. It is intended by
the parties hereto that the Merger shall (a) constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code and (b) be accounted
for as a purchase.
17
23
Section 2.13 Withholding Rights. Parent and the Surviving
Corporation shall be entitled to deduct and withhold from the number of shares
of Parent Common Stock otherwise deliverable under this Agreement, and from any
other payments made pursuant to this Agreement, such amounts as Parent and the
Surviving Corporation are required to deduct and withhold with respect to such
delivery and payment under the Internal Revenue Code or any provision of United
States federal, state, local, or foreign national, provincial, local or other
Tax law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been delivered and paid
to the holder of shares of Company Common Stock in respect of which such
deduction and withholding was made by Parent and the Surviving Corporation.
Section 2.14 Taking of Necessary Action; Further Action. If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action, as long as such action is not inconsistent
with this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to Parent and Merger Sub that
the statements contained in this Article III are true and correct except as set
forth herein and in the disclosure schedule dated as of and delivered by the
Company to Parent on the date of this Agreement (the "Company Disclosure
Schedule"). The disclosures set forth in the Company Disclosure Schedule shall
qualify only the disclosure under the section number referred to in the Company
Disclosure Schedule.
Section 3.1 Organization, Standing and Power. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of the
Company and its Subsidiaries has the corporate power to own its properties and
to carry on its business as now being conducted and as presently proposed to be
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing could
reasonably be expected to have a Company Material Adverse Effect. The Company
has delivered to Parent a true and correct copy of the Certificate of
Incorporation, (the "Certificate of Incorporation"), and Bylaws or other charter
documents, as applicable, of the Company and each of its Subsidiaries, each as
amended to date. Neither the Company nor any of its Subsidiaries is in violation
of any of the provisions of its respective charter or bylaws or equivalent
organizational documents. The Company is the owner of all outstanding shares of
capital stock of each of its Subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such Subsidiary are owned by the Company free
and clear of all liens, charges, claims or encumbrances or rights of others and
are not subject to preemptive rights or rights of first refusal created by
statute, the certificate of incorporation, or Bylaws of such Subsidiary or any
agreement to which such Subsidiary is a party or by which it is
18
24
bound. There are no outstanding subscriptions, options, warrants, puts, calls,
rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued capital stock or
other securities of any such Subsidiary, or otherwise obligating the Company or
any such Subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity (excluding the Subsidiaries and securities in publicly
traded companies held for passive investment and comprising less than one
percent (1%) of the outstanding stock of such company).
Section 3.2 Capital Structure. The authorized capital stock of the
Company consists of fifty million (50,000,000) shares of Common Stock, $0.01 par
value, of which there were issued and outstanding as of the close of business on
June 15, 2001, 9,061,620 shares, and ten million (10,000,000) shares of
Preferred Stock $0.01 par value of which five hundred thousand (500,000) shares
have been designated as Series G Preferred Stock. As of the close of business on
June 15, 2001 there were no shares of Preferred Stock issued and outstanding. No
shares of Company Common Stock are held in treasury of the Company or by its
Subsidiaries. There are no other outstanding shares of capital stock or voting
securities and no outstanding commitments to issue any shares of capital stock
or voting securities after June 15, 2001, except upon the exercise of options
outstanding as of such date under the Company Stock Option Plans (as defined in
Section 2.6(c)) or pursuant to the Company's 1996 Employee Stock Purchase Plan
(the "Company ESPP"). All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and non-assessable and are free and clear
of any liens or encumbrances, other than any liens, charges, claims,
encumbrances or rights of others, and are not subject to preemptive rights or
rights of first refusal created by statute, the Certificate of Incorporation, or
Bylaws of the Company or any agreement to which the Company is a party or by
which it is bound. As of the close of business on June 15, 2001, the Company had
reserved (i) 5,736,884 shares of Common Stock for issuance to employees,
consultants and directors pursuant to the Company Stock Option Plans, of which
2,264,058 shares had been issued pursuant to option exercises or direct stock
purchases, 3,155,594 shares were subject to outstanding, unexercised options, no
shares were subject to outstanding stock purchase rights, and 316,872 shares
were available for issuance thereunder and (ii) 1,050,000 shares of Common Stock
for issuance to employees pursuant to the Company ESPP, of which 535,153 shares
had been issued. Between June 15, 2001 and the date hereof, Company has not (i)
issued or granted additional options under the Company Stock Option Plans, or
(ii) accepted enrollments in the Company ESPP. Except for (i) the rights created
pursuant to this Agreement, the Company Stock Option Plans and the Company ESPP
and (ii) the Company's rights to repurchase any unvested shares under the
Company Stock Option Plans, there are no other options, warrants, calls, rights,
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of the Company or obligating the Company to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement. There
are no contracts, commitments or agreements relating to voting, purchase or sale
of the Company's capital stock (other than those granting the Company the right
to purchase unvested shares upon employment or service termination, and the
Voting Agreements) (i)
19
25
between or among the Company and any of its stockholders and (ii) to the
Company's Knowledge, between or among any of the Company's stockholders. The
terms of the Company Stock Option Plans permit the assumption or substitution of
options to purchase Parent Common Stock as provided in this Agreement, without
the consent or approval of the holders of such securities, stockholders, or
otherwise. The current Offering Period (as defined in the Company ESPP)
commenced under the Company ESPP on February 1, 2001 and will end on July 31,
2001, and except for the purchase rights granted on such commencement date to
participants in the current Purchase Period (as defined in the Company ESPP),
there are no other purchase rights or options outstanding under the Company
ESPP. True and complete copies of all forms of agreements and instruments
relating to or issued under the Company Stock Option Plans or Company ESPP (and
true and complete copies of all such agreements and instruments which differ in
any material respect from any of such forms) have been provided to Parent and
such agreements and instruments have not been amended, modified or supplemented
since being provided to Parent, and there are no agreements to amend, modify or
supplement such agreements or instruments in any case from the form provided to
Parent. The shares of Company Common Stock issued under the Company Stock Option
Plans, as amended and under all prior versions thereof, have either been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or were issued in transactions which qualified for exemptions under either
Section 4(2) of, or Rule 701 under, the Securities Act for stock issuances under
compensatory benefit plans.
Section 3.3 Authority; No Conflicts. The Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval of the Merger by the Company's stockholders holding a
majority of the outstanding shares of Company Common Stock as contemplated by
Section 7.1(a). This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery of this
Agreement by Parent and Merger Sub, constitutes the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws
affecting the rights and remedies of creditors generally and general principles
of equity. The execution and delivery of this Agreement by the Company do not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under, or require the
consent or approval of any person in respect of: (i) any provision of the
Certificate of Incorporation or Bylaws of the Company or any of its
Subsidiaries, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their properties
or assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, arbitrator, tribunal, administrative
agency or commission or other governmental authority or instrumentality, stock
exchange or market system, in each case whether domestic or foreign (each a
"Governmental Entity"), is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this
Agreement, or the consummation of the transactions contemplated hereby, except
for (i) the
20
26
filing of the Certificate of Merger as provided in Section 2.2; (ii) the filing
with the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers, Inc. (the "NASD") of the Proxy Statement (as
defined in Section 3.20) relating to the Company Stockholders Meeting (as
defined in Section 3.20); (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
(iv) such filings as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"); (v) the filing of a Form
S-4 Registration Statement with the SEC in accordance with the Securities Act of
1933, as amended; (vi) the filing of a Current Report on Form 8-K with the SEC;
(vii) filings pursuant to Rule 165 and Rule 425 of the Securities Act; and
(viii) such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Company Material Adverse Effect
and would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
Section 3.4 SEC Documents; Financial Statements. The Company has
provided (or made available if publicly available at xxx.xxx.xxx or
xxx.00xxxxxxx.xxx or other widely available online XXXXX retrieval service) to
Parent a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act), definitive proxy statement and other filings made with the SEC
by the Company since March 31, 2001 and, prior to the Effective Time, the
Company will have provided (or made available if publicly available at
xxx.xxx.xxx or xxx.00xxxxxxx.xxx or other widely available online Xxxxx
retrieval service) to Parent true and complete copies of any additional
documents filed with the SEC by the Company prior to the Effective Time
(collectively, the "Company SEC Documents"). The Company has timely filed all
forms, statements and documents required to be filed by it with the SEC and The
Nasdaq Stock Market since March 31, 2001. In addition, the Company has provided
(or made available if publicly available at xxx.xxx.xxx or xxx.00xxxxxxx.xxx or
other widely available online Xxxxx retrieval service) to Parent true and
complete copies of all exhibits to the Company SEC Documents filed prior to the
date hereof, and will promptly provide (or make available if publicly available
at xxx.xxx.xxx or xxx.00xxxxxxx.xxx or other widely available online Xxxxx
retrieval service) to Parent true and complete copies of all exhibits to any
additional Company SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the Company SEC Documents have
been so filed, and all material contracts so filed as exhibits are in full force
and effect, except those which have expired in accordance with their terms. As
of their respective filing dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the Securities Act, and none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Company
SEC Document. The financial statements of the Company, including the notes
thereto, included in the Company SEC Documents (the "Company Financial
Statements") were complete and correct in all material respects as of their
respective dates, complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as of their respective dates, and have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated and consistent
with each other (except as may be indicated
21
27
in the notes thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The
Company Financial Statements fairly present the consolidated financial condition
and operating results of the Company and its Subsidiaries at the dates and
during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments none of which
individually, or in the aggregate, are material). There has been no change in
Company accounting policies since March 31, 2001.
Section 3.5 Absence of Certain Changes. Since March 31, 2001 (the
"Company Balance Sheet Date"), the Company has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or could reasonably be expected to result in, a Company Material
Adverse Effect; (ii) any acquisition, sale or transfer of any material asset of
the Company or any of its Subsidiaries other than in the ordinary course of
business and consistent with past practice; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by the Company or any revaluation by the Company of any of
its or any of its Subsidiaries' assets; (iv) any declaration, setting aside, or
payment of a dividend or other distribution with respect to the shares of the
Company, or any direct or indirect redemption, purchase or other acquisition by
the Company of any of its shares of capital stock other than the purchase of
unvested shares upon employment or service termination; (v) any entering into by
the Company or any of its Subsidiaries of any material contract or agreement, or
any material amendment or termination of, other than in the ordinary course of
business, or default by the Company or any of its Subsidiaries under, any
material contract or agreement to which the Company or any of its Subsidiaries
is a party or by which it is bound (or, to the Knowledge of the Company, by any
other party thereto); (vi) any amendment or change to the Certificate of
Incorporation or Bylaws; or (vii) any increase in or modification of the
compensation or benefits payable, or to become payable, by the Company to any of
its directors, consultants or employees, other than pursuant to scheduled annual
performance reviews, provided that any resulting modifications are in the
ordinary course of business and consistent with the Company's past practices.
The Company has not agreed since March 31, 2001 to effect any changes, events,
or conditions or take any of the actions described in the preceding clauses (i)
through (vii) and is not currently involved in any negotiations to do any of the
things described in the preceding clauses (i) through (vii) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
Section 3.6 Absence of Undisclosed Liabilities. The Company has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Consolidated Balance Sheets or in the related Notes to Consolidated Financial
Statements included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001 (the "Company Balance Sheet"), (ii) those incurred
in the ordinary course of business since the Company Balance Sheet Date which
are consistent with past practice and which could not reasonably be expected to
have a Company Material Adverse Effect; and (iii) those incurred in connection
with the execution of this Agreement.
Section 3.7 Litigation. There is no litigation, arbitration or
investigation pending before any Governmental Entity, or, to the Knowledge of
the Company or any of its
22
28
Subsidiaries, threatened against the Company or any of its Subsidiaries or any
of their respective properties or any of their respective officers or directors
(in their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect or an adverse
impact on the ability of the Company to consummate the transactions contemplated
by this Agreement. There is no judgment, decree or order against the Company or
any of its Subsidiaries, or, to the Knowledge of the Company and its
Subsidiaries, any of their respective directors or officers (in their capacities
as such), that could prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement, or that could reasonably be
expected to have a Company Material Adverse Effect.
Section 3.8 Restrictions on Business Activities. There is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its Subsidiaries which has or reasonably could be expected to have, whether
before or after consummation of the Merger, the effect of prohibiting or
materially impairing any current business practice of the Company or any of its
Subsidiaries, any contemplated acquisition of property by the Company or any of
its Subsidiaries or the conduct by the Company or any of its Subsidiaries of its
business as currently conducted or as currently proposed to be conducted.
Section 3.9 Governmental Authorization. The Company and each of
its Subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which the Company or any of its Subsidiaries
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of the Company's or any of its Subsidiaries'
business or the holding of any such interest ((i) and (ii) herein collectively
called "Company Authorizations"), and all of such Company Authorizations are in
full force and effect, except where the failure to obtain or have any of such
Company Authorizations could not reasonably be expected to have a Company
Material Adverse Effect.
