EXHIBIT 55
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AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 8, 1998
AMONG
CADENCE DESIGN SYSTEMS, INC.,
QUICKTURN SYSTEMS DESIGN, INC.
AND
CDSI ACQUISITION, INC.
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TABLE OF CONTENTS
Page
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ARTICLE 1 THE MERGER..................................................................... 1
Section 1.1. The Merger.............................................................. 1
Section 1.2. Effective Time.......................................................... 2
Section 1.3. Closing of the Merger................................................... 2
Section 1.4. Effects of the Merger................................................... 2
Section 1.5. Certificate of Incorporation and Bylaws................................. 2
Section 1.6. Directors............................................................... 2
Section 1.7. Officers................................................................ 2
Section 1.8. Conversion of Shares.................................................... 2
Section 1.9. Dissent and Appraisal Rights............................................ 3
Section 1.10. Exchange of Certificates............................................... 3
Section 1.11. Stock Options.......................................................... 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 7
Section 2.1. Organization and Qualification; Subsidiaries; Investments............... 7
Section 2.2. Capitalization of the Company and its Subsidiaries...................... 8
Section 2.3. Authority Relative to this Agreement; Recommendation.................... 9
Section 2.4. SEC Reports; Financial Statements....................................... 10
Section 2.5. Information Supplied.................................................... 10
Section 2.6. Consents and Approvals; No Violations................................... 11
Section 2.7. No Default.............................................................. 11
Section 2.8. No Undisclosed Liabilities; Absence of Changes.......................... 12
Section 2.9. Litigation.............................................................. 13
Section 2.10. Compliance with Applicable Law......................................... 13
Section 2.11. Employee Benefit Plans; Labor Matters.................................. 14
Section 2.12. Environmental Laws and Regulations..................................... 15
Section 2.13. Taxes.................................................................. 16
Section 2.14. Intellectual Property.................................................. 17
Section 2.15. Insurance.............................................................. 22
Section 2.16. Certain Business Practices............................................. 22
Section 2.17. Product Warranties..................................................... 22
Section 2.18. Suppliers and Customers................................................ 22
Section 2.19. Vote Required.......................................................... 22
Section 2.20. Tax Treatment; Pooling................................................. 22
Section 2.21. Affiliates............................................................. 23
Section 2.22. Opinion of Financial Adviser........................................... 23
Section 2.23. Brokers................................................................ 23
Section 2.24. Company Rights Agreement............................................... 23
1
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION....................... 23
Section 3.1. Organization............................................................ 23
Section 3.2. Capitalization of Parent and its Subsidiaries........................... 24
Section 3.3. Authority Relative to this Agreement.................................... 25
Section 3.4. SEC Reports; Financial Statements....................................... 25
Section 3.5. Information Supplied.................................................... 26
Section 3.6. Consents and Approvals; No Violations................................... 26
Section 3.7. No Default.............................................................. 27
Section 3.8. No Undisclosed Liabilities; Absence of Changes.......................... 27
Section 3.9. Litigation.............................................................. 27
Section 3.10. Compliance with Applicable Law......................................... 28
Section 3.11. Tax Treatment; Pooling................................................. 28
Section 3.12. Opinion of Financial Adviser........................................... 28
Section 3.13. Brokers................................................................ 28
Section 3.14. No Prior Activities.................................................... 28
Section 3.15. Environmental Laws and Regulations..................................... 29
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ARTICLE 4 COVENANTS...................................................................... 29
Section 4.1. Conduct of Business of the Company...................................... 29
Section 4.2. Conduct of Business of Parent........................................... 32
Section 4.3. Preparation of S-4 and the Proxy Statement.............................. 32
Section 4.4. Other Potential Acquirers............................................... 33
Section 4.5. Comfort Letters......................................................... 34
Section 4.6. Meeting of Stockholders................................................. 34
Section 4.7. Stock Exchange Listing.................................................. 35
Section 4.8. Access to Information................................................... 35
Section 4.9. Certain Filings; Reasonable Efforts..................................... 36
Section 4.10. Public Announcements................................................... 37
Section 4.11. Indemnification and Directors' and Officers' Insurance................. 37
Section 4.12. Notification of Certain Matters........................................ 38
Section 4.13. Affiliates; Pooling; Tax-Free Reorganization........................... 38
Section 4.14. Additions to and Modification of Company Disclosure Schedule........... 39
Section 4.15. Company Rights Agreement............................................... 39
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER....................................... 40
Section 5.1. Conditions to Each Party's Obligations to Effect the Merger............. 40
Section 5.2. Conditions to the Obligations of the Company............................ 40
Section 5.3. Conditions to the Obligations of Parent and Acquisition................. 41
2
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER................................................. 43
Section 6.1. Termination............................................................. 43
Section 6.2. Effect of Termination................................................... 44
Section 6.3. Fees and Expenses....................................................... 44
Section 6.4. Amendment............................................................... 45
Section 6.5. Extension; Waiver....................................................... 45
ARTICLE 7 MISCELLANEOUS.................................................................. 45
Section 7.1. Nonsurvival of Representations and Warranties........................... 45
Section 7.2. Entire Agreement; Assignment............................................ 46
Section 7.3. Validity................................................................ 46
Section 7.4. Notices................................................................. 46
Section 7.5. Governing Law........................................................... 47
Section 7.6. Descriptive Headings.................................................... 47
Section 7.7. Parties in Interest..................................................... 47
Section 7.8. Certain Definitions..................................................... 47
Section 7.9. Personal Liability...................................................... 48
Section 7.10. Specific Performance................................................... 48
Section 7.11. Counterparts........................................................... 48
3
TABLE OF EXHIBITS
Exhibit A-1.............Form of Letter Agreement with Company Affiliates
Exhibit A-2.............Form of Letter Agreement with Parent Affiliates
Exhibit B-1.............Form of Representations related to Tax Matters of the Company
Exhibit B-2.............Form of Representations Related to Tax Matters of Parent and Acquisition
Exhibit C...............Matters to be Covered by Opinion of Legal Counsel to the Company
Exhibit D...............Matters to be Covered by Opinion of Legal Counsel to Parent and Acquisition
Exhibit E...............Form of Certificate of Merger
TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE
Section 2.1(a)......................Subsidiaries
Section 2.1(c)......................Equity Investments
Section 2.6.........................Consents and Approval
Section 2.7.........................Defaults
Section 2.8.........................Undisclosed Liabilities; Absence of Changes
Section 2.9.........................Litigation
Section 2.11(a).....................Employee Plans
Section 2.11(b).....................Employment and Related Agreements
Section 2.11(c).....................Employee Benefits Affected by this ransaction
Section 2.11(d).....................Employee Benefits to Former Employees
Section 2.11(e).....................Employee Matters
Section 2.13(b).....................Delinquent or Inaccurate Tax Returns
Section 2.13(c).....................All Taxes Paid
Section 2.13(d).....................Tax Claims
Section 2.13(e).....................Excess Parachute Payments
Section 2.14(a).....................Intellectual Property
Section 2.14(e)(1)..................Inbound License Agreements
Section 2.14(e)(2)..................Outbound License Agreements
Section 2.14(i).....................Pending or Threatened Infringement Claims
Section 2.14(j).....................Infringement Matters
Section 2.14(k).....................Existing Software Products
Section 2.14(l).....................Non Company Intellectual Property Rights
Section 2.14(m).....................Existing and Currently Manufactured Software
Section 2.14(o).....................Year 2000 Compliance
Section 2.17........................Product Warranties
Section 2.18........................Suppliers and Customers
Section 2.21........................Affiliates
Section 4.1.........................Conduct of Business
Section 5.3(i)......................Third Party Consents
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TABLE OF DEFINED TERMS
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Cross Reference
Term in Agreement Page
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Acquisition.................................Preamble................. 1
affiliate...................................Section 7.8(a)...........46
Agreement...................................Preamble................. 1
business day................................Section 7.8(b)...........46
Business System.............................Section 2.14(o)(i).......21
capital stock...............................Section 7.8(c)...........47
Certificate of Merger.......................Section 1.2.............. 2
Certificates................................Section 1.10(b).......... 4
Closing Date................................Section 1.3.............. 2
Closing.....................................Section 1.3.............. 2
Code........................................Preamble................. 1
Company.....................................Preamble................. 1
Company Acquisition.........................Section 7.8(d)...........47
Company Affiliates..........................Section 2.21.............22
Company Board...............................Section 2.3(a)........... 9
Company Financial Adviser...................Section 2.22.............22
Company Permits.............................Section 2.10.............13
Company Plans...............................Section 1.11(a).......... 6
Company Rights Agreement....................Section 2.2(a)........... 8
Company Rights..............................Section 2.2(a)........... 8
Company SEC Reports.........................Section 2.4(a)...........10
Company Securities..........................Section 2.2(a)........... 8
Company Stock Option or Options.............Section 1.11(a).......... 5
DGCL........................................Section 1.1.............. 1
Effective Time..............................Section 1.2.............. 2
Employee Plans..............................Section 2.11(a)..........14
Environmental Claim.........................Section 2.12(a)..........15
Environmental Laws..........................Section 2.12(a)..........15
ERISA Affiliate.............................Section 2.11(a)..........14
ERISA.......................................Section 2.11(a)..........14
Exchange Act................................Section 2.2(c)........... 9
Exchange Agent..............................Section 1.10(a).......... 3
Exchange Fund...............................Section 1.10(a).......... 3
Exchange Ratio..............................Section 1.8(b)........... 3
Governmental Entity.........................Section 2.6..............11