Section 3.10 Title to Property. The Company and its Subsidiaries
have good and valid title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the Company Balance Sheet
or acquired after the Company Balance Sheet Date (except properties, interests
in properties and assets sold or otherwise disposed of since the Company Balance
Sheet Date in the ordinary course of business), or in the case of leased
properties and assets, valid leasehold interests in, in each case free and clear
of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) the lien of current taxes not yet due and payable, (ii)
such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties, and (iii) purchase money liens incurred in the
ordinary course of business and liens securing debt which is reflected on the
Company Balance Sheet. The plants, property and equipment of the Company and its
Subsidiaries that are used in the operations of their businesses are in good
operating condition and repair, ordinary wear and tear excepted, and except
where the failure to be in good condition or repair would not have a Company
Material Adverse Effect. Section 3.10 of the Company Disclosure Schedule
identifies each parcel of real property owned or leased by the Company or any of
its Subsidiaries. No lease relating to a foreign parcel contains any
extraordinary payment obligation.
23
29
Section 3.11 Intellectual Property.
(a) The Company and its Subsidiaries own, or are licensed
or otherwise possess legally enforceable and unencumbered rights to use all
patents, trademarks, trade names, service marks, domain names, database rights,
copyrights, and any other similar intellectual property rights or applications
therefor, maskworks, net lists, schematics, technology, know-how, trade secrets,
inventions, ideas, algorithms, processes, computer software programs or
applications (in both source code and/or object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used, or currently proposed to be used, in the business of the Company and
its Subsidiaries as currently conducted, or currently proposed to be conducted.
The Company has not (i) licensed any of its Intellectual Property in source code
form to any person or (ii) entered into any exclusive agreements relating to its
Intellectual Property to with any person.
(b) Section 3.11(b) of the Company Disclosure Schedule
lists (i) all patents and patent applications and all registered trademarks,
trade names and service marks, registered copyrights, registered domain names,
and registered maskworks included in the Intellectual Property owned by the
Company, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all licenses (both in-bound and
outbound), sublicenses and other agreements as to which the Company is a party
and pursuant to which any person is authorized to use any Intellectual Property,
and (iii) all licenses, sublicenses and other agreements (other than licenses
for standard commercially available off-the-shelf software) as to which the
Company is a party and pursuant to which the Company is authorized to use any
third party patents, trademarks or copyrights, including software ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part of
any the Company product.
(c) To the Company's Knowledge, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
rights of the Company or any of its Subsidiaries, or any Third Party
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its Subsidiaries. Neither the Company
nor any of its Subsidiaries has entered into any agreement to indemnify any
other person against any charge of infringement of any Intellectual Property,
other than indemnification provisions contained in purchase orders or license
agreements arising in the ordinary course of business. No royalties or other
continuing payment obligations are due in respect of Third Party Intellectual
Property Rights.
(d) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any material license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights.
(e) All patents, trademarks, service marks and copyrights
held by the Company are valid and subsisting and have been properly assigned to
the Company by the inventors, authors or previous owners thereof. The Company
(i) has not been sued in any suit, action or proceeding (or received any notice
or, to the Company's Knowledge, threat) which involves a claim of infringement
of any patents, trademarks, service marks, copyrights or
24
30
violation of any trade secret or other proprietary right of any third party and
(ii) has not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. The manufacture, marketing,
licensing or sale of the Company's products does not infringe any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right of
any third party and, to the Knowledge of the Company, there is no substantial
basis for a claim that any of the Company's past or current products are
infringing or have infringed on any Third Party Intellectual Property Rights.
(f) The Company has secured valid written assignments from
all consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that the Company does
not already own by operation of law.
(g) The Company has taken all necessary and appropriate
steps to protect and preserve the confidentiality of all Intellectual Property
not otherwise protected by patents or copyright ("Confidential Information").
All use, disclosure or appropriation of Confidential Information owned by the
Company by or to a third party has been pursuant to the terms of a written
agreement between the Company and such third party. All use, disclosure or
appropriation of Confidential Information not owned by the Company has been
pursuant to the terms of a written agreement between Company and the owner of
such Confidential Information, or is otherwise lawful.
(h) There are no actions that must be taken by the Company
or any Subsidiary within ninety (90) days of the Closing Date that, if not
taken, will result in the loss of any Intellectual Property, including the
payment of any registration, maintenance or renewal fees or the filing of any
responses to the U.S. Patent and Trademark Office actions, documents,
applications or certificates for the purposes of obtaining, maintaining,
perfecting or preserving or renewing any Intellectual Property.
(i) The Company has not received any opinion of counsel
that any third party patents apply to the Company's products.
(j) The period of exclusivity under Section 2.5 of the
Patent License Agreement between MIT and Virtual Machine Works, Inc., dated
December 22, 1993, extends until December, 2004.
(k) Neither the Company nor any of its Subsidiaries is a
party to any non-competition or non-solicitation or other similar restrictive
agreement or arrangement relating to any business or service anywhere in the
world.
(l) The Company and its Subsidiaries have not disclosed or
delivered, or permitted the disclosure or delivery, to any escrow holder or
other third party, all or any part of the source code (including, without
limitation, any algorithm or documentation contained in or relating to any
source code) of its Intellectual Property.
25
31
Section 3.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" means any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" means any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including those substances,
materials and wastes defined in or regulated under any Environmental and Safety
Laws.
(iii) "Property" means all real property leased or
owned by the Company or its Subsidiaries either currently or in the past.
(iv) "Facilities" means all buildings and
improvements on the Property of the Company or its Subsidiaries.
(b) Except in all cases as, in the aggregate, would not
have a Company Material Adverse Effect, (i) no methylene chloride or asbestos is
contained in or has been used at or released from the Facilities; (ii) all
Hazardous Materials and wastes have been disposed of in accordance with all
Environmental and Safety Laws; (iii) the Company and its Subsidiaries have
received no notice (verbal or written) of any noncompliance of the Facilities or
its past or present operations with Environmental and Safety Laws; (iv) no
notices, administrative actions or suits are pending or, to the Company's
Knowledge, threatened relating to a violation of any Environmental and Safety
Laws; (v) to the Company's Knowledge, neither the Company nor its Subsidiaries
have been or are a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), or state
analog statute; (vi) there have not been in the past, and are not now, any
Hazardous Materials on, under or migrating to or from the Facilities or
Property; (vii) there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including treatment or storage tanks, sumps, or water, gas or oil xxxxx; (viii)
there are no polychlorinated biphenyls ("PCBs") deposited, stored, disposed of
or located on the Property or Facilities or any equipment on the Property
containing PCBs at levels in excess of fifty (50) parts per million; (ix) there
is no formaldehyde on the Property or in the Facilities, nor any insulating
material containing urea formaldehyde in the Facilities; (x) the Facilities and
the Company's and its Subsidiaries uses and activities therein have at all times
complied with all Environmental and Safety Laws; and (xi) the Company and its
Subsidiaries have all the permits and licenses required to be issued and are in
full compliance with the terms and conditions of those permits.
Section 3.13 Taxes. The Company and each of its Subsidiaries, and
any consolidated, combined, unitary or aggregate group for Tax (as defined
below) purposes of which the Company or any of its Subsidiaries is or has been a
member, have properly completed
26
32
and timely filed all Tax Returns required to be filed by them and have paid all
Taxes shown thereon to be due. All unpaid taxes of the Company and its
Subsidiaries for periods through the Company Balance Sheet Date are reflected on
the Company Balance Sheet. The Company has no liability for unpaid Taxes
accruing after the Company Balance Sheet Date other than Taxes arising in the
ordinary course of its business subsequent to the Company Balance Sheet Date.
There is (i) no material claim for Taxes that is a lien against the property of
the Company or any of its Subsidiaries or is being asserted against the Company
or any of its Subsidiaries other than liens for Taxes not yet due and payable;
(ii) no audit of any Tax Return of the Company or any of its Subsidiaries that
is being conducted by a Tax authority; and (iii) no extension of the statute of
limitations on the assessment of any Taxes that has been granted by the Company
or any of its Subsidiaries and that is currently in effect. Neither the Company
nor any of its Subsidiaries has been or will be required to include any material
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or 263A of the Internal Revenue Code or any comparable provision
under state or foreign Tax laws solely as a result of transactions, events or
accounting methods employed prior to the Merger other than as reported in the
Tax Returns that have been provided to Parent. The Company has not been
distributed in a transaction qualifying under Section 355 of the Internal
Revenue Code within the last two years, nor has Company distributed any
corporation in a transaction qualifying under Section 355 of the Code within the
last two years. There is no agreement, plan or arrangement to which Company or
any of its Subsidiaries is a party, including this Agreement, covering any
employee or former employee of Company or any of its Subsidiaries that,
individually or collectively, would be reasonably likely to give rise to the
payment of any amount that would not be deductible pursuant to Section 280G, 404
or 162(m) of the Internal Revenue Code. There is no contract, agreement, plan or
arrangement to which Company is a party or by which it is bound to compensate
any individual for excise taxes pursuant to Section 4999 of the Internal Revenue
Code. The Company and each of its Subsidiaries have withheld or collected and
paid over to the appropriate Tax Authorities (or are properly holding for such
timely payment) all Taxes required by law to be withheld or collected. Neither
the Company nor any of its Subsidiaries has filed or will file any consent to
have the provisions of paragraph 341(f)(2) of the Internal Revenue Code (or
comparable provisions of any state Tax laws) apply to the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to, nor
does the Company or any of its Subsidiaries have any liability under, any Tax
sharing or Tax allocation agreements. Neither the Company nor any of its
Subsidiaries has filed any disclosures under Section 6662 of the Internal
Revenue Code or comparable provisions of state, local or foreign law to prevent
the imposition of penalties with respect to any Tax reporting position taken on
any Tax Return. Neither the Company nor any of its Subsidiaries has refrained
from filing any disclosures under Section 6662 of the Internal Revenue Code or
comparable provisions of state, local or foreign law to prevent the imposition
of penalties with respect to any Tax reporting position taken on any Tax Return
based on or in substantial reliance on advice of outside counsel or other
consultants. Neither the Company nor any of its Subsidiaries has ever been a
United States real property holding corporation within the meaning of Section
897 of the Internal Revenue Code. Neither the Company nor any of its
Subsidiaries has ever been a member of a consolidated, combined or unitary group
of which the Company was not the ultimate parent corporation. The Company and
each of its Subsidiaries have in their possession receipts for any Taxes paid to
foreign Tax authorities. Neither the Company nor any of its affiliates has taken
or agreed to take any action, nor does the Company have Knowledge of any fact or
circumstance, that would prevent the
27
33
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code.
Section 3.14 Employee Benefit Plans.
(a) Section 3.14(a) of the Company Disclosure Schedule
lists, with respect to the Company, any Subsidiary of the Company and any trade
or business (whether or not incorporated) which is treated as a single employer
with the Company (an "ERISA Affiliate") within the meaning of Section 414(b),
(c), (m) or (o) of the Internal Revenue Code, (i) all material employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), (ii) any such employee benefit plan that has
been adopted, maintained, contributed to, or required to be contributed to by
the Company or any Subsidiary, whether formally or informally, for the benefit
of employees outside the United States; (iii) each loan to a non-officer
employee in excess of fifty thousand dollars ($50,000), loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit
(Internal Revenue Code Section 125) or dependent care (Internal Revenue Code
Section 129), life insurance or accident insurance plans, programs or
arrangements; (iv) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements; (v) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of the Company and that do not generally apply to all employees; and (vi) any
current or former employment or executive compensation or severance agreements,
written or otherwise, as to which unsatisfied obligations of the Company of
greater than fifty thousand dollars ($50,000) remain for the benefit of, or
relating to, any present or former employee, consultant or director of the
Company (collectively, the "Company Employee Plans").
(b) The Company has provided to Parent a copy of each of
the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and any material employee
communications relating thereto) and has, with respect to each Company Employee
Plan which is subject to ERISA reporting requirements, provided copies of the
Form 5500 reports filed for the last three (3) plan years. Any Company Employee
Plan intended to be qualified under Section 401(a) of the Internal Revenue Code
either (i) has obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under the Internal Revenue Code,
including all amendments to the Internal Revenue Code effected by the Tax Reform
Act of 1986 and subsequent legislation other than the Uruguay Round Agreements
Act of 1994, the Uniformed Services Employment and Reemployment Rights Act of
1994, the Small Business Job Protection Act of 1996, and the Taxpayer Relief Act
of 1997, or (ii) has applied to the Internal Revenue Service for such a
determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination or (iii) the requisite period for
application has not expired. The Company has also furnished Parent with the most
recent Internal Revenue Service determination, opinion, advisory, or
notification letter issued with respect to each such Company Employee Plan, and
nothing has occurred since the issuance of each such letter which would
reasonably be expected to cause the loss of the tax-qualified status of any
Company Employee
28
34
Plan subject to Internal Revenue Code Section 401(a). Company has also provided
to Parent all registration statements and prospectuses prepared in connection
with each Company Employee Plan.