HSR Act.....................................Section 2.6..............11
include.....................................Section 7.8(e)...........47
Indemnified Liabilities.....................Section 4.11.............37
Indemnified Persons.........................Section 4.11.............36
Insurance Policies..........................Section 2.15.............21
5
IRS.........................................Section 2.11(a)..........14
ISOs........................................Section 1.11(a).......... 6
knowledge or known..........................Section 7.8(d)...........47
Lien........................................Section 2.2(b)........... 9
Material Adverse Effect on Parent...........Section 3.1(b)...........23
Material Adverse Effect on the Company......Section 2.1(b)........... 7
Merger Consideration........................Section 1.8(a)........... 3
Merger......................................Section 1.1.............. 1
Notice of Superior Proposal.................Section 4.4(b)...........33
Other Interests.............................Section 2.1(b)........... 8
Parent......................................Preamble................. 1
Parent Common Stock.........................Section 1.8(a)........... 3
Parent Financial Adviser....................Section 3.12.............28
Parent Permits..............................Section 3.10.............27
Parent Rights...............................Section 3.2(a)...........24
Parent SEC Reports..........................Section 3.4(a)...........25
Parent Securities...........................Section 3.2(a)...........24
person......................................Section 7.8(f)...........47
Pooling Transaction.........................Section 2.20.............22
Proxy Statement.............................Section 2.5..............10
S-4.........................................Section 2.5..............10
SEC.........................................Section 2.4(a)...........10
Securities Act..............................Section 2.4(a)...........10
Share.......................................Section 1.8(a)........... 2
Shares......................................Section 1.8(a)........... 2
Stock Option Agreement......................Section 5.2(a)...........40
subsidiary or subsidiaries..................Section 7.8(g)...........47
Superior Proposal...........................Section 4.4(c)...........33
Surviving Corporation.......................Section 1.1.............. 1
Tax or Taxes................................Section 2.13(a)(i).......16
Tax Return..................................Section 2.13(a)(ii)......16
Third Party Acquisition.....................Section 4.4(c)...........33
Third Party.................................Section 4.4(c)...........33
Year 2000 Compliant.........................Section 2.14(o)(i).......21
6
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
December 8, 1998, is by and among Quickturn Design Systems, Inc., a Delaware
corporation (the "Company"), Cadence Design Systems, Inc., a Delaware
corporation ("Parent"), and CDSI ACQUISITION, INC., a Delaware corporation and
a wholly owned subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and
Acquisition have each (i) determined that the Merger (as defined below) is
advisable and fair and in the best interests of their respective stockholders
and (ii) approved the Merger upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, for Federal income tax purposes it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, certain officers and employees of the Company have entered
into employment and non-competition agreements, effective upon consummation of
the Merger, as an inducement to Parent to enter into this Agreement; and
WHEREAS, the Merger is intended to be treated as a "pooling of
interests" for financial accounting purposes.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger. At the Effective Time (as defined below)
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and upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"),
Acquisition shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of
Acquisition shall cease. At the election of the parties, the Merger may be
structured so that the Company shall be merged with and into Acquisition with
the result that Acquisition shall become the "Surviving Corporation." The
Merger is intended to qualify as a tax-free reorganization under Section 368(a)
of the Code. Parent, as the sole stockholder of Acquisition, hereby approves
the Merger and this Agreement.
SECTION 1.2. Effective Time. Subject to the terms and conditions set
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forth in this Agreement, on the Closing Date (as defined in Section 1.3), a
Certificate of Merger substantially in the form of Exhibit E (the "Certificate
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of Merger") shall be duly executed and acknowledged by Acquisition and the
Company and thereafter delivered to the Secretary of State of the State of
Delaware for filing pursuant to Section 251 of the DGCL. The Merger shall
become effective at such time as a properly executed copy of the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware in
accordance with Section 251 of the DGCL or such later time as Parent and the
Company may agree upon and as set forth in the Certificate of Merger (the time
the Merger becomes effective being referred to herein as the "Effective Time").
SECTION 1.3. Closing of the Merger. The closing of the Merger (the
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"Closing") will take place at a time and on a date (the "Closing Date")
to be specified by the parties, which shall be no later than the second business
day after satisfaction of the latest to occur of the conditions set forth in
Article 5, at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is agreed to
in writing by the parties hereto.
SECTION 1.4. Effects of the Merger. The Merger shall have the
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effects set forth in the DGCL. Without limiting the generality of the foregoing
and subject thereto, at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Acquisition shall vest in
the Surviving Corporation and all debts, liabilities and duties of the Company
and Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5. Certificate of Incorporation and Bylaws. The Certificate
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of Incorporation of Acquisition in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The bylaws of Acquisition in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
SECTION 1.6. Directors. The directors of Acquisition at the
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Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and bylaws of
the Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
Section 1.7. Officers. The officers of Acquisition at the Effective
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Time shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and bylaws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
Section 1.8. Conversion of Shares.
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(a) At the Effective Time, each share of common stock, $0.001 par
value per share, of the Company (individually a "Share" and collectively the
"Shares") issued and outstanding immediately prior to the Effective Time (other
than (i) Shares held in the
2
Company's treasury or by any of the Company's subsidiaries and (ii) Shares held
by Parent, Acquisition or any other subsidiary of Parent) shall, by virtue of
the Merger and without any action on the part of Acquisition, the Company or the
holder thereof, be converted into and shall become a number of fully paid and
nonassessable shares of common stock, par value $.01 per share, of Parent
("Parent Common Stock") equal to the Exchange Ratio (as defined below) (the
"Merger Consideration"). Unless the context otherwise requires, each reference
in this Agreement to shares of Parent Common Stock and to the Shares shall
include the associated Parent Rights (as such term is defined in Section 3.2(a)
hereof) and associated Company Rights (as defined in Section 2.2(a)),
respectively. Notwithstanding the foregoing, if, between the date of this
Agreement and the Effective Time, the outstanding shares of Parent Common Stock
or the Shares shall have been changed into a different number of shares or a
different class by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares then the Exchange
Ratio shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
(b) The "Exchange Ratio" shall be (i) $14.00 divided by (ii) the
average closing price of one share of Parent Common Stock (as reported on the
NYSE Composite Transactions reporting system) during the five trading days
immediately preceding the second business day prior to the Closing Date.
(c) At the Effective Time, each outstanding share of the common stock,
$0.01 par value per share, of Acquisition shall be converted into one share of
common stock, $0.01 par value per share, of the Surviving Corporation.
(d) At the Effective Time, each Share held in the treasury of the
Company and each Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled, retired and cease to exist and no
shares of Parent Common Stock shall be delivered with respect thereto.
Section 1.9. Dissenters and Appraisal Rights. The holders of the
-------------------------------
Shares will not be entitled to dissenters and appraisal rights in accordance
with Section 262 of the DGCL.
Section 1.10. Exchange of Certificates.
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(a) From time to time following the Effective Time, as required by
subsections (b) and (c) below, Parent shall deliver to its transfer agent, or a
depository or trust institution of recognized standing selected by Parent and
Acquisition (the "Exchange Agent") for the benefit of the holders of Shares
for exchange in accordance with this Article I: (i) certificates representing
the appropriate number of shares of Parent Common Stock issuable pursuant to
Section 1.8, and (ii) cash to be paid in lieu of fractional shares of Parent
Common Stock (such shares of Parent Common Stock and such cash are hereinafter
referred to as the "Exchange Fund"), in exchange for outstanding Shares.
3
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") and whose shares were converted into
the right to receive shares of Parent Common Stock pursuant to Section 1.8: (i)
a letter of transmittal (which shall specify that delivery shall be effected and
risk of loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent together with such letter
of transmittal duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock and, if applicable, a check representing the cash
consideration to which such holder may be entitled on account of a fractional
share of Parent Common Stock that such holder has the right to receive pursuant
to the provisions of this Article I and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares that
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a transferee if the Certificate representing such Shares is presented to the
Exchange Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 1.10, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Parent
Common Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 1.10.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 1.10(f), until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate there shall be paid to the record holder of
the certificates representing whole shares of Parent Common Stock issued in
exchange therefor without interest (i) the amount of any cash payable in lieu of
a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.10(f) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such number of whole shares of Parent Common Stock and (ii) at the appropriate
payment date the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common Stock.
(d) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor upon
the making of an affidavit of that fact by the holder thereof such shares of
Parent Common Stock and cash in
4
lieu of fractional shares, if any, as may be required pursuant to this
Agreement; provided, however, that Parent or the Exchange Agent may, in its
discretion, require the delivery of a suitable bond or indemnity.
(e) All shares of Parent Common Stock issued upon the surrender for
exchange of Shares in accordance with the terms hereof (including any cash paid
pursuant to Section 1.10(c) or 1.10(f)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such Shares; subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the date hereof that remain unpaid at
the Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
(f) No fractions of a share of Parent Common Stock shall be issued in
the Merger but in lieu thereof each holder of Shares otherwise entitled to a
fraction of a share of Parent Common Stock shall upon surrender of his or her
Certificate or Certificates be entitled to receive an amount of cash (without
interest) determined by multiplying the average closing price for Parent Common
Stock as reported on the NYSE Composite Transactions reporting system for the
five (5) business days prior to the Effective Time by the fractional share
interest to which such holder would otherwise be entitled. The parties
acknowledge that payment of the cash consideration in lieu of issuing fractional
shares was not separately bargained for consideration, but merely represents a
mechanical rounding off for purposes of simplifying the corporate and accounting
complexities that would otherwise be caused by the issuance of fractional
shares.