(c) (i) None of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, except
as required by applicable law; (ii) there has been no "prohibited transaction,"
as such term is defined in Section 406 of ERISA and Section 4975 of the Internal
Revenue Code, with respect to any Company Employee Plan, which would reasonably
be expected to have, in the aggregate, a Company Material Adverse Effect; (iii)
each Company Employee Plan has been administered in accordance with its terms
and in compliance with the requirements prescribed by any and all statutes,
rules and regulations (including ERISA and the Internal Revenue Code), except as
would not have, in the aggregate, a Company Material Adverse Effect, and the
Company and each Subsidiary or ERISA Affiliate have performed in all material
respects all obligations required to be performed by them under, are not in
default in any material respect under or violation of, and have no Knowledge of
any material default or violation by any other party to, any of the Company
Employee Plans; (iv) neither the Company nor any Subsidiary or ERISA Affiliate
is subject to any material liability or material penalty under Sections 4976
through 4980 of the Internal Revenue Code or Title I of ERISA with respect to
any of the Company Employee Plans; (v) all material contributions required to be
made by the Company or any Subsidiary or ERISA Affiliate to any Company Employee
Plan have been made on or before their due dates and a reasonable amount has
been accrued for contributions to each Company Employee Plan for the current
plan years; (vi) with respect to each Company Employee Plan, no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event for
which the thirty (30) day notice requirement has been waived under the
regulations to Section 4043 of ERISA) nor any event described in Section 4062,
4063 or 4041 or ERISA has occurred; (vii) no Company Employee Plan is covered
by, and neither the Company nor any Subsidiary or ERISA Affiliate has incurred
or expects to incur any liability under Title IV of ERISA or Section 412 of the
Internal Revenue Code; and (viii) each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability to Parent (other than for benefits accrued through
the date of termination and ordinary administrative expenses typically incurred
in a termination event). With respect to each Company Employee Plan subject to
ERISA or applicable foreign law as an employee pension plan within the meaning
of Section 3(2) of ERISA, an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, or an employee compensation, pension, welfare, or other
benefit plan under applicable foreign law, the Company has prepared in good
faith and timely filed all requisite governmental reports (which were true and
correct as of the date filed) and has properly and timely filed and distributed
or posted all notices and reports to employees required to be filed, distributed
or posted with respect to each such Company Employee Plan, except where the
failure to do so would not have a Company Material Adverse Effect. No suit,
administrative proceeding, action or other litigation has been brought, or to
the Knowledge of the Company is threatened, against or with respect to any such
Company Employee Plan, including any audit or inquiry by the IRS or United
States Department of Labor.
(d) With respect to each Company Employee Plan, the Company
and each of its United States Subsidiaries have complied except to the extent
that such failure to comply would not, individually or in the aggregate, have a
Company Material Adverse Effect, with (i)
29
35
the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations (including proposed regulations) thereunder, (ii) the applicable
requirements of the Family Medical and Leave Act of 1993 and the regulations
thereunder, and (iii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 and the regulations (including
proposed regulations) thereunder.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of the Company, any Company Subsidiary or any other ERISA
Affiliate to severance benefits or any other payment, except as expressly
provided in this Agreement, or (ii) accelerate the time of payment or vesting,
or increase the amount of compensation due any such employee or service
provider, except as may be required by Section 6.9 of this Agreement. Without
limiting the generality of the foregoing, the execution and delivery of this
Agreement, without more, does not constitute a change in or of control or a
termination or constructive termination of employment within the meaning of any
severance or option plan or agreement to which the Company or any of its
Subsidiaries is a party.
(f) There has been no amendment to, written interpretation
or announcement (whether or not written) by the Company, any Company Subsidiary
or other ERISA Affiliate relating to, or change in participation or coverage
under, any Company Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal quarter included in the Company's financial
statements.
(g) The Company does not currently maintain, sponsor,
participate in or contribute to, nor has it ever maintained, established,
sponsored, participated in, or contributed to, any pension plan (within the
meaning of Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Internal Revenue Code.
(h) Neither the Company nor any Company Subsidiary or other
ERISA Affiliate is a party to, or has made any contribution to or otherwise
incurred any obligation under, any "multiemployer plan" as defined in Section
3(37) of ERISA.
(i) There is no agreement, contract or arrangement to which
the Company or any of its Subsidiaries is a party that may result in the payment
of any amount that would not be deductible by reason of Section 280G or Section
404 of the Internal Revenue Code.
(j) Each compensation and benefit plan adopted, maintained
or contributed to or required to be maintained or contributed to by the Company
or any of its Subsidiaries by the law or applicable custom or rule of a
jurisdiction outside of the United States (the "Foreign Plans") is listed in
Section 3.14(j) of the Company Disclosure Schedule. In regards to each such
Foreign Plan (i) all material contributions to, and material payments from, the
Foreign Plans which may have been required to be made in accordance with the
terms of any such Foreign Plan, and, when applicable, the law, custom and rule
of the jurisdiction in which such Foreign Plan is maintained, have been timely
made or shall be made by the Closing Date, and all such contributions to the
Foreign Plans, and all payments under the Foreign Plans, for any
30
36
period ending before the Closing Date that are not yet, but will be, required to
be made, are reflected as an accrued liability on the Company Balance Sheet,
(ii) the Company and each of its Subsidiaries have complied in all material
respects with all applicable reporting and notice requirements, and each of the
Foreign Plans has obtained from the Governmental Entity having jurisdiction with
respect to such plan all required determinations, if any, that such Foreign Plan
is in compliance with the laws, customs and rules of the relevant jurisdiction
if such determination is required in order to give effect to such Foreign Plan;
(iv) each of the Foreign Plans has been administered in all material respects at
all times in accordance with its terms and applicable law and regulations.
Section 3.15 Interested Party Transactions. Except as disclosed in
the Company SEC Documents, neither the Company nor any of its Subsidiaries is
indebted to any director, officer or employee of the Company or any of its
Subsidiaries (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to the
Company or any of its Subsidiaries, and there are no other transactions of the
type required to be disclosed pursuant to Item 404 of Regulation S-K under the
Securities Act and the Exchange Act.
Section 3.16 Certain Agreements Affected by the Merger. At the
Closing neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any, current or former, director or employee or
service provider of the Company or any of its Subsidiaries; (ii) increase any
benefits otherwise payable by the Company or its Subsidiaries; or (iii) result
in the acceleration of the time of payment or vesting of any such benefits.
Section 3.17 Employee Matters.
(a) Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining or other labor union contract applicable to
employees of the Company or any of its Subsidiaries, no collective bargaining
agreement is being negotiated by the Company or any of its Subsidiaries and
neither the Company nor any of its Subsidiaries has any duty to bargain with any
labor organization with respect to such persons. There is no pending demand for
recognition or any other request or demand from a labor organization for
representative status with respect to any persons employed by the Company or any
of its Subsidiaries. There is no labor dispute, strike or work stoppage against
the Company or any of its Subsidiaries pending or, to the Knowledge of the
Company, threatened which may interfere with the respective business activities
of the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries, or, to the Knowledge of the Company, any of their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company or any
of its Subsidiaries, and there is no charge or complaint against the Company or
any of its Subsidiaries by the National Labor Relations Board or any comparable
Governmental Entity pending or, to the Knowledge of the Company, threatened.
Neither the Company nor any of its Subsidiaries have any pending contract
grievances under any collective bargaining agreements, other administrative
charges, claims, grievances or lawsuits before any Governmental Entity or
arbiter or arbitrator arising under any
31
37
laws govern employment and, to the Knowledge of the Company and its
Subsidiaries, there exist no facts that could reasonably be expected to give
rise to such a claim.
(b) The Company and each of its Subsidiaries are in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices. The Company has in all material respects withheld all
amounts required by law or by agreement to be withheld from the wages, salaries,
and other payments to employees; and is not liable for any material arrears of
wages or any material taxes or any material penalty for failure to comply with
any of the foregoing. The Company is not liable for any material payment to any
trust or other fund or to any Governmental Entity, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending claims against
the Company or any of its Subsidiaries for any material amounts under any
workers compensation plan or policy or for long term disability. Neither the
Company nor any of its Subsidiaries has any obligations under COBRA with respect
to any former employees or qualifying beneficiaries thereunder, except for
obligations that are not material in amount. There are no material controversies
pending or, to the Knowledge of the Company or any of its Subsidiaries,
threatened, between the Company or any of its Subsidiaries and any of their
respective employees, which controversies have or could reasonably be expected
to result in an action, suit, proceeding, claim, arbitration or investigation
before any Governmental Entity.
(c) To the Company's Knowledge, no employees of the Company
or any of its Subsidiaries are in violation of any term of any employment
contract, patent disclosure agreement, noncompetition agreement, or any
restrictive covenant to a former employer relating to the right of any such
employee to be employed by the Company or its Subsidiaries because of the nature
of the business conducted or presently proposed to be conducted by the Company
or any of its Subsidiaries, or to the use of trade secrets or proprietary
information of others. No employees of the Company or any of its Subsidiaries
material to the conduct of their respective businesses have given written notice
to the Company, nor is the Company otherwise aware, that any such employee
intends to terminate his or her employment with the Company or any of its
Subsidiaries.
(d) The Company and its Subsidiaries have provided to
Parent a list of the names, positions, rates and elements of compensation for
all officers, directors, employees, advisory board members and consultants of
the Company and its Subsidiaries who are currently receiving compensation or
other benefits or remuneration from the Company and its Subsidiaries, showing
each such person's name, positions, an annual remuneration, bonuses and benefits
for the current fiscal year and the most recently completed fiscal year.
(e) With respect to any persons employed by the Company or
any of its Subsidiaries, (i) the Company and the Company's Subsidiaries have not
violated any legal requirement prohibiting discrimination on the basis of race,
color, national origin, sex, religion, age, marital status, or handicap in its
employment conditions or practices; and (ii) there are no pending or, to the
Knowledge of the Company and the Company's Subsidiaries, threatened
discrimination complaints relating to race, color, national origin, sex,
religion, age, marital
32
38
status, or handicap against the Company or its Subsidiaries, before any
governmental entity nor, to the Knowledge of the Company and its Subsidiaries,
does any basis therefor exist.
(f) The Company and its Subsidiaries have complied, in all
material respects, with all laws governing the employment of personnel by U.S.
companies and the employment of non-U.S. nationals in the United States,
including the Immigration and Nationality Act 8 U.S.C. Sections 1101 et seq. and
its implementing regulations.
(g) The Company and the employees of its Subsidiaries have
timely given all notices required to be given to employees under, or otherwise
complied with by Worker Adjustment and Retraining Notification Act of 1988, as
amended, and any rules and regulations promulgated thereunder ("WARN") or
similar statutes or regulations of any jurisdiction relating to any plant
closing or mass layoff (or similar triggering event) caused by or relating to
the Merger.
(h) Section 3.17(h) of the Company Disclosure Schedule
lists of all non-U.S. employees of the Company or its Subsidiaries showing each
such person's name, title (if applicable), city/country of employment, rate of
annual remuneration, citizenship, stock option grants, terms and conditions of
employment not in the ordinary course of business, manager's name and work
location.
Section 3.18 Insurance. Section 3.18 of the Company Disclosure
Schedule lists all Company insurance policies as of the date hereof. The Company
and each of its Subsidiaries have 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 no
Knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
Section 3.19 Compliance With Laws. Each of the Company and its
Subsidiaries has complied in all material respects with, are not in violation
of, and have not received any written or, to the Knowledge of the Company, other
notices of violation with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its business. Without limiting the generality of the
foregoing, the Company has conducted its export transactions in accordance with
applicable provisions of United States export control laws and regulations,
including to the Export Administration Act and implementing Export
Administration Regulations, except for such violations which could not
reasonably be expected to have a Company Material Adverse Effect. Without
limiting the foregoing, except as could not reasonably be expected to have a
Company Material Adverse Effect:
(a) the Company has obtained all export licenses and other
approvals required for its exports of products, software and technologies from
the United States;
33
39
(b) the Company is in compliance with the terms of all
applicable export licenses or other approvals;
(c) there are no pending or, to the Knowledge of the
Company, threatened claims against the Company with respect to such export
licenses or other approvals;
(d) there are no actions, conditions or circumstances
pertaining to the Company's export transactions that may give rise to any future
claims; and
(e) no consents or approvals for the transfer of export
licenses to Parent are required, or such consents and approvals can be obtained
without material cost and without undue delay.
Section 3.20 Registration Statement; Proxy Statement/Prospectus.
The information supplied by the Company for inclusion in the registration
statement on Form S-4 (or such other or successor form as shall be appropriate)
pursuant to which the shares of Parent Common Stock to be issued in the Merger
will be registered with the SEC (the "Registration Statement") shall not at the
time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by the Company for inclusion in the proxy statement/prospectus to be
sent to the stockholders of the Company in connection with the meeting of the
Company's stockholders to consider the Merger (the "Company Stockholders
Meeting") (such proxy statement/prospectus as amended or supplemented is
referred to herein as the "Proxy Statement") shall not, on the date the Proxy
Statement is first mailed to the Company's stockholders, at the time of the
Company Stockholders Meeting and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any event or information
should be discovered by the Company which should be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement, the Company
shall promptly inform Parent and Merger Sub. Notwithstanding the foregoing, the
Company makes no representation, warranty or covenant with respect to any
information supplied by Parent or Merger Sub or any other third party which is
contained in any of the foregoing documents.
Section 3.21 Vote Required. The affirmative vote of the holders of
a majority of the shares of the Company Common Stock outstanding on the record
date set for the Company Stockholders Meeting is the only vote of the holders of
any of the Company's capital stock necessary to adopt this Agreement.
Section 3.22 Voting Agreements. All of the persons listed on
Section 3.22 of the Company Disclosure Schedule have signed and delivered a
Voting Agreement, and such Voting Agreement is in full force and effect.
34
40
Section 3.23 Board Approval; Rights Plan; State Takeover Statutes.