(g) Any portion of the Exchange Fund that remains undistributed to the
stockholders of the Company upon the expiration of twelve (12) months after the
Effective Time shall be delivered to Parent upon demand and any stockholders of
the Company who have not theretofore complied with this Article 1 shall
thereafter look only to Parent for payment of their claim for Parent Common
Stock and cash in lieu of fractional shares as the case may be and any
applicable dividends or distributions with respect to Parent Common Stock.
(h) Neither Parent nor the Company shall be liable to any holder of
Shares or Parent Common Stock as the case may be for such shares (or dividends
or distributions with respect thereto) or cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.11. Stock Options.
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(a) At the Effective Time, each outstanding option or warrant to
purchase Shares (a "Company Stock Option" or collectively "Company Stock
Options") issued pursuant to the Company's 1988 Stock Option Plan, 1990 Stock
Option Plan, 1992 Key Executive Stock Option Plan, 1993 Employee Qualified Stock
Purchase Plan, 1996
5
Supplemental Stock Plan, as amended, 1997 Stock Option Plan, as amended, 1994
Outside Director Stock Option Plan, Key Executive Stock Option Plan, SpeedSim,
Inc. 1995 Incentive and Nonqualified Stock Option Plan, or other agreement or
arrangement, whether vested or unvested, shall be converted as of the Effective
Time into options or warrants, as applicable, to purchase shares of Parent
Common Stock in accordance with the terms of this Section 1.11. All plans or
agreements described above pursuant to which any Company Stock Option has been
issued or may be issued other than outstanding warrants are referred to
collectively as the "Company Plans." Each Company Stock Option shall be deemed
to constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, a number of shares of Parent Common
Stock equal to the number of shares of Parent Common Stock that the holder of
such Company Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option or warrant in full immediately
prior to the Effective Time at a price per share equal to (x) the aggregate
exercise price for the Shares otherwise purchasable pursuant to such Company
Stock Option divided by (y) the product of (i) the number of Shares otherwise
purchasable pursuant to such Company Stock Option, multiplied by (ii) the
Exchange Ratio; provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification under Section 422
of the Code ("incentive stock options" or "ISOs" ) the option price, the number
of shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the Company Plan and that the agreements
evidencing the grants of such Options shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 1.11 after
giving effect to the Merger). Parent shall comply with the terms of the Company
Plans and ensure, to the extent required by and subject to the provisions of
such Plans, that Company Stock Options that qualified as incentive stock options
prior to the Effective Time continue to qualify as incentive stock options of
Parent after the Effective Time.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Stock Options assumed in accordance with this Section 1.11.
As soon as practicable after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor or other appropriate forms)
with respect to the shares of Parent Common Stock subject to any Company Stock
Options held by persons who are directors, officers or employees of the Company
or its subsidiaries and shall use all reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(d) At or before the Effective Time, the Company shall cause to be
effected any necessary amendments to the Company Plans to give effect to the
foregoing provisions of this Section 1.11.
6
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition, subject to the exceptions set forth in the Disclosure Schedule (the
"Company Disclosure Schedule") delivered by the Company to Parent in accordance
with Section 4.15 (which exceptions shall specifically identify a Section,
Subsection or clause of a single Section or Subsection hereof, as applicable, to
which such exception relates) that:
Section 2.1. Organization and Qualification; Subsidiaries;
---------------------------------------------
Investments.
-----------
(a) Section 2.1(a) of the Company Disclosure Schedule sets forth, as
of the date of this Agreement, a true and complete list of all the Company's
directly or indirectly owned subsidiaries, together with the jurisdiction of
incorporation of each subsidiary and the percentage of each subsidiary's
outstanding capital stock or other equity interests owned by the Company or
another subsidiary of the Company. Each of the Company and its subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted. The Company has heretofore delivered to
Acquisition or Parent accurate and complete copies of the Certificate of
Incorporation and bylaws (or similar governing documents), as currently in full
force and effect, of the Company and its subsidiaries. Section 2.1(a) of the
Company Disclosure Schedule identifies all the material subsidiaries of the
Company. The Company has no operating subsidiaries other than those
incorporated in a state of the United States.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect (as defined below) on the Company. When used in connection with the
Company or its subsidiaries, the term "Material Adverse Effect on the Company"
means any circumstance, change in, or effect on (or circumstance, change in, or
effect involving a prospective change on) the Company and its subsidiaries,
taken as a whole, (a) that is, or is reasonably likely in the future to be,
materially adverse to the operations, assets or liabilities (including
contingent liabilities), earnings or results of operations, or the business
(financial or otherwise) of the Company and its subsidiaries, taken as a whole,
excluding from the foregoing the effect, if any, of (i) changes in general
economic conditions or changes affecting the industry in which the Company
operates, (ii) stockholder class action litigation arising from allegations of a
breach of fiduciary duty relating to this Agreement, (iii) of the public
announcement or pendency of the transactions contemplated hereby on current or
prospective customers or revenues of the Company (provided that such effect is
direct and that the Company shall have the burden of proving such direct
effect), or (iv) any action or inaction required of the Company by Parent under
Section 4.1, or (b) that would reasonably be
7
expected to prevent or materially delay or impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
(c) Section 2.1(c) of the Company Disclosure Schedule sets forth a
true and complete list of each equity investment in an amount of One Hundred
Thousand Dollars ($100,000) or more or that represents a five percent (5%) or
greater ownership interest in the subject of such investment made by the Company
or any of its subsidiaries in any other person other than the Company's
subsidiaries ("Other Interests"). The Other Interests are owned by the
Company, by one or more of the Company's subsidiaries or by the Company and one
or more of its subsidiaries, in each case free and clear of all Lien (as defined
below), except for Liens that may be created by any partnership or joint venture
agreements for Other Interests.
Section 2.2. Capitalization of the Company and its Subsidiaries.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of Forty
Million (40,000,000) Shares, of which, as of November 30, 1998, 18,095,580
Shares were issued and outstanding and Two Million (2,000,000) shares of
preferred stock, $0.001 par value per share, no shares of which are outstanding.
All of the outstanding Shares have been validly issued and are fully paid,
nonassessable and free of preemptive rights. As of November 30, 1998,
approximately 4,396,556 Shares were reserved for issuance and, as of December 5,
1998, 3,597,768 were issuable upon or otherwise deliverable in connection with
the exercise of outstanding Company Stock Options issued pursuant to the Company
Plans. Between December 5, 1998 and the date hereof, no shares of the Company's
capital stock have been issued other than pursuant to Company Stock Options
already in existence on such date, and between December 5, 1998 and the date
hereof no stock options have been granted. Except as set forth above and for
the rights (the "Company Rights") issued pursuant to the Company's Preferred
Shares Rights Agreement, dated as of January 10, 1996, as amended between the
Company and BankBoston, N.A. (the "Company Rights Agreement"), as of the date
hereof, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or any of its
subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (iii) no options or other
rights to acquire from the Company or any of its subsidiaries, and, except as
described in the Company SEC Reports (as defined below), no obligations of the
Company or any of its subsidiaries to issue any capital stock, voting securities
or securities convertible into or exchangeable or exercisable for capital stock
or voting securities of the Company and (iv) no equity equivalent interests in
the ownership or earnings of the Company or its subsidiaries or other similar
rights (collectively "Company Securities"). As of the date hereof, there are
no outstanding rights or obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities. There are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company.
8
(b) All of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same except as may be provided as a matter of
law). There are no (i) securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for, (ii) options or (iii)
except for the Company Rights, other rights to acquire from the Company or any
of its subsidiaries any capital stock or other ownership interests in or any
other securities of any subsidiary of the Company, and there exists no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of any such capital
stock. There are no outstanding contractual obligations of the Company or its
subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any subsidiary of the Company.
For purposes of this Agreement, "Lien" means, with respect to any asset
(including any security), any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset; provided, however, that the
term "Lien" shall not include (i) statutory liens for Taxes, which are not yet
due and payable or are being contested in good faith by appropriate proceedings
and disclosed in Section 2.13(d) of the Company Disclosure Schedule or that are
otherwise not material, (ii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the premises
rented, (iii) deposits or pledges made in connection with, or to secure payment
of, workers' compensation, unemployment insurance, old age pension or other
social security programs mandated under applicable laws, (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens, and (v)
restrictions on transfer of securities imposed by applicable state and federal
securities laws.
(c) The Company Rights and the Shares constitute the only class of
equity securities of the Company or its subsidiaries registered or required to
be registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Section 2.3. Authority Relative to this Agreement; Recommendation.
----------------------------------------------------
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations under 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 and validly authorized by the Board of
Directors of the Company (the "Company Board"), and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby except the approval and
adoption of this Agreement by the holders of a majority of the outstanding
Shares. This Agreement has been duly and validly executed and delivered by the
Company and constitutes, assuming the due authorization, execution and delivery
hereof by Parent and Acquisition, a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to any applicable bankruptcy, insolvency, reorganization,
9
moratorium or similar laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity.
(b) The Company Board has unanimously resolved to recommend that the
stockholders of the Company approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the Securities and Exchange Commission (the "SEC")
since January 1, 1997, each of which complied at the time of filing in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, each law as in
effect on the dates such forms, reports and documents were filed. None of such
Company SEC Reports, including, any financial statements or schedules included
or incorporated by reference therein, contained when filed any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading,
except to the extent superseded by a Company SEC Report filed subsequently and
prior to the date hereof. The audited consolidated financial statements of the
Company included in the Company SEC Reports fairly present, in conformity in all
material respects with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations and changes
in financial position for the periods then ended.
(b) The Company has heretofore made available or promptly will make
available to Acquisition or Parent a complete and correct copy of any amendments
or modifications that are required to be filed with the SEC but have not yet
been filed with the SEC to agreements, documents or other instruments that
previously had been filed by the Company with the SEC pursuant to the Exchange
Act.
Section 2.5. Information Supplied. None of the information supplied
--------------------
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) the proxy statement relating to the meeting of the
Company's stockholders to be held in connection with the Merger (the "Proxy
Statement") will, at the date mailed to stockholders of the Company and at the
time of the meeting of stockholders of the Company to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein in light of the circumstances under which they are made not
misleading. The Proxy Statement insofar as it relates to the meeting of the
Company's
10
stockholders to vote on the Merger will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no representation,
warranty or covenant with respect to any information supplied or required to be
supplied by Parent or Acquisition which is contained in or omitted from any of
the foregoing documents.
Section 2.6. Consents and Approvals; No Violations. Except for
-------------------------------------
filings, permits, authorizations, consents and approvals as may be required
under applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), any filings under similar merger
notification laws or regulations of foreign Governmental Entities and the filing
and recordation of the Certificate of Merger as required by the DGCL, no filing
with or notice to and no permit, authorization, consent or approval of any
United States or foreign court or tribunal, or administrative, governmental or
regulatory body, agency or authority (a "Governmental Entity") is necessary
for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not, individually or in the
aggregate, materially and adversely affect the business operations of the
Company after the Merger or its ability to consummate the Merger. Neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or bylaws (or similar governing documents) of the
Company or any of its subsidiaries, (ii) except as set forth in Section 2.6 of
the Company Disclosure Schedule, result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound
or (iii) except as set forth in Section 2.6 of the Company Disclosure Schedule,
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets except, in the case of clause (ii) or (iii), for
violations, breaches or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 2.7. No Default. Except as set forth in Section 2.7 of the
----------
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
in breach, default or violation (and no event has occurred that with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is now a party or by which it or
any of its properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company
or any of its subsidiaries or any of its properties or
11
assets, except, in the case of clause (ii) or (iii), for violations, breaches or
defaults that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except
----------------------------------------------
as and to the extent publicly disclosed by the Company in the Company SEC
Reports or as set forth in Section 2.8 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company (including the notes thereto), other
than liabilities and obligations which, individually or in the aggregate, will
not have a Material Adverse Effect on the Company. Except as publicly disclosed
by the Company in the Company SEC Reports or as set forth in Section 2.8 of the
Company Disclosure Schedule, since September 30, 1998, there have been no
events, changes or effects with respect to the Company or its subsidiaries that
have had or reasonably would be expected to have a Material Adverse Effect on
the Company. Without limiting the generality of the foregoing, except as and to
the extent publicly disclosed by the Company in the Company SEC Reports or as
set forth in Section 2.8 of the Company Disclosure Schedule, since September 30,
1998, the Company and its subsidiaries have conducted their respective
businesses in all material respects only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses consistent with past practices, and there has not been any (i)
change in the financial condition, properties, business or results of operations
of the Company and its subsidiaries, except for those changes that, individually
or in the aggregate, have not had and are not reasonably likely to have a
Material Adverse Effect on the Company; (ii) material damage, destruction or
other casualty loss with respect to any material asset or property owned, leased
or otherwise used by the Company or any of its subsidiaries, not covered by
insurance; (iii) declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company or any of its
subsidiaries (other than wholly-owned subsidiaries) or any repurchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any of its subsidiaries; (iv) amendment of any
material term of any outstanding security of the Company or any of its
subsidiaries; (v) incurrence, assumption or guarantee by the Company or any of
its subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices; (vi) creation or assumption by the Company or any of its subsidiaries
of any Lien on any material asset other than in the ordinary course of business
consistent with past practices; (vii) loan, advance or capital contributions
made by the Company or any of its subsidiaries to, or investment in, any person
other than (x) loans or advances to employees in connection with business-
related travel, (y) loans made to employees consistent with past practices that
are not in the aggregate in excess of Fifty Thousand Dollars ($50,000), and (z)
loans, advances or capital contributions to or investments in wholly-owned
subsidiaries, and in each case made in the ordinary course of business
consistent with past practices; (viii) transaction or commitment made, or any
contract or agreement entered into, by the Company or any of its subsidiaries
relating to its assets or business (including the acquisition or disposition of
any assets) or any relinquishment by the Company or any of its subsidiaries of
any contract, agreement or other
12
right, in either case, material to the Company and its subsidiaries, taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement; (ix) labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any of its subsidiaries, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees; or (x) change by the Company or any of its subsidiaries in its
accounting principles, practices or methods. Since September 30, 1998, except as
disclosed in the Company SEC Reports filed prior to the date hereof or increases
in the ordinary course of business consistent with past practices, there has not
been any increase in the compensation payable or that could become payable by
the Company or any of its subsidiaries to (a) officers of the Company or any of
its subsidiaries or (b) any employee of the Company or any of its Subsidiaries
whose annual cash compensation is One Hundred Thousand Dollars ($100,000) or
more.
Section 2.9. Litigation. Except as publicly disclosed by the Company
----------
in the Company SEC Reports or as set forth in Section 2.9 of the Company
Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Company or
would reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by
the Company in the Company SEC Reports, neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
that, insofar as can be reasonably foreseen in the future, would reasonably be
expected to have a Material Adverse Effect on the Company or could reasonably be
expected to prevent or delay the consummation of the transactions contemplated
hereby.
Section 2.10. Compliance with Applicable Law. Except as publicly
------------------------------
disclosed by the Company in the Company SEC Reports, the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals that would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. Except as publicly disclosed by the Company in the Company SEC
Reports, the Company and its subsidiaries are in compliance with the terms of
the Company Permits, except where the failure so to comply would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Except as publicly disclosed by the Company in the Company SEC Reports, the
businesses of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of the United States or any
foreign country or any political subdivision thereof or of any Governmental
Entity, except (i) that no representation or warranty is made in this Section
2.10 with respect to Environmental Laws (as defined in Section 2.12) and (ii)
for violations or possible violations of any United States or foreign laws,
ordinances or regulations that do not and, insofar as reasonably can be foreseen
in the future, will not result in any charges, assessments, levies, fines or
other
13
liabilities being imposed upon or incurred by the Company that will equal or
exceed Five Hundred Thousand Dollars ($500,000) for any single violation or One
Million Dollars ($1,000,000) in the aggregate. Except as publicly disclosed by
the Company in the Company SEC Reports, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same, other than such investigations or reviews as would not, individually
or in the aggregate, have a Material Adverse Effect on the Company.
Section 2.11. Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Section 2.11(a) of the Company Disclosure Schedule lists as of the
date hereof all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, health, life, or disability insurance, dependent care,
severance and other similar fringe or employee benefit plans, programs or
arrangements and any current or former employment or executive compensation or
severance agreements written or otherwise maintained or contributed to for the
benefit of or relating to any employee or former employee of the Company, any
trade or business (whether or not incorporated) that is a member of a controlled
group including the Company or that is under common control with the Company
within the meaning of Section 414 of the Code (an "ERISA Affiliate "), as well
as"), excluding ") for each each plan with Employee Plans disclosed respect to
which under which the Employee Plan the Company or Company has no where such
report an ERISA remaining is required and Affiliate could obligations and (ii)
the incur liability any of the documents and under Section foregoing that are
instruments 4069 (if such required to be governing each plan has been or
maintained by the such Employee were terminated) Company under the Plan (other
than or Section laws of any those referred to 4212(c) of ERISA foreign in
Section (together the jurisdiction. The 4(b)(4) of "Employee Plans Company has
made ERISA). No event available to has occurred and, Parent a copy of to the
knowledge (i) the most of the Company, recent annual there currently report on
Form exists no 5500 filed with condition or set the Internal of circumstances
Revenue Service in connection (the "IRS with which the Company or any of its
subsidiaries could be subject to any liability under the terms of any Employee
Plans, ERISA, the Code or any other applicable law, including any liability
under Title IV of ERISA, that would have a Material Adverse Effect on the
Company.
(b) Section 2.11(b) of the Company Disclosure Schedule sets forth a
list as of the date hereof of (i) all employment agreements with officers of the
Company; (ii) all agreements with consultants who are individuals obligating the
Company to make annual cash payments in an amount exceeding Fifty Thousand
Dollars ($50,000); (iii) all severance agreements, programs and policies of the
Company with or relating to its employees except such programs and policies
required to be maintained by law; and (iv) all plans, programs, agreements and
other arrangements of the Company with or relating to its employees that contain
change in control provisions whether or not listed in other parts of the Company
Disclosure Schedule. The Company has made available to Parent copies (or
descriptions in
14
detail reasonably satisfactory to Parent) of all such agreements, plans,
programs and other arrangements.
(c) Except as disclosed in Section 2.11(c) of the Company Disclosure
Schedule, there will be no payment, accrual of additional benefits, acceleration
of payments or vesting of any benefit under any Employee Plan or any agreement
or arrangement disclosed under this Section 2.11 solely by reason of entering
into or in connection with the transactions contemplated by this Agreement.
(d) No Employee Plan that is a welfare benefit plan within the meaning
of Section 3(1) of ERISA provides benefits to former employees of the Company or
its ERISA Affiliates other than pursuant to Section 4980B of the Code or similar
state laws.