The Board of Directors of the Company has unanimously (i) approved this
Agreement and the Merger, (ii) determined that this Agreement and the Merger are
advisable and in the best interests of the stockholders of the Company and are
on terms that are fair to such stockholders (iii) recommended that the
stockholders of the Company adopt this Agreement and approve the consummation of
the Merger and (iv) taken all action to the extent necessary to render
inapplicable to the Merger the rights distributed to the holders of Company
Common Stock, pursuant to the Amended and Restated Rights Agreement dated as of
January 22, 1999 between the Company and Bank Boston, N.A. (as Rights Agent).
Assuming the accuracy of Parent's representation set forth in Section 4.11 of
this Agreement, the Board of Directors' approval of this Agreement and the
Merger is sufficient to render inapplicable to this Agreement, the Merger, and
the transactions contemplated by this Agreement, the restrictions of Section 203
of the DGCL to the extent, if any, such Section is applicable to this Agreement,
the Merger, or the transactions contemplated by this Agreement. No other state
takeover statute or similar statute or regulation applies to or purports to
apply to this Agreement, the Merger, or the transactions contemplated by this
Agreement.
Section 3.24 Brokers' and Finders' Fees; Opinion of Financial
Adviser. The Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or investment bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby, except as specified in the
Xxxxxxx Letter. The Company has been advised by its financial advisor, Xxxxxxx &
Company, Inc., that in such advisor's opinion, as of the date hereof, the
Exchange Ratio is fair, from a financial point of view, to the stockholders of
the Company.
Section 3.25 Customers and Suppliers; Backlog. As of the date
hereof, none of the Company's customers which individually accounted for more
than five percent (5%) of the Company's gross revenues during the 12-month
period preceding the Company Balance Sheet Date has terminated or materially
reduced, or indicated in writing, or to the Knowledge of the Company, otherwise
to the Company that it intends to terminate or materially reduce, any agreement
with the Company. As of the date hereof, no material supplier of the Company has
indicated in writing, or to the Knowledge of the Company, otherwise that it will
stop, or decrease the rate of, supplying materials, products or services to the
Company. All orders contained in Backlog have been accepted by the Company and
the customer without exception to any of the original terms of the order and the
Company has received no notice that any such customer intends to cancel its
order, nor does the Company have a substantial basis to believe any such
cancellation is likely.
Section 3.26 No Default. Neither the Company nor any of its
Subsidiaries is, and has not received written, or to the Knowledge of the
Company, other notice that it is or would be with the passage of time, (a) in
violation of any provision of its Certificate of Incorporation or Bylaws or
other organizational documents, or (b) in default or violation with any term,
condition or provisions of (i) any judgment, decree, order, injunction or
stipulation applicable to the Company or its Subsidiaries or (ii) any agreement,
note, mortgage, indenture, contract, lease, instrument, permit, concession,
franchise or license to which the Company or its Subsidiaries are party or by
which their assets or properties are bound, except where such default or
violation could not reasonably be expected to result in a Company Material
Adverse Effect.
35
41
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that
the statements contained in this Article IV are true and correct except as set
forth herein and in the disclosure schedule dated as of and delivered by Parent
to the Company on the date of this Agreement (the "Parent Disclosure Schedule").
The disclosures set forth in the Parent Disclosure Schedule shall qualify only
the disclosure under the section number referred to in the Parent Disclosure
Schedule.
Section 4.1 Organization, Standing and Power. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing could reasonably be expected
to have a Parent Material Adverse Effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
Section 4.2 Capital Structure. (a) The authorized capital stock of
Parent consists of two hundred million (200,000,000) shares of Common Stock,
$0.01 par value, of which there were issued and outstanding as of the close of
business on June 9, 2001, 60,856,710 shares, and two million (2,000,000) shares
of Preferred Stock, $0.01 par value, of which one hundred thousand (100,000)
shares have been designated as Series A Participating Preferred Stock. As of
close of business on June 2, 2001 there were no shares of Preferred Stock issued
and outstanding. The shares of Parent Common Stock to be issued pursuant to the
Merger (including pursuant to the exercise of any options assumed pursuant to
Section 6.9) will be duly authorized, validly issued, fully paid, and
non-assessable, free of any liens or encumbrances imposed by Parent or Merger
Sub.
(b) The authorized capital stock of Merger Sub consists of
one thousand (1,000) shares of Common Stock, $0.0001 par value, of which one
thousand (1,000) shares and no shares of Preferred Stock, $0.0001 par value were
issued and outstanding as of the date hereof. The shares of Merger Sub Common
Stock to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid, and non-assessable, free of any liens or encumbrances
imposed by Parent or Merger Sub.
Section 4.3 Authority. Parent and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery of this
Agreement by the Company, constitutes the valid and binding obligation of Parent
and Merger Sub enforceable against Parent and Merger Sub in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws affecting the rights and remedies of creditors generally and general
principles of equity. The execution and delivery of
36
42
this Agreement do not, and the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a benefit
under (i) any provision of the Certificate of Incorporation or Bylaws of Parent
or any of its Subsidiaries, as amended, or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or any of its Subsidiaries or any of their
properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Parent and Merger Sub or the
consummation by Parent and Merger Sub of the transactions contemplated hereby,
except for (i) the filing of the Certificate of Merger provided in Section 2.2;
(ii) the filing with the SEC and NASD of the Registration Statement; (iii) the
filing of a Schedule 13D with the SEC with respect to the Voting Agreements;
(iv) the filing of a Form 8-K and Schedule 13D with the SEC and NASD within
fifteen (15) days after the Closing Date; (v) any filings as may be required
under applicable state securities laws and the securities laws of any foreign
country; (vi) such filings as may be required under the HSR Act; (vii) the
filing, if required, with The Nasdaq Stock Market of a Notification Form for
Listing of Additional Shares with respect to the shares of Parent Common Stock
issuable upon conversion of the Company Common Stock in the Merger and upon
exercise of the options under the Company Stock Option Plans assumed by Parent;
(viii) the filing of a registration statement on Form S-8 with the SEC, or other
applicable form covering the shares of Parent Common Stock issuable pursuant to
outstanding options under the Company Stock Option Plans assumed by Parent; (ix)
filings pursuant to Rule 165 and Rule 425 of the Securities Act; and (x) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a Parent Material Adverse Effect and would
not prevent or materially alter or delay any of the transactions contemplated by
this Agreement.
Section 4.4 SEC Documents; Financial Statements. Parent has made
available to the Company a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filings
filed with the SEC by Parent since March 20, 2001, and, prior to the Effective
Time, Parent will have provided or made available to the Company true and
complete copies of any additional documents filed with the SEC by Parent prior
to the Effective Time (collectively, the "Parent SEC Documents"). Parent has
timely filed all forms, statements and documents required to be filed by it with
the SEC and The Nasdaq Stock Market since March 20, 2001. In addition, Parent
has made available to the Company true and complete copies of all exhibits to
the Parent SEC Documents filed prior to the date hereof, and will promptly make
available to the Company true and complete copies of all exhibits to any
additional Parent SEC Documents filed prior to the Effective Time. All documents
required to be filed as exhibits to the Company SEC Documents have been so
filed, and all material contracts so filed as exhibits are in full force and
effect, except those which have expired in accordance with their terms. As of
their respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, and
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
37
43
subsequently filed Parent SEC Document. The financial statements of Parent,
including the notes thereto, included in the Parent SEC Documents (the "Parent
Financial Statements") were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Parent
Financial Statements fairly present the consolidated financial condition and
operating results of Parent and its Subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments none of which individually, or in the
aggregate, are material). There has been no change in Parent accounting policies
since March 20, 2001.
Section 4.5 Absence of Undisclosed Liabilities. Parent has no
material obligations or liabilities of any nature (matured or unmatured, fixed
or contingent) other than (i) those set forth or adequately provided for in the
Balance Sheet included in Parent's Form 10-Q for the period ended January 31,
2001 (the "Parent Balance Sheet"), (ii) those incurred in the ordinary course of
business since January 31, 2001, which are consistent with past practice and
which could not reasonably be expected to have a Parent Material Adverse Effect;
and (iii) those incurred in connection with the execution of this Agreement.
Section 4.6 Litigation. There is no litigation, arbitration or
investigation pending against Parent or any of its Subsidiaries before any
Governmental Entity, or, to the Knowledge of Parent, threatened against Parent
or any of its Subsidiaries or any of their respective properties that,
individually or in the aggregate, could reasonably be expected to have a Parent
Material Adverse Effect or to materially and adversely affect the ability of
Parent or its Subsidiaries to consummate the transactions contemplated by this
Agreement. There is no judgment, decree or order against Parent or any of its
Subsidiaries, or, to the Knowledge of Parent, any of their respective directors
or officers (in their capacities as such), that would prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, or that
would have a Parent Material Adverse Effect.
Section 4.7 Registration Statement; Proxy Statement/Prospectus.
The information supplied by Parent and Merger Sub for inclusion in the
Registration Statement shall not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The information supplied by Parent for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to the
Company's stockholders, at the time of the Company Stockholders Meeting and at
the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which it is made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Company Stockholders Meeting
which has become false or misleading. If at any time prior to the Effective Time
any
38
44
event or information should be discovered by Parent or Merger Sub which should
be set forth in an amendment to the Registration Statement or a supplement to
the Proxy Statement, Parent or Merger Sub will promptly inform the Company.
Notwithstanding the foregoing, Parent and Merger Sub make no representation,
warranty or covenant with respect to any information supplied by the Company or
any third party which is contained in any of the foregoing documents.
Section 4.8 Board Approval. The Boards of Directors of Parent and
Merger Sub, as the case may be, have (i) approved this Agreement and the Merger,
(ii) determined that the Merger is advisable and in the best interests of their
respective stockholders and is on terms that are fair to such stockholders and
(iii) recommended that the stockholder of Merger Sub adopt this Agreement and
approve the consummation of the Merger. The stockholder of Merger Sub has
adopted this Agreement and approved the consummation of the Merger. No vote of
the holders of Parent Common Stock is required under applicable law or Nasdaq
National Market rules in connection with this Agreement or the Merger.
Section 4.9 Broker's and Finders' Fees. Parent has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
Section 4.10 Tax Matters. Neither Parent nor any of its affiliates
has taken or agreed to take any action, nor does Parent have Knowledge of any
fact or circumstance, that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
Section 4.11 Parent Owned Shares of Company Common Stock. Neither
Parent, Merger Sub or their respective Subsidiaries own any shares of Company
Common Stock.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
Section 5.1 Conduct of Business of Company. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, the Company agrees (except to the
extent expressly contemplated by this Agreement), to carry on its and its
Subsidiaries' business in the ordinary course in substantially the same manner
as heretofore conducted, to pay and to cause its Subsidiaries to pay debts and
Taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform other material obligations when due, and to use its commercially
reasonable efforts consistent with past practice and policies to preserve intact
its and its Subsidiaries' present business organizations, use its commercially
reasonable efforts consistent with past practice to keep available the services
of its and its Subsidiaries' present officers and key employees and use its
commercially reasonable efforts consistent with past practice to preserve its
and its Subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it or its
Subsidiaries, to the end that its and its Subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. The Company agrees to
promptly
39
45
notify Parent of any material event or occurrence not in the ordinary course of
its or its Subsidiaries' business, and of any event which could reasonably be
expected to have a Company Material Adverse Effect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, the Company shall not do, cause or permit any of the following
actions, or allow, cause or permit any of its Subsidiaries to do, cause or
permit any of the following actions:
(a) Charter Documents. cause or permit any amendments to
its Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. declare or pay any
cash or property dividends on or make any other cash or property distributions
in respect of any of its capital stock, or repurchase or otherwise acquire,
directly or indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with the Company's standard
or usual (as at the date hereof) agreements providing for the repurchase of
shares in connection with any termination of service to it or its Subsidiaries;
(c) Stock Option Plans, Etc. take any action to accelerate,
amend or change the period of exercisability or vesting, or waive any repurchase
rights, in respect of options or other rights granted under the Company Stock
Option Plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans or with respect to any restricted stock.