(e) There are no controversies relating to any Employee Plan or other
labor matters pending or, to the knowledge of the Company, threatened between
the Company or any of its subsidiaries and any of their respective employees,
which controversies, individually or in the aggregate, have or would reasonably
be expected to have a Material Adverse Effect of the Company. Neither the
Company nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any of its subsidiaries except as disclosed in Section 2.11(e) of the
Company Disclosure Schedule, nor does the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company has
no knowledge of any strikes, slowdowns, work stoppages, lockouts or threats
thereof by or with respect to any employees of the Company or any of its
subsidiaries.
Section 2.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by the Company in the Company SEC
Reports, (i) each of the Company and its subsidiaries is in material compliance
with all applicable federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata) (collectively "Environmental Laws") except for non-compliances that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, which compliance includes, but is not limited to, the possession by
the Company and its subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws and compliance with
the terms and conditions thereof; (ii) neither the Company nor any of its
subsidiaries has received written notice of or, to the knowledge of the Company,
is the subject of any action, cause of action, claim, investigation, demand or
notice by any person alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim "); and (iii) to the knowledge of the
Company, there are no existing facts that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as disclosed in the Company SEC Reports, there are no
Environmental Claims that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company that are pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries or, to the knowledge of the
15
Company, against any person whose liability for any Environmental Claim the
Company or any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law.
Section 2.13. Taxes.
-----
(a) Definitions. For purposes of this Agreement:
-----------
(i) the term "Tax" (including "Taxes") means (A) all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto, (B)
any liability for payment of amounts described in clause (A) whether as a result
of transferee liability, of being a member of an affiliated, consolidated,
combined or unitary group for any period, or otherwise through operation of law,
and (C) any liability for the payment of amounts described in clauses (A) or (B)
as a result of any tax sharing, tax indemnity or tax allocation agreement or any
other express or implied agreement to indemnify any other person; and
(ii) the term "Tax Return " means any return, declaration, report,
statement, information statement and other document required to be filed with
respect to Taxes.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have timely filed all material Tax
Returns they are required to have filed; and such Tax Returns are accurate and
correct in all material respects and do not contain a disclosure statement under
Section 6662 of the Code (or any predecessor provision or comparable provision
of state, local or foreign law).
(c) The Company and its subsidiaries have paid or adequately provided
in the financial statements included in the SEC Reports for all Taxes (whether
or not shown on any Tax Return) they are required to have paid or to pay, which
amounts are not material either individually or in the aggregate.
(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Schedule, no material claim for assessment or collection of Taxes is presently
being asserted against the Company or its subsidiaries and neither the Company
nor any of its subsidiaries is a party to any pending action, proceeding, or
investigation by any governmental taxing authority nor does the Company have
knowledge of any such threatened action, proceeding or investigation.
(e) Except as set forth in Section 2.13(e) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement,
16
contract, arrangement or plan that has resulted or would result, individually or
in the aggregate, in connection with this Agreement or any change of control of
the Company or any of its subsidiaries, in the payment of any "excess parachute
payments" within the meaning of Section 28OG of the Code.
Section 2.14. Intellectual Property.
---------------------
(a) Section 2.14(a) of the Company Disclosure Schedule sets forth, for
the Intellectual Property owned, in whole or in part, including jointly with
others, by the Company or any of its subsidiaries, a complete and accurate list
of all United States and foreign (a) patents and patent applications; (b)
Trademark registrations and applications and material unregistered Trademarks;
and (c) copyright registrations and applications, indicating for each, the
applicable jurisdiction, registration number (or application number), and date
issued (or date filed). For purposes of this Agreement, "Intellectual Property"
means: trademarks and service marks (whether register or unregistered), trade
names, designs and general intangibles of like nature, together with all
goodwill related to the foregoing (collectively, "Trademarks"); patents
(including any continuations, continuations in part, renewals and applications
for any of the foregoing)(collectively "Patents"); copyrights (including any
registrations and applications therefor and whether registered or
unregistered)(collectively "Copyrights"); computer software; databases; works of
authorship; mask works; technology; trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models, user
interfaces, customer lists, inventions, discoveries, concepts, ideas,
techniques, methods, source codes, object codes, methodologies and, with respect
to all of the foregoing, related confidential data or information (collectively,
"Trade Secrets").
(b) Trademarks.
----------
(i) All Trademark registrations are currently in compliance in
all material respects with all legal requirements (including the timely post-
registration filing of affidavits of use and incontestability and renewal
applications) other than any requirement that, if not satisfied, would not
result in a cancellation of any such registration or otherwise materially affect
the priority and enforceability of the Trademark in question.
(ii) No registered Trademark has been within the last three (3)
years or is now involved in any opposition or cancellation proceeding in the
United States Patent and Trademark Office. To the Company's knowledge, no such
action has been threatened in writing within the one (1)-year period prior to
the date of this Agreement.
(iii) To the knowledge of the Company and its subsidiaries, there
has been no prior use of any material Trademark by any third party which would
confer upon said third party superior rights in any such Trademark.
(iv) All material Trademarks registered in the United States have
been in continuous use by the Company or its subsidiaries.
17
(v) The Company and its subsidiaries have adequately policed the
Trademarks against third party infringement; and the material Trademarks
registered in the United States have been continuously used in the form
appearing in, and in connection with the goods and services listed in, their
respective registration certificates.
(c) Patents.
-------
(i) All Patents are currently in compliance with legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use) other than any requirement that, if not satisfied,
would not result in a revocation or otherwise materially affect the
enforceability of the Patent in question.
(ii) No Patent has been or is now involved in any interference,
reissue, reexamination or opposing proceeding in the United States Patent and
Trademark Office. To the Company's knowledge, no such action has been
threatened in writing within the one (1)-year period prior to the date of this
Agreement.
(iii) To the Company's knowledge, there is no patent or patent
application of any person that conflicts in any material respect with any
Patent.
(d) Trade Secrets.
-------------
(i) The Company has taken reasonable steps in accordance with
normal industry practice to protect the Company's rights in confidential
information and Trade Secrets of the Company.
(ii) Without limiting the generality of Section 2.14(d)(i) and
except as would not be materially adverse to the Company or its business, the
Company enforces a policy of requiring each relevant employee, consultant and
contractor to execute proprietary information, confidentiality and assignment
agreements substantially in the Company's standard forms that assign to the
Company all rights to any Intellectual Property rights relating to the Company's
business and that otherwise appropriately protect the Intellectual Property of
the Company, and, except under confidentiality obligations, there has been no
disclosure by the Company or any subsidiary of material confidential information
or Trade Secrets.
(e) License Agreements.
------------------
Section 2.14(e)(1) of the Company Disclosure Schedule sets forth a
complete and accurate list of all license agreements granting to the Company or
any of its subsidiaries any material right to use or practice any rights under
any Intellectual Property other than office automation software used generally
in the Company's or any of its subsidiaries' operations and other software that
is not used in connection with the design, development, use, maintenance and
support, testing, assembly and manufacture of the Company's or any such
subsidiary's products and is commercially available on reasonable terms to any
person for a license fee of no more than $100,000 (collectively, the "Inbound
18
License Agreements"), indicating for each the title and the parties thereto and
the amount of any future royalty or license fee payable thereunder. Section
2.14(e)(2) of the Company Disclosure Schedule sets forth a complete and accurate
list of all license agreements under which the Company or any of its
subsidiaries licenses software or grants other rights in to use or practice any
rights under any Intellectual Property, excluding licenses with customers that
in the twelve-month period prior to the date hereof have purchased or licensed
products for which the total payments to the Company and its subsidiaries did
not exceed $100,000 (collectively, the "Outbound License Agreements"),
indicating for each the title and the parties thereto. There is no material
outstanding or, to the Company's knowledge, threatened dispute or disagreement
with respect to any Inbound License Agreement or any Outbound License Agreement.
(f) Ownership; Sufficiency of IP Assets. The Company or one of its
-----------------------------------
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of its Intellectual
Property used in its business. The Intellectual Property identified in Section
2.14(a) of the Company Disclosure Schedule, together with the Company's and its
subsidiaries' unregistered copyrights and the Company's and such subsidiaries'
rights under the licenses granted to the Company or any of its subsidiaries
under the Inbound License Agreements, constitute all the material Intellectual
Property rights used in the operation of the Company's and its subsidiaries'
businesses as they are currently conducted and are all the Intellectual Property
rights necessary to operate such businesses after the Effective Time in
substantially the same manner as such businesses have been operated by the
Company prior thereto.
(g) Protection of IP. The Company has taken reasonable steps to
----------------
protect the Intellectual Property of the Company and its subsidiaries.
(h) No Infringement by the Company. To the Company's knowledge, the
------------------------------
products used, manufactured, marketed, sold or licensed by the Company, and all
Intellectual Property used in the conduct of the Company's and its subsidiaries'
businesses as currently conducted, do not infringe upon, violate or constitute
the unauthorized use of any rights owned or controlled by any third party,
including without limitation, any Intellectual Property of any third party.
(i) No Pending or Threatened Infringement Claims. Except and to the
--------------------------------------------
extent publicly disclosed in the Company SEC Reports, no litigation is now or,
within the three (3) years prior to the date of this Agreement, was pending and,
to the Company's knowledge, no notice or other claim in writing has been
received by the Company within the one (1) year prior to the date of this
Agreement, (A) alleging that the Company any of its subsidiaries has engaged in
any activity or conduct that infringes upon, violates, or constitutes the
unauthorized use of the Intellectual Property rights of any third party or (B)
challenging the ownership, use, validity or enforceability of any Intellectual
Property owned or exclusively licensed by the Company. Except as specifically
disclosed in one or more Sections of the Company Disclosure Schedules pursuant
to this Section 2.14, no Intellectual Property owned or licensed by the Company
or any of its subsidiaries is subject to any
19
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company or any such subsidiary or, in the case of any
Intellectual Property licensed to others, restricting the sale, transfer,
assignment or licensing thereof by the Company or any of its subsidiaries to any
person.
(j) No Infringement by Third Parties. Except as and to the extent
--------------------------------
publicly disclosed in the Company SEC Reports or as set forth in Section 2.14(j)
of the Company Disclosure Schedule, to the knowledge of the Company, no third
party is misappropriating, infringing, diluting, or violating any Intellectual
Property owned or exclusively licensed by the Company or any of its
subsidiaries, and no such claims have been brought against any third party by
the Company or any of its subsidiaries.
(k) Assignment; Change of Control. The execution, delivery and
-----------------------------
performance by the Company of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or impairment of,
or give rise to any right of any third party to terminate, any of the Company's
or any of its subsidiaries' rights to own any of its Intellectual Property or
their respective rights under the License Agreements, nor require the consent of
any Governmental Authority or third party in respect of any such Intellectual
Property.
(l) Software. The Software owned or purported to be owned by the
--------
Company or any of its subsidiaries, was either (i) developed by employees of
Company or any of its subsidiaries within the scope of their employment; (ii)
developed by independent contractors who have assigned their rights to the
Company or any of its subsidiaries pursuant to written agreements; or (iii)
otherwise acquired by the Company or a subsidiary from a third party. Except as
set forth in Section 2.14(l) of the Company Disclosure Schedule, the Software
does not contain any programming code, documentation or other materials or
development environments that embody Intellectual Property rights of any person
other than the Company or any of its subsidiaries, except for such materials or
development environments obtained by the Company or any of its subsidiaries from
other persons who make such materials or development environments generally
available to all interested purchasers or end-users on standard commercial
terms. For purposes of this Section 2.14(l), "Software" means any and all (i)
computer programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (ii) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and
(iv) all documentation, including user manuals and training materials, relating
to any of the foregoing.
(m) Performance of Existing Software Products. The Company's and
-----------------------------------------
its subsidiaries' existing and currently manufactured and marketed Software
products listed and described on Section 2.14(m) of the Company Disclosure
Schedule perform in all material respects, free of significant bugs or
programming errors, the functions described in any agreed specifications or end
user documentation or other information provided to customers of the
20
Company on which such customers relied when licensing or otherwise acquiring
such products.
(n) Documentation. The Company and its subsidiaries have taken all
-------------
actions customary in the software industry to document the Software and its
operation, such that the materials comprising the Software, including the source
code and documentation, have been written in a clear and professional manner so
that they may be understood, modified and maintained in an efficient manner by
reasonably competent programmers.
(o) Year 2000 Compliance.
--------------------
(i) Except as set forth in Section 2.14(o) of the Company
Disclosure Schedule, all of the Company's and its subsidiaries' material
products (including products currently under development) will record, store,
process and calculate and present calendar dates falling on and after December
31, 1998, and will calculate any information dependent on or relating to such
dates in the same manner and with the same functionality, data integrity and
performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1998, or calculate any information
dependent on or relating to such dates (collectively "Year 2000 Compliant").
Except as set forth in Section 2.14(o) of the Company Disclosure Schedule, (A)
all of the Company's and its subsidiaries' material products will lose no
significant functionality with respect to the introduction of records containing
dates falling on or after December 31, 1998; (B) all of the Company's and its
subsidiaries' internal computer systems comprised of software, hardware,
databases or embedded control systems (microprocessor controlled, robotic or
other device) related to the Company's and its subsidiaries' businesses
(collectively, a "Business System "), that constitutes any material part of, or
is used in connection with the use, operation or enjoyment of, any material
tangible or intangible asset or real property of the Company and its
subsidiaries, including its accounting systems, are Year 2000 Compliant. Except
as set forth on Section 2.14(o) of the Company Disclosure Schedule, the current
versions of the Company's and its subsidiaries' software and all other
Intellectual Property may be used prior to, during and after December 31, 1998,
such that such Software and Intellectual Property will operate prior to, during
and after such time period without error caused by date data that represents or
references different centuries or more than one century.
(ii) To the knowledge of the Company, all of the Company's
products and the conduct of the Company's business with customers and suppliers
will not be materially adversely affected by the advent of the year 2000, the
advent of the twenty-first century or the transition from the twentieth century
through the year 2000 and into the twenty-first century. To the knowledge of the
Company and except as set forth on Section 2.14(o) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is reasonably likely
to incur material expenses arising from or relating to the failure of any of its
Business Systems or any products (including all products sold on or prior to the
date hereof) as a result of the advent of the year 2000, the advent of the
twenty-first century or the transition from the twentieth century through the
year 2000.
21
Section 2.15. Insurance. Each of the Company and its subsidiaries
---------
maintains insurance policies (the "Insurance Policies") against all risks of
a character and in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Each Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full. None of the Insurance Policies
will terminate or lapse (or be affected in any other materially adverse manner)
by reason of the transactions contemplated by this Agreement. Each of the
Company and its subsidiaries has complied in all material respects with the
provisions of each Insurance Policy under which it is the insured party. No
insurer under any Insurance Policy has canceled or generally disclaimed
liability under any such policy or, to the Company's knowledge, indicated any
intent to do so or not to renew any such policy. All material claims under the
Insurance Policies have been filed in a timely fashion.
Section 2.16. Certain Business Practices. None of the Company, any
--------------------------
of its subsidiaries or any directors, officers, agents or employees of the
Company or any of its subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
Section 2.17. Product Warranties. Section 2.17 of the Company
------------------
Disclosure Schedule sets forth complete and accurate copies of the written
warranties and guaranties by the Company or any of its subsidiaries currently in
effect with respect to its products. There have not been any material
deviations from such warranties and guaranties, and neither the Company, any of
its subsidiaries nor any of their respective salesmen, employees, distributors
and agents is authorized to undertake obligations to any customer or to other
third parties in excess of such warranties or guaranties. Neither the Company
nor any of its subsidiaries has made any oral warranty or guaranty with respect
to its products.
Section 2.18. Suppliers and Customers. The documents and information
-----------------------
supplied by the Company to Parent or any of its representatives in connection
with this Agreement with respect to relationships and volumes of business done
with its significant suppliers and customers are accurate in all material
respects. During the last twelve (12) months, the Company has received no
notices of termination or written threats of termination from any of the five
(5) largest suppliers or the five (5) largest customers of the Company and its
subsidiaries.
Section 2.19. Vote Required. The affirmative vote of the holders of
-------------
a majority of the outstanding Shares is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve and adopt
this Agreement.
Section 2.20. Tax Treatment; Pooling. Neither the Company nor, to
----------------------
the knowledge of the Company, any of its affiliates has taken or agreed to take
action that would prevent the Merger from (a) constituting a reorganization
qualifying under the provisions of
22
Section 368(a) of the Code or (b) being treated for financial accounting
purposes as a pooling of interests in accordance with generally accepted
accounting principles and the rules regulations and interpretations of the SEC
(a "Pooling Transaction").
Section 2.21. Affiliates. Except for the directors and executive
----------
officers of the Company, each of whom is listed in Section 2.21 of the Company
Disclosure Schedule, there are no persons who, to the knowledge of the Company,
may be deemed to be affiliates of the Company under Rule 145 of the Securities
Act ("Company Affiliates").
Section 2.22. Opinion of Financial Adviser. ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
----------------------------
(the "Company Financial Adviser") has delivered to the Company Board its
written opinion dated the date of this Agreement to the effect that as of such
date the Merger Consideration is fair, from a financial point of view, to the
holders of Shares.
Section 2.23. Brokers. No broker, finder or investment banker (other
-------
than the Company Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to Acquisition or Parent) is entitled to any
brokerage finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 2.24. Company Rights Agreement. The Company has taken all
------------------------
necessary action to ensure that neither its entering into this Agreement or the
Stock Option Agreement, nor the consummation of the Merger, nor exercise of
Parent's rights under such Stock Option Agreement in accordance with its terms,
will cause the Company Rights to become exercisable, cause Parent or Acquisition
to become an "Acquiring Person" (each as defined in the Company Rights
Agreement), or cause there to occur a "Triggering Event" or a "Distribution
Date" (each as defined in the Company Rights Agreement).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
Section 3.1. Organization.
------------
(a) Each of Parent and Acquisition is duly organized, validly existing
and in good standing under the laws of the State of Delaware, respectively, and
has all requisite power and authority to own, lease and operate its properties
and to carry on its businesses as now being conducted. Parent has heretofore
made available to the Company accurate and complete copies of the Certificate of
Incorporation and bylaws as currently in full force and effect, of Parent and
Acquisition.
23
(b) Each of Parent and Acquisition is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect on Parent. When used in connection with
Parent or Acquisition the term "Material Adverse Effect on Parent" means any
circumstance, change in, or effect on (or circumstance, change in, or effect
involving a prospective change on) Parent and its subsidiaries, taken as a
whole, (a) that is, or is reasonably likely in the future to be, materially
adverse to the operations, assets or liabilities (including contingent
liabilities), earnings or results of operations, or the business (financial or
otherwise) of Parent and its subsidiaries, taken as a whole, excluding from the
foregoing the effect, if any, of (i) changes in general economic conditions or
changes affecting the industry in which Parent operates, (ii) stockholder class
action litigation arising from allegations of a breach of fiduciary duty
relating to this Agreement, (iii) the public announcement or pendency of the
transactions contemplated hereby on current or prospective customers or revenues
of the Parent (provided that such effect is direct and that Parent shall have
the burden of proving such direct effect), or (iv) any action or inaction
required of Parent by the Company under this Agreement, or (b) that would
reasonably be expected to prevent or materially delay or impair the ability of
Parent and Acquisition to consummate the transactions contemplated by this
Agreement.