(d) Material Contracts. enter into any contract or
commitment involving payments by the Company or its Subsidiaries in excess of
five hundred thousand dollars ($500,000) individually or three million dollars
($3,000,000) in the aggregate or which are otherwise material to the Company and
its Subsidiaries (excluding sales of products or purchases of supplies in the
ordinary course of business consistent with past practice), or violate, amend or
otherwise modify or waive any of the terms of any of its material contracts;
(e) Issuance of Securities. issue, deliver, encumber or,
sell, authorize or propose the issuance, delivery, encumbrance, or sale of, or
purchase or propose the purchase of, any shares of its or its Subsidiaries'
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities, other
than (i) the issuance of shares of its Common Stock pursuant to the exercise of
stock options, warrants or other rights therefor outstanding as of the date of
this Agreement, (ii) the grant of stock options under Company Stock Option Plans
to employees and non-employee directors in the ordinary course of business (not
to exceed the Authorized Option Shares), with an exercise price equal to the
fair market value of the Company Common Stock on the date of grant and otherwise
on terms (including vesting schedules) consistent with the Company's past
practice with similarly situated employees, (iii) issuance of shares of Company
Common Stock to participants in the Company ESPP pursuant to the terms thereof
and (iv) the repurchase of Company Common Stock from former employees, directors
and consultants in accordance with the Company's standard or usual (as at the
date hereof) agreements providing for the repurchase of shares in connection
with any termination of service;
40
46
(f) Intellectual Property. transfer or license to any
person or entity any rights to its Intellectual Property other than the license
of non-exclusive rights to its Intellectual Property except for standard tool
integrations, joint marketing and joint promotional arrangements entered into by
the Company and another entity, in each case in the ordinary course of business
consistent with past practice;
(g) Exclusive Rights. enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(h) Dispositions. sell, lease, license or otherwise dispose
of or encumber any of its properties or assets which are material, individually
or in the aggregate, to its and its Subsidiaries' business, taking the Company
together with its Subsidiaries as a whole, or which have a value in excess of
five million dollars ($5,000,000) other than sales of products in the ordinary
course of business consistent with the Company's past practice;
(i) Indebtedness. incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others other than pursuant to the Modification
of Revolving Credit and Security Agreement, dated March 27, 2001 by and between
the Company and Comerica Bank;
(j) Leases. enter into any operating leases obligating the
Company or any of its Subsidiaries to make payments over the life of the lease
term in excess of two hundred fifty thousand dollars ($250,000) in the case of
any individual lease or three million dollars ($3,000,000) with respect to all
such leases in the aggregate;
(k) Payment of Obligations. pay, discharge or satisfy in an
amount in excess of one million dollars ($1,000,000) in any one case, any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the Transaction Expenses or the payment, discharge or satisfaction of
liabilities reflected or reserved against in the Company Financial Statements;
(l) Capital Expenditures. make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business consistent with the Company's past practice that exceed two million
dollars ($2,000,000) individually or seven million five hundred thousand dollars
($7,500,000) in the aggregate;
(m) Insurance. materially reduce the amount or scope of any
material insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. terminate or waive any right or
claim of substantial value under contracts listed under Section 3.11(b) of the
Company Disclosure Schedule or in connection with any litigation disclosed in
the Company SEC Documents;
(o) Employee Benefit Plans; Pay Increases. adopt or amend
any employee benefit or stock purchase or option plan, pay any special bonus or
special remuneration to any employees or consultants or directors (except as in
accordance with the Bonus Plan), or increase the salaries, wage rates, target
incentive percentages or fringe benefits or otherwise increase the
41
47
benefits of its employees or consultants or directors other than pursuant to
scheduled annual performance reviews, except, in each case, for modifications in
the ordinary course of business consistent with the Company's past practices,
any amendments to any Company Employee Plan that may be required by applicable
law, and any other incentive or retention bonuses or amendments or modifications
to any Company Employee Plan that (i) the Company's board of directors approves
and reasonably believes necessary in order for the Company to compete
effectively with businesses of a similar nature to the Company's business and
(ii) are paid or accrued on the Company's Financial Statements for a period
ending not later than June 30, 2002.
(p) Labor Agreements. enter into any employment contract
(other than an offer letter for at will employment) or, except if required by
applicable law, any collective bargaining agreement.
(q) Severance Arrangements. grant any severance or
termination pay, or any additional notice of termination, to, or grant any
acceleration or extension of the exercisability or vesting of any equity
securities held by, (i) any director or officer, or (ii) any other employee
except, payments and stock option grants required by standard written agreements
which are in force on the date hereof or are in the ordinary course of business
consistent with past practice in nature and amount and provided, in each case,
that such amounts shall be paid or accrued on the Company's Financial Statements
for a period ending not later than June 30, 2002;
(r) Lawsuits. commence a lawsuit other than (i) for the
routine collection of obligations, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, or (iii) for a breach of this Agreement;
(s) Acquisitions. acquire or agree to acquire any business,
corporation, limited liability company, partnership, association, entity, or
other business organization or division thereof (whether by merger,
consolidation, share exchange, reorganization, stock purchase, asset purchase,
or otherwise) or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to its and its Subsidiaries'
business, taking the Company together with its Subsidiaries as a whole (except
for purchases of supplies and components in the ordinary course of business
consistent with past practice), or acquire or agree to acquire any equity
securities of or interests in any corporation, partnership, limited liability
company, association, entity, or business organization, or enter into any
material strategic relationships or alliances, except for standard tool
integrations, joint marketing and joint promotional arrangements entered into by
the Company and another entity in the ordinary course of business consistent
with past practice;
(t) Taxes. make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of Taxes, file any
material Tax Return or any amendment to a material Tax Return, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
42
48
(u) Revaluation. write down the value of inventory or write
off notes or accounts receivable or otherwise revalue any of its assets except
in a manner consistent with past practice;
(v) Accounting Policies and Procedures. make any change to
its accounting methods, principles, assumptions, policies (including reserve
policies), procedures or practices, except as may be required by GAAP,
Regulation S-X promulgated by the SEC or applicable statutory accounting
principles; or
(w) Other. take or agree in writing or otherwise to take
any of the actions described in Section 5.1(a) through (v).
Section 5.2 No Solicitation. From and after the date hereof until
the earlier of the Effective Time or the termination of this Agreement in
accordance with Article VIII, the Company and each of its Subsidiaries and the
officers, directors, and other agents, representatives and advisors (including
any investment bankers, attorneys or accountants) of the Company or any of its
Subsidiaries (collectively, "Company Representatives") shall not, directly or
indirectly (and the Company shall not permit any of its or its Subsidiaries'
other employees to), (a) take any action to solicit, initiate, intentionally
encourage, or facilitate any Takeover Proposal, or (b) subject to the terms of
the immediately following sentence, engage in any discussions or negotiations
with, or disclose any nonpublic information relating to the Company or any of it
Subsidiaries to, or afford access to the properties, books or records of the
Company or any of its Subsidiaries to, any person that has advised the Company
that such person may be considering making a Takeover Proposal (or that the
Board of Directors or officers of the Company has reason to believe is seeking
to make, or that has made, a Takeover Proposal) (each such person, a "Competing
Bidder"), or endorse, approve or recommend any Takeover Proposal or enter into
any agreement (including any letter of intent, preliminary agreement or similar
arrangement) providing for any Takeover Proposal; provided that nothing herein
shall prohibit the Board of Directors of the Company from complying with Rules
14d-9 and 14e-2 promulgated under the Exchange Act. If (i) a bona fide
unsolicited written Takeover Proposal shall be received by the Board of
Directors of the Company, and (ii) the Board of Directors of the Company
determines in good faith (after consultation with its outside financial advisor
and after considering all terms and conditions of such Takeover Proposal,
including the likelihood and timing of its consummation) that such Takeover
Proposal (A) (if the determination of the Board of Directors is made prior to
adoption of this Agreement by the Company's stockholders) would result in a
transaction more favorable to the Company's stockholders from a financial point
of view than the Merger as contemplated by this Agreement or (B) (if the
determination is made following adoption of this Agreement and after March 31,
2002 and the Board of Directors of the Company has determined in good faith that
the conditions set forth Section 7.3(b) will not be satisfied) would result in a
transaction with a value of six dollars ($6) or less per share of Company Common
Stock or (C) (if the determination of the Board of Directors is made following
adoption of this Agreement by the Company's stockholders and the other
determination specified in the immediately preceding clause (B) has not been
made) would result in a transaction with a value greater than twenty four
dollars and seventy cents ($24.70) per share of Company Common Stock (any such
more favorable Takeover Proposal being referred to in this Agreement as a
"Superior Proposal"), and (iii) the Board of Directors of the Company determines
in good faith, after consultation with outside legal counsel, that it is
necessary in
43
49
order for the Board of Directors of the Company to comply with its fiduciary
duties to stockholders under applicable law, and (iv) the Company has notified
Parent of such determination by the Board of Directors of the Company and has
provided Parent with true and complete copies of the Takeover Proposal received
from the Competing Bidder and the financial assumptions and projections reviewed
and relied upon by the Board of Directors of the Company (including assumptions
and projections regarding the anticipated amount of Contingent Consideration) in
determining that a Takeover Proposal constitutes a Superior Proposal, and in the
case of clause (B) above in determining that the conditions set forth in Section
7.3(b) will not be satisfied, then Company Representatives may engage in
discussions and negotiations with the Competing Bidder, disclose nonpublic
information relating to the Company and its Subsidiaries to the Competing
Bidder, afford access to the properties, books or records of the Company and its
Subsidiaries to the Competing Bidder, modify or withdraw its Recommendation,
recommend such Superior Proposal to the stockholders of the Company, and
(subject to Section 8.3(b)) approve the entering (but not enter) into an
agreement for a Superior Proposal in accordance with Section 8.1(g), subject to
compliance with each of the following requirements: (X) prior to furnishing such
information, engaging in such discussions or negotiations, disclosing such
nonpublic information, or affording such access, the Company shall provide to
Parent all documents containing or referring to non-public information of the
Company that are supplied to the Competing Bidder; and (Y) the Company shall
enter into a nondisclosure agreement with the Competing Bidder containing, and
shall provide such non-public information subject to, terms at least as
restrictive on the Competing Bidder as the Confidentiality Agreement is on
Parent; and (Z) the Company shall provide Parent at least three (3) business
days prior notice before any modification or withdrawal of its Recommendation or
any recommendation of a Superior Proposal or any approval of the entering into
of an agreement for a Superior Proposal in accordance with Section 8.1(g) and
Section 8.3(b). The Company shall immediately notify Parent after receipt of any
Takeover Proposal, any inquiry looking toward a Takeover Proposal, or any
request for non-public information relating to the Company or any of its
Subsidiaries or for access to the properties, books or records of the Company or
any of its Subsidiaries by any person that has made (or that the Company has
reason to believe is considering making), a Takeover Proposal (such notice to
include the identity of the person or persons making such proposal, inquiry, or
request), and will keep Parent fully informed of the status and details of any
such proposal, inquiry, or request (including all terms and conditions and
modifications thereto) and shall provide Parent with a true and complete copy of
such proposal, inquiry, or request and any amendment thereto, if it is in
writing, or a written summary of the material terms thereof, if it is not in
writing. The Company shall immediately cease and cause to be terminated all
existing discussions or negotiations with any persons (other than Parent)
conducted heretofore with respect to a Takeover Proposal. Promptly following the
signing and delivery of this Agreement the Company shall inform all employees of
the Company and its Subsidiaries of the actions which the Company is prohibited
from taking by the first sentence of this Section 5.2 and shall direct each such
employee to refrain from taking any such action. The Company shall further
inform all such employees that any violation of such direction shall be grounds
for immediate termination of employment. The Company shall not be considered to
be in breach of the first sentence of this Section 5.2 with respect to the acts
of any employee who is not a Company Representative unless such acts were
performed at the direction or with the knowledge of a Company Representative.
44
50
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Parent shall prepare, and (i) the Company shall file
with the SEC (if necessary), preliminary proxy materials relating to the
approval of the Merger by the stockholders of the Company, and (ii) Parent shall
file with the SEC, a Registration Statement on Form S-4 (or such other or
successor form as shall be appropriate). As promptly as practicable following
receipt of SEC comments thereon, if any, or upon receipt of notification that
the SEC with not comment thereon, the Company shall file with the SEC definitive
proxy materials and Parent shall file with the SEC amendments to its
Registration Statement on Form S-4 (or such other or successor form as shall be
appropriate), in each case which complies in form with applicable SEC
requirements and the Company shall use commercially reasonable efforts to cause
the Registration Statement to become effective as soon thereafter as
practicable. The Company and Parent will notify each other promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff or any other government officials for amendments or supplements to
the Proxy Statement or any other filing or for additional information and will
supply each other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Proxy Statement or
other filing. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Proxy Statement or any other filing, the Company
shall promptly inform Parent of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company, such amendment or supplement. The Proxy Statement
shall solicit the approval of the Merger and adoption of this Agreement by the
stockholders of the Company and shall include the approval of this Agreement and
the Merger by the Board of Directors of the Company and, subject to the
fiduciary duties of the directors of the Company and the provisions of Section
5.2, Section 8.1(e), and Section 8.3(b)(i), the unanimous recommendation of the
Board of Directors of the Company to the Company's stockholders that they vote
in favor of the adoption of this Agreement (provided that the Board of Directors
of the Company may exclude such recommendation if, pursuant to Section 5.2, it
is permitted to endorse or recommend a Superior Proposal) and shall include the
opinion of the Company's financial advisors as described in Section 3.24 (unless
subsequently withdrawn).
(b) Each of Parent and the Company shall provide promptly
to the other such information concerning its business and financial statements
and affairs as, in the reasonable judgment of the providing party or its
counsel, may be required or appropriate for inclusion in the Proxy Statement and
the Registration Statement, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other with the other's
counsel and auditors in the preparation of the Proxy Statement and the
Registration Statement. Each of the Company and Parent will respond to any
comments of the SEC and, will use its respective commercially reasonable efforts
to have the Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing and the Company will cause the
Proxy Statement to be mailed to its stockholders at the earliest practicable
time after the Registration Statement is declared effective by the SEC.
45
51
Section 6.2 Meeting of Stockholders. The Company shall promptly
after the date hereof take all action necessary in accordance with the DGCL and
its Certificate of Incorporation and Bylaws to convene the Company Stockholders
Meeting within forty-five (45) days after the Registration Statement has been
declared effective by the SEC. The Company shall consult with Parent regarding
the date of the Company Stockholders Meeting and shall not postpone or adjourn
(other than for the absence of a quorum) the Company Stockholders Meeting
without the consent of Parent. Subject to Section 6.1, the Company shall use its
commercially reasonable efforts to solicit from stockholders of the Company
proxies in favor of adoption of this Agreement and shall take all other action
reasonably necessary or advisable to secure the vote or consent of stockholders
required to effect the Merger.
Section 6.3 Access to Information.
(a) The Company shall afford Parent and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of the Company's
and its Subsidiaries' properties, books, contracts, commitments and records, and
(ii) all other information concerning the business, properties and personnel of
the Company and its Subsidiaries as Parent may reasonably request. The Company
agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(b) No information or knowledge obtained in any
investigation pursuant to this Section 6.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
(c) The Company shall provide Parent and its accountants,
counsel and other representatives reasonable access, during normal business
hours during the period prior to the Effective Time, to all of the Company's and
Subsidiaries Tax Returns and other records and workpapers relating to Taxes, and
shall also provide the following information upon the request of Parent or its
Subsidiaries: (i) a schedule of the types of Tax Returns being filed by the
Company and each of its Subsidiaries in each taxing jurisdiction, (ii) a
schedule of the year of the commencement of the filing of each such type of Tax
Return, (iii) a schedule of all closed years with respect to each such type of
Tax Return filed in each jurisdiction, (iv) a schedule of all material Tax
elections filed in each jurisdiction by the Company and each of its
Subsidiaries, (v) a schedule of any deferred intercompany gain with respect to
transactions to which the Company or any of its Subsidiaries has been a party,
and (vi) receipts for any Taxes paid to foreign Tax authorities. The Company
shall also, promptly upon Parent's request during the period prior to the
Effective Time, prepare and provide the following information to Parent and its
accountants, counsel and other representatives in a form reasonably acceptable
to Parent: (i) such transfer-pricing information, studies and documentation as
may be requested by Parent relating to transactions between the Company and any
of its Subsidiaries (and any other related parties); (ii) such information,
studies and documentation relating to the amount and use of net operating losses
and Tax credits by Company and its Subsidiaries as may be requested by Parent
and (iii) such records and information as may be requested by Parent
substantiating any Tax credits claimed or to be claimed by the Company and any
of its Subsidiaries.
Section 6.4 Confidentiality.
46
52
(a) The parties acknowledge that the provisions of the
Confidentiality Agreement shall continue in full force and effect in accordance
with its terms until the Effective Time except that (i) the sixth and twelfth
paragraphs of the Confidentiality Agreement shall as of the date hereof be of no
further force or effect and (ii) employment offers made in connection with this
Agreement shall not violate any provision of the Confidentiality Agreement.
(b) The Company shall keep confidential all information and
knowledge concerning Parent obtained from Parent or any of its advisers in the
course of the negotiations relating to this Agreement or the consideration by
the Company of a possible transaction with the Parent, or the effectuation of
the transactions contemplated by this Agreement, including all notes, analyses,
compilations, studies, interpretations, or other documents prepared by the
Company which contain, reflect or are based upon, in whole or in part, the
information furnished to the Company (the "Parent Confidential Information");
provided, however, that the foregoing shall not apply to information or
knowledge which (i) the Company can demonstrate was already lawfully in its
possession prior to the disclosure thereof by Parent, (ii) has been approved in
writing for use or disclosure by Parent, (iii) is or becomes generally known to
the public and does not become so known through any violation of law or this
Agreement by the Company, (iv) is later lawfully acquired by the Company from
other sources, (v) is required to be disclosed by order of court or government
agency after seeking any reasonably available protection against general
disclosure, (vi) is required to be disclosed in the course of any litigation
between any of the parties hereto and is disclosed in accordance with any
protective order or confidentiality order or arrangement applicable thereto, or
(vii) is independently developed by the Company without the use of any Parent
Confidential Information; it being understood that the Company may disclose
relevant information and knowledge to its employees and agents on a "need to
know" basis, provided that the Company causes such employees and agents to treat
such information and knowledge confidentially.
(c) The Company agrees that it shall use the Parent
Confidential Information solely for the purpose of effectuating the transactions
contemplated by this Agreement, that the Parent Confidential Information shall
be kept confidential and that the Company shall not disclose any of the Parent
Confidential Information in any manner whatsoever except as permitted in Section
6.4. The Company agrees to be responsible for any breach of Section 6.4 and
agrees, at its sole expense, to take all reasonable measures (including court
proceedings) to restrain its representatives (including attorneys, accountants,
consultants, bankers, and financial advisors) from prohibited or unauthorized
disclosure of the Parent Confidential Information.
(d) In the event that the Company is requested or required
(by deposition, interrogatories, requests for information or documents or other
discovery mechanism in legal proceedings, subpoena, civil investigative demand
or other similar process) to disclose any of the Parent Confidential
Information, the Company shall provide Parent with prompt written notice of any
such request or requirement so that Parent may seek a protective order or other
appropriate remedy or waive compliance with the provisions of this Agreement.
If, in the absence of a protective order or other remedy or the receipt of a
waiver by Parent, the Company is nonetheless, in the written opinion of its
counsel, legally compelled to disclose the Parent Confidential Information to
any court or tribunal or else stand liable for contempt or suffer other censure
or penalty, the Company may, without liability hereunder, disclose to such court
or
47
53
tribunal only that portion of the Parent Confidential Information which such
counsel advises the Company is legally required to be disclosed, provided that
the Company exercises its commercially reasonable efforts to preserve the
confidentiality of the Parent Confidential Information, including by cooperating
with Parent to obtain an appropriate protective order or other assurance that
confidential treatment will be accorded the Parent Confidential Information by
such court or tribunal.
(e) In the event this Agreement is terminated pursuant to
Section 8.1 this Section 6.4 shall survive indefinitely and otherwise shall
survive until the Effective Time.
Section 6.5 Public Disclosure. Unless otherwise permitted by this
Agreement, Parent and the Company shall consult with each other before issuing
any press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) about the other party or their relationship or activities or regarding
the terms of this Agreement and the transactions contemplated hereby, and
neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD, in which case the party proposing to issue such press release or make
such public statement or disclosure shall use its commercially reasonable
efforts to consult with the other party before issuing such press release or
making such public statement or disclosure.
Section 6.6 Consents; Cooperation.
(a) Each of Parent and the Company shall promptly apply for
or otherwise seek, and use its commercially reasonable efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
Merger, including those required under the HSR Act; provided, however, that
neither party shall be required to make any out-of-pocket expenditures (other
than filing or similar fees) to any Governmental Entity or third party in
connection therewith. The Company shall use its commercially reasonable efforts
to obtain all necessary consents, waivers and approvals under any of its
material contracts in connection with the Merger for the assignment thereof or
otherwise. The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other federal or state
antitrust or fair trade law.
(b) Each of Parent and the Company shall use its
commercially reasonable 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 the 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 or
decrees 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
48
54
and the Company shall cooperate and use its commercially reasonable efforts
vigorously to contest and resist any such action or proceeding and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (each, an "Order"),
that is in effect and that prohibits, prevents, or restricts consummation of the
Merger or any such other transactions, unless by mutual agreement Parent and the
Company decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither Parent nor the Company shall have
any obligation to litigate or contest any administrative or judicial action or
proceeding or any Order beyond the Final Date (as defined in Section 8.1(b)).
Each of Parent and the Company shall use its commercially reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to such
transactions as promptly as possible after the execution of this Agreement.
Parent and the Company also agree to take any and all of the following actions
to the extent necessary to obtain the approval of any Governmental Entity with
jurisdiction over the enforcement of any applicable laws regarding the
transactions contemplated hereby: entering into negotiations; providing
information required by law or governmental regulation; and substantially
complying with any second request for information pursuant to the Antitrust
Laws.
(c) Notwithstanding anything to the contrary in this
Agreement, (i) neither Parent nor any of it Subsidiaries shall be required to
divest any of their respective businesses, product lines or assets, or the
Company's or any of its Subsidiaries' respective businesses, product lines or
assets or to qualify to do business in any jurisdiction in which it is not now
so qualified, or to file a general consent to service of process under any
applicable state laws, and (ii) without the prior written consent of Parent,
neither the Company nor its Subsidiaries shall, or shall be required to, divest
any of their respective businesses, product lines or assets, or to take or agree
to take any other action or agree to any limitation that would reasonably be
expected to have a Company Material Adverse Effect or a Parent Material Adverse
Effect.
Section 6.7 Legal Requirements. Subject to the provisions and
provisos of Section 6.6, each of Parent, Merger Sub and the Company will, and
will cause their respective Subsidiaries to, (a) take all requisite commercially
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement, (b) cooperate with and furnish
information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement, and (c) subject to Section
6.6(c) take all requisite commercially reasonable actions necessary to obtain
(and cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity required to be obtained or made in connection with
the taking of any action contemplated by this Agreement.
Section 6.8 Blue Sky Laws. Parent shall take all commercially
reasonable steps to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the Parent Common Stock in
connection with the Merger. The Company shall use its commercially reasonable
efforts to assist Parent as may be necessary to comply with the
49
55
securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Parent Common Stock in connection with the
Merger.
Section 6.9 Employee Benefit Plans. (a)At the Effective Time, the
Company Stock Option Plans and each outstanding option to purchase shares of
Company Common Stock under the Company Stock Option Plans, whether vested or
unvested, shall be assumed by Parent. The Company represents and warrants to
Parent that Section 6.9(a) of the Company Disclosure Schedule hereto sets forth
a true and complete list as of the date hereof of all holders of outstanding
options under the Company Stock Option Plans, including the number of shares of
the Company's capital stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. On the
Closing Date, the Company shall deliver to Parent an updated Section 6.9(a) of
the Company Disclosure Schedule hereto current as of such date. Each such option
so assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Company Stock Option Plans
and the applicable stock option agreements, immediately prior to the Effective
Time, except that (i) such option will be exercisable for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such option immediately
prior to the Effective Time multiplied by the Exchange Ratio and rounded down to
the nearest whole number of shares of Parent Common Stock, and (ii) the per
share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed option shall be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent. The Merger shall not terminate any
of the outstanding options under the Company Stock Option Plans or accelerate
the exercisability or vesting of such options or the shares of Parent Common
Stock which shall be subject to those options upon Parent's assumption of the
options in the Merger. It is the intention of the parties that the options so
assumed by Parent qualify, to the maximum extent permissible, following the
Effective Time as incentive stock options as defined in Section 422 of the
Internal Revenue Code to the extent such options qualified as incentive stock
options prior to the Effective Time. Within ten (10) business days after the
Effective Time, Parent will issue to each person who, immediately prior to the
Effective Time was a holder of an outstanding option under the Company Stock
Option Plans a document evidencing the foregoing assumption of such option by
Parent, and Parent may prohibit option exercises prior to the filing of the
registration statement on Form S-8 in accordance with Section 6.10.
(b) All outstanding rights of the Company which it may hold
immediately prior to the Effective Time to repurchase unvested shares of Company
Common Stock (the "Repurchase Options") shall continue in effect following the
Merger and shall thereafter continue to be exercisable by Parent upon the same
terms and conditions in effect immediately prior to the Effective Time, except
the Merger shall not accelerate the vesting of unvested shares provided for in
the agreements evidencing the Repurchase Options and except that the shares
purchasable pursuant to the Repurchase Options and the purchase price per share
shall be adjusted to reflect the Exchange Ratio.
(c) Outstanding purchase rights under the Company ESPP
shall be exercised immediately prior to the Effective Time, and each participant
in the Company ESPP
50
56
shall accordingly be issued shares of Company Common Stock at that time which
shall be converted into shares of Parent Common Stock in the Merger. The Company
ESPP shall terminate with such exercise date (after the purchase described in
the preceding sentence has been effected), and no purchase rights shall be
subsequently granted or exercised under the Company ESPP and no Company ESPP
payroll deductions from Company employees shall be made thereafter. Company
employees who meet the eligibility requirements for participation in the Parent
Employee Stock Purchase Plan shall be eligible to begin payroll deductions under
that plan as of the start date of the first offering period thereunder beginning
after the Effective Time and prior to such date, Parent shall name the Surviving
Corporation as a subsidiary whose employees may participate in the Parent ESPP,
provided that such employees satisfy the eligibility requirements for
participation.
(d) On or as soon as practicable following the Effective
Time, continuing employees of the Company and its Subsidiaries ("Continuing
Employees") shall be eligible to participate in those benefit plans and programs
maintained for similarly situated employees of Parent (or in substantially
similar programs), on the same terms applicable to similarly situated employees
of Parent and to the extent that such plans and programs provide the following
benefits: medical/dental/vision care, life insurance, disability income, sick
pay, holiday and vacation pay, 401(k) plan coverage, Internal Revenue Code
Section 125 benefit arrangements, bonus, profit-sharing or other incentive
plans, pension or retirement programs, dependent care assistance and severance
benefits. Each Continuing Employee shall be given credit, for purposes of any
service requirements for participation or vesting, for his or her period of
service with the Company or any of its Subsidiaries credited under a similar
plan prior to the Effective Time, subject to appropriate break in service rules.
Each such employee shall, with respect to any Parent plans or programs which
have co-payment, deductible or other co-insurance features, receive credit for
any amounts such individual has paid to date in the plan year of the Effective
Time under comparable plans or programs maintained by the Company or any of its
Subsidiaries prior to the Effective Time. Each Continuing Employee and eligible
dependent who, at the Effective Time, was participating in an employee group
health plan maintained by the Company or any of its Subsidiaries shall not be
excluded from Parent's employee group health plan or limited in coverage
thereunder by reason of any waiting period restriction or pre-existing condition
limitation.