Section 3.2. Capitalization of Parent and its Subsidiaries.
---------------------------------------------
(a) The authorized capital stock of Parent consists of 600,000,000
shares of Parent Common Stock, of which, as of December 7, 1998, 218,140,000
shares of Parent Common Stock were issued and outstanding (each together with a
Parent Common Stock purchase right (the "Parent Rights") issued pursuant to
the Rights Agreement dated as of February 9, 1996 between Parent and ▇▇▇▇▇▇
Trust and Savings Bank) and 400,000 shares of preferred stock, $.01 par value
per share, none of which are outstanding. All of the outstanding shares of
Parent Common Stock have been validly issued and are fully paid, nonassessable
and free of preemptive rights. As of December 7, 1998, 58,185,625 shares of
Parent Common Stock were reserved for issuance and 39,311,061 were issuable upon
or otherwise deliverable in connection with the exercise of outstanding options
and warrants. Between December 7, 1998 and the date hereof, no shares of
Parent's capital stock have been issued other than pursuant to stock options and
warrants already in existence on such date and except for grants of stock
options to employees, officers and directors in the ordinary course of business
consistent with past practice. Between December 7, 1998 and the date hereof, no
stock options or warrants have been granted. Except as set forth above and
except for the Parent Rights, as of the date hereof, there are outstanding (i)
no shares of capital stock or other voting securities of Parent (ii) no
securities of Parent or its subsidiaries convertible into or exchangeable for
shares of capital stock, or voting securities of Parent (iii) no options or
other rights to acquire from Parent or its subsidiaries and no obligations of
Parent or its subsidiaries to issue any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Parent and (iv) except for the Parent Rights, the Automated
Systems, Inc. 1983 Stock Option Plan, ▇▇▇▇▇▇ & Chyan Technology, Inc. 1989
24
Stock Option Plan, ▇▇▇▇▇▇ & Chyan Technology, Inc. 1993 Equity Incentive Plan,
Unicad, Inc. Stock Option Plan, Cadence Design Systems, Inc. 1997 Nonstatutory
Stock Option Plan, High Level Design Systems 1993 Stock Option Plan, High Level
Design Systems 1995 Special Nonstatutory Stock Option Plan, Ambit Design
Systems, Inc. 1994 Incentive Stock Option Plan, Ambit Design Systems, Inc. 1996
Incentive Stock Option Plan, Ambit OP (Shares Issued Outside Plans), Cadence
Design Systems, Inc. 1993 Non-Statutory Stock Option Plan, Cadence Design
Systems, Inc. 1993 Directors Stock Option Plan, Cadence Design Systems, Inc.
1995 Directors Stock Option Plan, Cadence Design Systems, Inc. 1997 Nonstatutory
Stock Option Plan, OP Stock Option Plan (shares issued outside CDN Directors
Plan) and warrants issued to Comdisco and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., no equity
equivalent interests in the ownership or earnings of Parent or its subsidiaries
or other similar rights (collectively, "Parent Securities"). As of the date
hereof, other than in connection with the Company's seasoned authorized stock
repurchase program, there are no outstanding obligations of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Parent Securities.
There are no stockholder agreements, voting trusts or other agreements or
understandings to which Parent is a party or by which it is bound relating to
the voting of any shares of capital stock of Parent.
(b) The Parent Rights and Parent Common Stock constitute the only
classes of equity securities of Parent or any of its subsidiaries registered or
required to be registered under the Exchange Act.
Section 3.3. Authority Relative to this Agreement. Each of Parent
------------------------------------
and Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations under 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 and validly authorized by the boards of directors of Parent and
Acquisition and by Parent as the sole stockholder of Acquisition and no other
corporate proceedings on the part of Parent or Acquisition are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and Acquisition and constitutes, assuming the due authorization,
execution and delivery hereof by the Company, a valid, legal and binding
agreement of each of Parent and Acquisition enforceable against each of Parent
and Acquisition in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
Section 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) Parent has filed all required forms, reports and documents
("Parent SEC Reports") with the SEC since December 31, 1997, each of which,
complied at the time of filing in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, each law as in effect
on the dates such forms reports and documents were filed. None of such Parent
SEC Reports, including any financial statements or schedules included or
25
incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading,
except to the extent superseded by a Parent SEC Report filed subsequently and
prior to the date hereof. The audited consolidated financial statements of
Parent included in the Parent SEC Reports fairly present in conformity in all
material respects with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto) the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended.
(b) Parent has heretofore made available or promptly will make
available to the Company a complete and correct copy of any amendments or
modifications that are required to be filed with the SEC but have not yet been
filed with the SEC to agreements documents or other instruments that previously
had been filed by Parent with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied. None of the information supplied
--------------------
or to be supplied by Parent or Acquisition for inclusion or incorporation by
reference to (i) the S-4 will at the time the S-4 is filed with the SEC and at
the time it becomes effective under the Securities Act contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Proxy Statement will at the date mailed to stockholders and at the
times of the meeting or meetings of stockholders of the Company to be held in
connection with the Merger contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made not misleading. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder. Notwithstanding the foregoing, Parent makes no representation,
warranty or covenant with respect to any information supplied or required to be
supplied by the Company which is contained in or omitted from any of the
foregoing documents.
Section 3.6. Consents and Approvals; No Violations. Except for
-------------------------------------
filings, permits, authorizations, consents, and approvals as may be required
under and other applicable requirements of the Securities Act, the Exchange Act,
state securities or blue sky laws, the HSR Act, and any filings under similar
merger notification laws or regulations of foreign Governmental Entities and the
filing and recordation of the Certificate of Merger as required by the DGCL, no
filing with or notice to, and no permit authorization consent or approval of any
Governmental Entity is necessary for the execution and delivery by Parent or
Acquisition of this Agreement or the consummation by Parent or Acquisition of
the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Neither the execution, delivery and performance of this
Agreement by Parent or Acquisition nor the consummation by Parent or Acquisition
of the transactions contemplated hereby will (i)
26
conflict with or result in any breach of any provision of the respective
Certificate or Certificate of Incorporation or bylaws (or similar governing
documents) of Parent or Acquisition or any of Parent's other subsidiaries, (ii)
result in a violation or breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent or
Acquisition or any of Parent's other subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or Acquisition or any of Parent's other subsidiaries or any
of their respective properties or assets except, in the case of (ii) or (iii),
for violations, breaches or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
Section 3.7. No Default. Neither Parent nor any of its subsidiaries
----------
is in breach, default or violation (and no event has occurred that with notice
or the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent or any of its subsidiaries is now a party or by which any of
them or any of their respective properties or assets may be bound or (iii) any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets, except, in the case of clause (ii) or (iii), for violations, breaches or
defaults that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except
----------------------------------------------
as and to the extent publicly disclosed by Parent in the Parent SEC Reports,
neither Parent nor any of its subsidiaries has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise that would be
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of Parent and its consolidated subsidiaries
(including the notes thereto), other than liabilities and obligations incurred
in the ordinary course of business since September 30, 1998, which, individually
or in the aggregate, will not have a Material Adverse Effect on Parent. Except
as publicly disclosed by Parent in the Parent SEC Reports, since September 30,
1998, there have been no events changes or effects with respect to Parent or its
subsidiaries having or that would reasonably be expected to have a Material
Adverse Effect on Parent.
Section 3.9. Litigation. Except as publicly disclosed by Parent in
----------
the Parent SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent threatened, against Parent
or any of its subsidiaries or any of their respective properties or assets
before any Governmental Entity that, individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect or could reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement. Except as publicly disclosed by Parent in the Parent SEC
27
Reports, neither Parent nor any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree that, insofar as can be reasonably
foreseen in the future would reasonably be expected to have a Material Adverse
Effect on Parent or could reasonably be expected to prevent or delay the
consummation of the transactions contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly
------------------------------
disclosed by Parent in the Parent SEC Reports, Parent and its subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals that would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Except as publicly disclosed by Parent in the Parent SEC Reports, Parent and its
subsidiaries are in compliance with the terms of the Parent Permits, except
where the failure so to comply would not, individually or in the aggregate, have
a Material Adverse Effect on Parent. Except as publicly disclosed by Parent in
the Parent SEC Reports, the businesses of Parent and its subsidiaries are not
being conducted in violation of any law ordinance or regulation of any
Governmental Entity except that no representation or warranty is made in this
Section 3.10 with respect to Environmental Laws and except for violations or
possible violations that do not and, insofar as reasonably can be foreseen in
the future, will not, individually or in the aggregate, have a Material Adverse
Effect on Parent. Except as publicly disclosed by Parent in the Parent SEC
Reports, no investigation or review by any Governmental Entity with respect to
Parent or its subsidiaries is pending or, to the knowledge of Parent,
threatened, nor, to the knowledge of Parent, has any Governmental Entity
indicated an intention to conduct the same, other than in each case those that
Parent reasonably believes will not have a Material Adverse Effect on Parent.
Section 3.11. Tax Treatment; Pooling. Neither Parent, Acquisition
----------------------
nor, to the knowledge of Parent, any of its affiliates has taken, proposes to
take, or has agreed to take any action that would prevent the Merger (a) from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code or (b) from being treated as a Pooling Transaction for financial
accounting purposes.