(e) The Company shall take all action necessary to
terminate, or cause to terminate, before the Effective Time, any Company Benefit
Plan that is a 401(k) plan or other defined contribution retirement plan or the
Company ESPP. With respect to each Company Employee Plan subject to ERISA as an
employee pension plan within the meaning of Section 3(2) of ERISA, and to the
Company's knowledge, no partial termination could be deemed to have occurred as
a result of a reduction in the Company's workforce.
(f) Within five (5) business days following the date of
this Agreement, the Company shall set forth on Section 6.9(f) of the Company
Disclosure Schedule a list of all persons who the Company reasonably believes
are, with respect to the Company and as of the date of this Agreement,
"disqualified individuals" (within the meaning of Section 280G of the Internal
Revenue Code and the regulations promulgated thereunder). Within a reasonable
period of time after the last business day of the month prior to the expected
Closing Date and on or about the date five (5) business days prior to the
expected Closing Date, the Company shall
51
57
revise Section 6.9(f) of the Company Disclosure Schedule to reflect the most
recently available closing price of Company Common Stock as of the last business
day of such month and to reflect any additional information which the Company
reasonably believes would impact the determination of persons who are, with
respect to the Company and as of the each such date, "disqualified individuals"
(within the meaning of Section 280G of the Internal Revenue Code and the
regulations promulgated thereunder).
(g) On or as soon as practicable following the Effective
Time, certain employees of the Company or its Subsidiaries shall be eligible to
participate in a bonus plan, which shall be accrued by the Company prior to the
Closing Date, in substantially the form attached hereto as Schedule 6.9(g) (the
"Bonus Plan"). The dollar amount available for distribution to such employees
under the Bonus Plan shall be as set forth in Schedule 6.9(g) and shall be
calculated pursuant to the Bonus Plan based on Revenue plus Net Backlog or PBT,
whichever produces a lower total Bonus Plan dollar amount, except that if PBT
produces a lower total Bonus Plan dollar amount than Revenue plus Net Backlog
but the same or higher total Bonus Plan dollar amount than Revenue, the total
Bonus Plan dollar amount shall be calculated based upon Revenue plus Net
Backlog. The aggregate dollar amount to be distributed to management and
non-management employees shall be as set forth on Schedule 6.9(g). The
identification of employees to participate in the Bonus Plan, as well as the
amounts payable to each shall be determined solely by the Company.
Section 6.10 Form S-8. Parent agrees to file, no later than ten
(10) business days after the Effective Time (provided that Parent has received
within five (5) business days after the Effective Time all option documentation
it reasonably requires relating to the outstanding options) a registration
statement on Form S-8 under the Securities Act covering the shares of Parent
Common Stock issuable pursuant to outstanding options and shares granted to
employees, officers, and directors of, and bona fide consultants to, the Company
if they are individuals for whom a Form S-8 registration statement is available
and are listed on Section 6.10 of the Company Disclosure Schedule. The Company
shall cooperate with and assist Parent in the preparation of such registration
statement.
Section 6.11 Listing of Additional Shares. Prior to the Effective
Time, Parent shall file with The Nasdaq National Market a Notification Form for
Listing of Additional Shares with respect to the shares referred to in Section
7.2(b).
Section 6.12 Indemnification.
(a) For not less than six (6) years after the Effective
Time, Parent will indemnify and hold harmless the present and former officers,
directors, employees and agents of Company (the "Indemnified Parties") in
respect of acts or omissions occurring on or prior to the Effective Time to the
extent provided for under Company's Certificate of Incorporation and Bylaws and
each indemnification agreement with Company officers and directors to which
Company is a party, in each case in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law.
(b) For six (6) years after the Effective Time, Parent will
provide officers' and directors' liability insurance in respect of acts or
omissions occurring on or prior to the
52
58
Effective Time covering each such Person currently covered by Company's
officers' and directors' liability insurance policy on terms at least as
favorable as the coverage currently in effect on the date hereof, provided that,
in satisfying its obligation under this Section 6.12(b), Parent shall not be
obligated to pay, or to cause the Surviving Corporation to pay, premiums in
excess of one hundred fifty percent (150%) of the amount per annum Company paid
in its last full fiscal year, which amount has been disclosed to Parent, and if
the Parent or the Surviving Corporation is unable to obtain the insurance
required by this Section 6.12(b) it shall obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
(c) The provisions of this Section 6.12 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs.
Section 6.13 Tax Treatment. The parties each intend that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code and shall use their respective commercially reasonable
efforts to cause the Merger to so qualify. Each of Parent and the Company shall
execute and deliver a certificate in form reasonably acceptable to the other
party setting forth factual representations and covenants that will serve as a
basis for the tax opinions described in Section 7.1(e).
Section 6.14 Stockholder Litigation. Unless and until the Board of
Directors of the Company has withdrawn its Recommendation (as defined in Section
8.1(e)), the Company shall give Parent the opportunity to participate at its own
expense in the defense of any stockholder litigation against the Company and/or
its directors relating to the transactions contemplated by this Agreement.
Section 6.15 Employee Agreements. The Company shall use its
commercially reasonable efforts to obtain the signatures of (i) the employees of
the Company specified in Schedules 6.15(a) and (b) to the Employee Agreements in
the forms attached as Exhibits D and E, respectively, and (ii) the employees of
the Company specified in Schedules 6.15(c) and (d) to the amendments to their
existing severance agreements in the forms attached as Exhibits F and G,
respectively, prior to the Closing Date.
Section 6.16 Injunctions or Restraints. In the event an injunction
or other order preventing the consummation of the Merger shall have been issued,
each party agrees to use commercially reasonable efforts to have such injunction
or other order lifted.
Section 6.17 Certain Employee Actions. Promptly following the
signing and delivery of this Agreement the Company shall inform all employees of
the Company and its Subsidiaries of the actions which Parent is prohibited from
taking by the Quickturn Non-Compete and shall direct each such employee to
refrain from taking any action that could reasonably be expected to subject
Parent to liability under the Quickturn Non-Compete. The Company shall supervise
all employees of the Company and its Subsidiaries in order to reasonably ensure
such employees' compliance with the provisions of this Section 6.17.
Section 6.18 Further Assurances. Subject to Section 5.2, Section
6.1 and Section 6.6(c) (a) each of the parties to this Agreement shall use its
commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled
53
59
the conditions to closing under this Agreement, and (b) each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or reasonably desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby. Nothing in this
Agreement shall be construed to require Parent to seek the approval of its
stockholders for any of the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
and effect the Merger shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, by agreement of all the parties hereto:
(a) Stockholder Approval. This Agreement and the Merger
shall have been approved by the requisite vote of the stockholders of the
Company under the DGCL and the Certificate of Incorporation of the Company.
(b) Registration Statement Effective. The SEC shall have
declared the Registration Statement effective; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall be in
effect; and no proceeding for that purpose by the SEC shall be pending.
(c) No Injunctions, Restraints or Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
Governmental Entity seeking any of the foregoing be pending, threatened; and no
action shall have been taken by any Governmental Entity, and no statute, rule,
regulation or order shall have been enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
(d) HSR. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have elapsed or been terminated.
(e) Tax Opinion. Parent and the Company each shall have
received substantially similar written opinions from their respective counsel in
form and substance reasonably satisfactory to them, dated on or about the date
of Closing to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code, and such opinions
shall not have been withdrawn. Parent and the Company each shall use their best
efforts to obtain such opinions from their respective counsel; provided,
however, that if the Company's outside legal counsel does not render such
opinion, this condition shall nevertheless be deemed satisfied with respect to
the Company if Parent's outside legal counsel renders such opinion to Parent. In
rendering such opinions, counsel shall be entitled to rely upon, among other
things, reasonable assumptions as well as representations of Parent, Merger Sub
and the Company. In addition, Parent and the Company shall have received from
54
60
their respective counsel such tax opinions as may be required by the SEC in
connection with the filing of the Registration Statement.
(f) No Parent Stockholder Approval. The issuance of shares
of Parent Common Stock in connection with the transactions contemplated by this
Agreement (including shares issuable upon the exercise of any options assumed
hereunder) shall not require any approval of Parent stockholders under
applicable Nasdaq rules.
Section 7.2 Additional Conditions to Obligations of the Company.
The obligations of the Company to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Closing of each of the following
additional conditions, any of which may be waived, in writing, by the Company:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of Parent and Merger Sub in this Agreement shall
be true and correct in all material respects (except for such representations
and warranties that are qualified by their terms by a reference to materiality
or Parent Material Adverse Effect, which representations and warranties as so
qualified shall be true and correct in all respects) on and as of the Closing
Date as though such representations and warranties were made on and as of the
Closing Date, except where the failure to be so true and correct, without regard
to any materiality or Parent Material Adverse Effect qualifications contained
therein, could not reasonably be expected, either individually or in the
aggregate, to have a Parent Material Adverse Effect; and (ii) Parent and Merger
Sub shall have performed and complied in all material respects with all
covenants, agreements and obligations in this Agreement required to be performed
and complied with by them prior to the Effective Time; and (iii) the Company
shall have received a certificate of an appropriate officer of Parent certifying
that the conditions set forth in this Section 7.2(a) are satisfied.
(b) Listing of Additional Shares. The shares of Parent
Common Stock issuable upon conversion of the Company Common Stock in the Merger
and upon exercise of the options under the Company Stock Option Plans assumed by
Parent shall have been approved for listing on The Nasdaq National Market, or
shall be exempt from such requirement under the then applicable laws,
regulations and rules of the Nasdaq National Market.
Section 7.3 Additional Conditions to the Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to consummate and effect
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following additional conditions, any of
which may be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. (i) The
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality or
Company Material Adverse Effect, which representations and warranties as so
qualified shall be true and correct in all respects) on and as of the Closing
Date as though such representations and warranties were made on and as of the
Closing Date, except, in the case of the representations and warranties of the
Company in Section 3.1 through Section 3.20, Section 3.25 and Section 3.26,
where the failure to be so true and correct, without regard to
55
61
any materiality or Company Material Adverse Effect qualifications contained
therein, could not reasonably be expected, either individually or in the
aggregate, to have a Company Material Adverse Effect, (ii) the Company shall
have performed and complied in all material respects with all covenants,
agreements and obligations in this Agreement required to be performed and
complied with by it prior to the Effective Time, and (iii) Parent shall have
received a certificate of the chief executive officer and chief financial
officer of the Company certifying that the conditions set forth in this Section
7.3(a) are satisfied.
(b) Financial Conditions. (i) Revenue, as finally
determined pursuant to Section 2.7(d), shall have been in the aggregate greater
than or equal to fifty million dollars ($50,000,000), and (ii) PBT, as finally
determined pursuant to Section 2.7(d), shall have been in the aggregate greater
than or equal to a loss of ten million dollars (-$10,000,000)
(c) Third Party Consents. Parent shall have received
evidence reasonably satisfactory to it of the consent or approval of those
persons whose consent or approval shall be required in connection with the
Merger under each material contract of the Company or any of its Subsidiaries
set forth on Schedule 7.3(c).
(d) Injunctions or Restraints on Conduct of Business. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition materially limiting or restricting Parent's ownership,
conduct or operation of the business of the Company and its Subsidiaries
following the Effective Time shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other Governmental Entity,
seeking the foregoing be pending or threatened.
(e) Quickturn Noncompetition Agreement. Section 6.2 of the
Asset Purchase Agreement, dated as of June 14, 1997 by and among Parent,
Quickturn Design Systems, Inc. ("Quickturn") and Arkos Design, Inc. (the
"Quickturn Non-Compete") shall have expired or been terminated or waived by
Quickturn, or other action shall have been taken which has the effect of
rendering such provision inapplicable to the Merger or unenforceable.
(f) Employee Retention.
(A) In the event the employee listed in Schedule
6.15(a) shall have (i) accepted employment with Parent and (ii) executed the
Employment Agreement attached as Exhibit D, and such Employment Agreement shall
be in full force and effect, then at least seven (7) of the employees listed in
Schedule 6.15(b) shall have accepted employment with Parent;
(B) In the event the employee listed in Schedule
6.15(a) shall not have (i) accepted employment with Parent and (ii) executed the
Employment Agreement attached as Exhibit D, then seven (7) of the employees
listed in Schedule 6.15(b) shall have (A) accepted employment with Parent and
(B) executed the Employment Agreement attached as Exhibit E, and such Employment
Agreements shall be in full force and effect.
56
62
(C) Each of the employees listed in Schedules
6.15(c) shall have executed an amendment to their existing severance agreement
in the form attached as Exhibit F, and such amendment shall be in full force and
effect.
(D) Each of the employees listed in Schedule 6.15(d)
shall have executed an amendment to their existing severance agreement in the
form attached as Exhibit G, and such amendment shall be in full force and
effect.
(E) The percentages of employees specified in Rows
A, B, C, D and E of Schedule 7.3(f) shall have accepted employment with Parent,
subject to the additional terms and conditions set forth therein.
(g) OEM Agreement. The Company shall have entered into an
OEM license agreement that meets the requirements of Schedule 7.3(g).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. At any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company, this Agreement may be terminated and
the Merger abandoned:
(a) by mutual consent of the Boards of Directors of Parent
and the Company;
(b) by either Parent or the Company, by written notice to
the other party, if the Closing shall not have occurred on or before September
14, 2002 or such later date as may be agreed upon in writing by the parties
hereto (the "Final Date"); provided, however, that the Final Date shall, at the
election of either party, be extended to October 14, 2002 if the Closing shall
not have occurred by September 14, 2002 because (i) any of the determinations
required by Section 2.7(d) have not been completed and (ii) the failure of such
determinations to be completed or the failure of the Merger to occur on or
before the Final Date has not principally been caused by action or failure to
act constituting a breach, in any material respect, of this Agreement, by the
party seeking such extension and (iii) all other conditions set forth in Article
VII have been satisfied or waived;
(c) by Parent, by written notice to the Company, if (i) any
of the Company's representations and warranties in the Agreement would be
inaccurate if made as of the time of such notice, or the Company shall have
breached any of its covenants, agreements or obligations in this Agreement, and
(ii) the condition set forth in Section 7.3(a) would not be satisfied if such
inaccuracy or breach were to remain uncured, and (iii) such inaccuracy or
breach, if curable, shall not have been cured within thirty (30) business days
after receipt by the Company of written notice of such inaccuracy or breach;
57
63
(d) by the Company, by written notice to Parent, if (i) any
of Parent's representations and warranties in this Agreement would be inaccurate
if made as of the time of such notice, or Parent shall have breached any of its
covenants, agreements or obligations in this Agreement, and (ii) the condition
set forth in Section 7.2(a) would not be satisfied if such inaccuracy or breach
were to remain uncured, and (iii) such inaccuracy or breach shall not have been
cured within thirty (30) business days after receipt by Parent of written notice
of such inaccuracy or breach;
(e) by Parent, by written notice to the Company, if: (i) a
Trigger Event shall have occurred or a Takeover Proposal shall have been made
and, in either case, shall not have been absolutely and unconditionally
abandoned or withdrawn, and the Board of Directors of the Company, if so
requested by Parent, does not within ten (10) business days of such request, (A)
reconfirm its unanimous recommendation of this Agreement and the transactions
contemplated hereby, and (B) (in the case of a Takeover Proposal or Trigger
Event involving a tender or exchange offer) reject such Takeover Proposal or
Trigger Event; (ii) the Board of Directors of the Company shall have failed to
unanimously recommend that the Company's stockholders vote to approve the Merger
and adopt this Agreement (a "Recommendation"), or shall have withdrawn
(including by failing to include such Recommendation in the Proxy Statement) or
modified its Recommendation in a manner adverse to Parent, or shall have
resolved to do any of the foregoing; (iii) the Board of Directors of the Company
shall have recommended, endorsed, accepted, approved, or otherwise agreed to a
Takeover Proposal or shall have resolved to do any of the foregoing; or (iv) the
Company or any Company Representative shall have failed to comply with Section
5.2.
(f) by either Parent or the Company, by written notice to
the other party, if: (i) any permanent injunction or other order of a court or
other competent authority preventing the consummation of the Merger shall have
become final and nonappealable, provided such party used commercially reasonable
efforts to have such injunction or other order lifted or (ii) any required vote
of the stockholders of the Company shall not have been obtained at a duly held
meeting of stockholders or at any adjournment thereof (provided that the right
to terminate this Agreement under this clause (ii) shall not be available to the
Company where the failure to obtain such stockholder approval shall have been
caused by the action or failure to act of the Company and such action or failure
constitutes a breach of this Agreement); or
(g) by the Company, by written notice to Parent and
compliance with the provisions of this Section 8.1(g), if (i) the Company has
received a Takeover Proposal constituting a Superior Proposal, the Board of
Directors of the Company in accordance with Section 5.2 has determined that it
desires to approve entering into a written agreement providing for such Superior
Proposal and has notified Parent in writing of such desire; and (ii) five (5)
business days have elapsed after Parent's receipt of such written notification
(which notification shall include a copy of such Superior Proposal and a
description of any additional material non-written modifications thereof), and
during such five (5) business day period the Company has reasonably cooperated
with Parent with the intent of enabling Parent to make an offer that is at least
as favorable to the stockholders of the Company as such Superior Proposal; and
(iii) prior to 6 p.m. California time on the fifth business day of such five (5)
business day period Parent has not made an offer that is at least as favorable
to the Company's stockholders as such Superior Proposal (and, in the case of a
Superior Proposal within the scope of clause (B) of the second
58
64
sentence of Section 5.2, Parent has not waived the condition set forth in
Section 7.3(b)); and (iv) at the end of such five (5) business day period the
Board of Directors of the Company reasonably believes that such Takeover
Proposal continues to be a Superior Proposal; and (v) the Company prior to such
termination pays to Parent in immediately available funds all amounts required
to be paid pursuant to Section 8.3(b). The Company agrees to notify Parent
promptly if its desire to enter into a written agreement with respect to the
Superior Proposal referred to in its notification shall change at any time after
giving such notification.
Section 8.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Parent, Merger
Sub or the Company or their respective officers, directors, stockholders or
affiliates; provided that (a) the provisions of Section 6.4 and Section 8.3,
this Section 8.2 and Article IX shall remain in full force and effect and
survive any termination of this Agreement, and (b) nothing herein shall relieve
any party from liability in connection with a willful or intentional breach of
any of such party's representations or warranties set forth in this Agreement or
the breach of any such party's covenants or agreements set forth in this
Agreement.
Section 8.3 Expenses and Termination Fees.
(a) Except as provided in subsections (b) and (c) of this
Section 8.3, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including the fees and expenses of its advisers, accountants and legal
counsel) shall be paid by the party incurring such expense, except that expenses
incurred in connection with printing the Proxy Materials and the Registration
Statement, registration, and filing fees incurred in connection with the
Registration Statement, the Proxy Materials and the listing of additional shares
pursuant to Section 7.2(b), and fees, costs and expenses associated with
compliance with applicable Blue Sky securities laws in connection with the
Merger and filing fees under the HSR Act shall be shared equally by the Company
and Parent.
(b) In the event that: (i) Parent shall terminate this
Agreement pursuant to Section 8.1(e); (ii) the Company shall terminate this
Agreement pursuant to Section 8.1(g); or (iii) Parent or the Company shall
terminate this Agreement pursuant to Section 8.1(b) or Section 8.1(f)(ii) and,
prior to such termination pursuant to Section 8.1(b) or Section 8.1(f)(ii),
there shall have been (A) a Trigger Event with respect to the Company, or (B) a
Takeover Proposal with respect to the Company, in either case which at the time
of such termination shall not have been absolutely and unconditionally withdrawn
or abandoned by the other party thereto, then, in each such event, in addition
to any other remedies Parent may have, the Company shall pay to Parent (1) in
the case of a termination described in Section 8.3(b)(i) or Section 8.3(b)(ii),
the sum of five million five hundred thousand dollars ($5,500,000) (provided,
however, that if Section 5.2(ii)(B) is applicable to such termination, the
amount payable by the Company shall be two million six hundred thousand dollars
($2,600,000), and (2) in the case of a termination described in Section
8.3(b)(iii), if within twelve (12) months of a termination described in Section
8.3(b)(iii) any Takeover Proposal or any Trigger Event shall be consummated or
any letter of intent or preliminary or definitive agreement with respect thereto
shall be signed, the sum of five million five hundred thousand dollars
($5,500,000) (provided, however, that the amount payable by the
59
65
Company shall be five million dollars ($5,000,000) if the Takeover Proposal or
Trigger Event shall be consummated with a person or entity other than the person
or entity making the Takeover Proposal or Trigger Event which originally
triggered the right of termination under Section 8.1(b) or Section 8.1(f)(ii) or
with an affiliate of such person or entity). The payments required by this
Section 8.3(b) shall be made within two (2) business days after termination in
the case of a termination by Parent pursuant to Section 8.1(e), prior to
termination in the event of a termination by the Company pursuant to Section
8.1(g), and upon the earlier of the consummation of a Trigger Event or Takeover
Proposal or the execution and delivery of any letter of intent or preliminary or
definitive agreement with respect to a Takeover Proposal in the event of
termination pursuant to Section 8.1(b) or Section 8.1(f)(ii). Solely for
purposes of Section 8.3(b), all references to fifteen percent (15%) in the
definition of the term "Takeover Proposal" shall be increased to forty percent
(40%) and all references to eighty five percent (85%) therein shall be reduced
to sixty percent (60%).
Section 8.4 Amendment. Subject to Section 251(d) of the DGCL, the
boards of directors of the parties hereto may cause this Agreement to be amended
at any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective
Time any party hereto may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival at Effective Time. The representations,
warranties, covenants and agreements set forth in this Agreement shall terminate
at the Effective Time, except that the agreements set forth in Article II,
Section 6.4 (Confidentiality), Section 6.5 (Public Disclosure) Section 6.9
(Employee Benefit Plans), Section 6.10 (Form S-8), Section 6.12
(Indemnification), Section 6.18 (Further Assurances), Section 8.2 (Effect of
Termination), Section 8.3 (Expenses and Termination Fees), Section 8.4
(Amendment), and this Article IX shall survive the Effective Time.
Section 9.2 Notices. All notices and other communications required
or permitted hereunder shall be in writing and shall be addressed to the
intended recipient as set forth below):
(a) if to Parent or Merger Sub, to:
60
66
Synopsys, Inc.
000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
IKOS Systems, Inc.
00 Xxxxx Xxxx Xxxx.
Xxx Xxxx, XX 00000
Attention: CEO
Telephone No.: (000) 000-0000
Facsimile No: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Xxxxx Xxxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
All notices so given shall be effective upon receipt, and shall in any event be
deemed received (a) three (3) calendar days after deposit with the U.S. Postal
Service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one (1) business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) upon
telephonic confirmation of delivery, if delivered by facsimile transmission
Section 9.3 Interpretation.
61
67
(a) Prior to the Effective Time: (i) nothing in this
Agreement shall be construed as establishing a joint venture, strategic
alliance, or license between Parent or any of its Subsidiaries, on the one hand,
and the Company or any of its Subsidiaries, on the other hand, and (ii) nothing
in this Agreement shall be construed to require Parent or any of its
Subsidiaries to make any investment of cash or other property in or any loan to
the Company or any of its Subsidiaries.
(b) When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used in this Agreement shall be deemed in each case to be
followed by the words "without limitation." The phrase "provided to," "furnished
to," and terms of similar import in this Agreement means that a paper copy of
the information referred to has been furnished to the party to whom such
information is to be provided. In this Agreement, 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 July 2, 2001. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 9.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one 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 9.5 Entire Agreement; Nonassignability; Parties in
Interest. This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Company Disclosure Schedule and the
Parent Disclosure Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, excluding the Confidentiality Agreement to the extent
provided by Section 6.4 herein; (b) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided; and (c) are not intended
to, and shall not be construed as, conferring upon any person other than the
parties hereto any rights or remedies.
Section 9.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 9.7 Remedies Cumulative. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
62
68
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
regard to the laws that might otherwise govern under applicable principles of
conflicts of law. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction and venue of any court located within the County of New
Castle in the State of Delaware, in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein, agrees that
process may be served upon them in any manner authorized by the laws of the
State of Delaware for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
Section 9.9 Rules of Construction. The parties hereto agree that
they have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
[Signature page follows.]
63
69
EXECUTION COPY
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused
this Agreement and Plan of Merger and Reorganization to be executed and
delivered by their respective officers thereunto duly authorized, all as of the
date first written above.
SYNOPSYS, INC.
By: /s/ XXXX xx XXXX
-------------------------------
Name:
-------------------------------
Title: Chief Executive Officer
-------------------------------
IKOS SYSTEMS, INC.
By: /s/ XXXXX XXXXX
-------------------------------
Name:
-------------------------------
Title: Chief Executive Officer
-------------------------------
OAK MERGER CORPORATION
By: /s/ XXXXXX X. XXXXXXX
-------------------------------
Name:
-------------------------------
Title: Vice President
-------------------------------
SIGNATURE PAGE TO AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION
70
FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Amendment") is made and entered into as of August 1, 2001, by and among
Synopsys, Inc., a Delaware corporation ("Parent"), Oak Merger Corporation, a
Delaware corporation and wholly-owned subsidiary of Synopsys ("Merger Sub") and
IKOS Systems, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Merger Sub and the Company entered into that certain
Agreement and Plan of Merger and Reorganization by and among Parent, Merger Sub
and the Company dated July 2, 2001 (the "Merger Agreement"); and
WHEREAS, the parties desire to amend a certain provision of the Merger
Agreement.
THEREFORE, the parties hereby agree as follows:
1. Section 6.9(g) is hereby amended to add the following sentence to the
end of Section 6.9(g):
"In the event that (1) the Closing Date occurs prior to June 30, 2002
pursuant to Section 2.7(b)(i) of the Merger Agreement and (2) the Contingent
Consideration is $9.00, then the dollar amount of the Bonus Plan available for
distribution to Company employees shall be $5.0 million."
2. Capitalized terms that are not defined herein have the same meaning
given to them in the Merger Agreement. Except as amended hereby, all other
provisions of the Merger Agreement shall continue in full force and effect.
71
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
First Amendment to the Agreement and Plan of Merger and Reorganization to be
executed and delivered by their respective officers thereunto duly authorized,
all as of the date first written above.
SYNOPSYS, INC.
By: /s/ XXXXXX X. XXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
OAK MERGER CORPORATION
By: /s/ XXXXXX X. XXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
IKOS SYSTEMS, INC.
By: /s/ XXXXXX X. XXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