Section 3.12. Opinion of Financial Adviser. ▇▇▇▇▇▇▇, Sachs & Co.
----------------------------
(the "Parent Financial Adviser") has delivered to the Board of Directors of
Parent its opinion to the effect that, as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to Parent.
Section 3.13. Brokers. No broker finder or investment banker (other
-------
than the Parent Financial Adviser) is entitled to any brokerage finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Acquisition.
Section 3.14. No Prior Activities. Except for obligations incurred
-------------------
in connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any
28
obligation or liability nor engaged in any business or activity of any type or
kind whatsoever or entered into any agreement or arrangement with any person.
Section 3.15 Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by Parent in the Parent SEC Reports
(i) each of Parent and its subsidiaries is in material compliance with all
Environmental Laws, except for non-compliances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Parent, which
compliance includes, but is not limited to, the possession by the Parent and its
subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws and compliance with the terms and
conditions thereof; (ii) neither Parent nor any of its subsidiaries has received
written notice of or, to the knowledge of Parent, is the subject of any
Environmental Claim, and (iii) to the knowledge of Parent, there are no existing
facts that are reasonably likely to prevent or interfere with such material
compliance in the future.
(b) Except as disclosed in the Parent SEC Reports, there are no
Environmental Claims that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on the Company that are pending or,
to the knowledge of Parent, threatened against Parent or any of its subsidiaries
or, to the knowledge of Parent, against any person whose liability for any
Environmental Claim the Parent or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law.
ARTICLE 4
COVENANTS
Section 4.1. Conduct of Business of the Company. Except as
----------------------------------
contemplated by this Agreement or as described in Section 4.1 of the Company
Disclosure Schedule, during the period from the date hereof to the Effective
Time, the Company will and will cause each of its subsidiaries to conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement seek, to preserve intact its current
business organizations, keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it with the intention that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Without limiting
the generality of the foregoing, except as otherwise expressly provided in this
Agreement or as described in Section 4.1 of the Company Disclosure Schedule,
prior to the Effective Time, neither the Company nor any of its subsidiaries
will, without the prior written consent of Parent and Acquisition:
(a) amend its Certificate or Articles of Incorporation or bylaws (or
other similar governing instrument);
29
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (except bank loans) or equity equivalents
(including any stock options or stock appreciation rights) except for the
issuance and sale of Shares pursuant to options granted under the Company Plans
prior to the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their capacity
as such, or redeem or otherwise acquire any of its securities or any securities
of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring
or any other fashion the corporate structure of ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person except for obligations of subsidiaries of the
Company incurred in the ordinary course of business; (iii) make any loans,
advances or capital contributions to or investments in any other person (other
than to subsidiaries of the Company or customary loans or advances to employees
in each case in the ordinary course of business consistent with past practice);
(iv) pledge or otherwise encumber shares of capital stock of the Company or any
of its subsidiaries; or (v) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material Lien
thereupon;
(g) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, health, life, or disability insurance, dependent care,
severance or other employee benefit plan agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner or increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (g) shall not prevent the Company or its subsidiaries from increasing
annual compensation and/or providing for or amending bonus arrangements for
employees for fiscal 1998 in the ordinary course of year-end compensation
reviews
30
consistent with past practice (to the extent that such compensation increases
and new or amended bonus arrangements do not result in a material increase in
benefits or compensation expense to the Company or any such subsidiary);
(h) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions having a fair market value in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate, other than
sales of its products in the ordinary course of business consistent with past
practices;
(i) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(j) revalue in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts receivable,
other than in the ordinary course of business;
(k) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice that would be material to the Company and its subsidiaries, taken as a
whole; (iii) amend, modify or waive any right under any material contract of the
Company or any of its subsidiaries; (iv) modify its standard warranty terms for
its products or amend or modify any product warranties in effect as of the date
hereof in any material manner that is adverse to the Company or any of its
subsidiaries; or (v) authorize any new capital expenditure or expenditures that
individually is in excess of One Hundred Thousand Dollars ($100,000) or in the
aggregate are in excess of Three Hundred Thousand Dollars ($300,000); provided
that nothing in the foregoing clause (v) shall limit any capital expenditure
required pursuant to existing customer contracts;
(l) make any tax election or settle or compromise any income tax
liability material to the Company and its subsidiaries taken as a whole;
(m) settle or compromise any pending or threatened suit, action or
claim that (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which would have a Material Adverse Effect on the
Company;
(n) commence any material software development project or terminate
any material software development project that is currently ongoing, in either
case except pursuant to the terms of existing contracts with customers or except
as contemplated by the Company's project development budget previously provided
to Parent; or
(o) take or agree in writing or otherwise to take any of the actions
described in Sections 4.1(a) through 4.1(n) (and it shall use all reasonable
efforts not to take any action that would make any of the representations or
warranties of the Company contained in this Agreement untrue or incorrect).
31
Section 4.2. Conduct of Business of Parent. Except as contemplated
-----------------------------
by this Agreement, during the period from the date hereof to the Effective Time,
Parent will and will cause each of its subsidiaries to conduct their operations
in the ordinary course of business consistent with past practice and, to the
extent consistent therewith, with no less diligence and effort than would be
applied in the absence of this Agreement, seek to preserve intact its current
business organizations, keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement prior to
the Effective Time, neither Parent nor any of its subsidiaries will, without the
prior written consent of the Company:
(a) knowingly take any action that would result in a failure to
maintain the trading of the Parent Common Stock on the New York Stock Exchange
("NYSE");
(b) acquire or agree to acquire by merging or consolidating with by
purchasing an equity interest in or the assets of or by any other manner any
business or any corporation, partnership or other business organization or
division thereof or otherwise acquire or agree to acquire any assets of any
other entity (other than the purchase of assets from suppliers, clients or
vendors in the ordinary course of business and consistent with past practice) if
such transaction would prevent or materially delay the consummation of the
transactions contemplated by this Agreement;
(c) adopt or propose to adopt any amendments to its charter documents
that would have an adverse impact on the consummation of the transactions
contemplated by this Agreement; or
(d) take or agree in writing or otherwise to take any of the actions
described in Sections 4.2(a) through 4.2(c) or any action that would make any of
the representations or warranties of Parent contained in this Agreement untrue
or incorrect.
Section 4.3. Preparation of S-4 and the Proxy Statement. The Company
------------------------------------------
shall promptly prepare and file with the SEC the Proxy Statement and Parent
shall promptly prepare and file with the SEC the S-4 in which the Proxy
Statement will be included as a prospectus. Each of Parent and the Company
shall use all reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Parent shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock in
the Merger and upon the exercise of Company Stock Options and the Company shall
furnish all information concerning the Company and the holders of Shares as may
be reasonably requested in connection with any such action.
32
Section 4.4. Other Potential Acquirers.
-------------------------
(a) The Company, its affiliates (as reasonably determined by the
Company) and their respective officers and other employees with managerial
responsibilities, directors, representatives and agents shall immediately cease
any discussions or negotiations with any parties with respect to any Third Party
Acquisition (as defined below). Neither the Company nor any of its affiliates
(as reasonably determined by the Company) shall, nor shall the Company authorize
or permit any of its or their respective officers, directors, employees
representatives or agents to, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with or provide any non-
public information to any person or group (other than Parent and Acquisition or
any designees of Parent and Acquisition) concerning any Third Party Acquisition;
provided, however, that nothing herein shall prevent the Company Board from
taking and disclosing to the Company's stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender or exchange offer. The Company shall promptly notify the Parent in the
event it receives any proposal or inquiry concerning a Third Party Acquisition,
including the terms and conditions thereof and the identity of the party
submitting such proposal, and shall advise Parent from time to time of the
status and any material developments concerning the same.
(b) Except as set forth in this Section 4.4(b), the Company Board
shall not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if the
Company Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of legal counsel, that it is
required to do so in order to comply with its fiduciary duties, the Company
Board may withdraw its recommendation of the transactions contemplated hereby or
approve or recommend a Superior Proposal (as defined in subsection (c) below),
but in each case only (i) after providing written notice to Parent (a "Notice of
Superior Proposal") advising Parent that the Company Board has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal and (ii) if
Parent does not, within five (5) business days of Parent's receipt of the Notice
of Superior Proposal, make an offer that the Company Board by a majority vote
determines in its good faith judgment (based on the written advice of a
financial adviser of nationally recognized reputation) to be at least as
favorable to the Company's stockholders as such Superior Proposal; provided,
however, that the Company shall not be entitled to enter into any agreement with
respect to a Superior Proposal unless and until this Agreement is terminated by
its terms pursuant to Section 6.1 and the Company has paid all amounts due to
Parent pursuant to Section 6.3. Any disclosure that the Company Board may be
compelled to make with respect to the receipt of a proposal for a Third Party
Acquisition or otherwise in order to comply with its fiduciary duties or Rule
14d-9 or 14e-2 will not constitute a violation of this Agreement, provided that
such disclosure states that no action will be taken by the Company Board in
violation of this Section 4.4(b).
(c) For the purposes of this Agreement, "Third Party Acquisition"
means the occurrence of any of the following events: (i) the acquisition of the
Company by merger or
33
otherwise by any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Parent, Acquisition or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
any material portion of the assets of the Company and its subsidiaries taken as
a whole, other than the sale of its products in the ordinary course of business
consistent with past practices; (iii) the acquisition by a Third Party of
fifteen percent (15%) or more of the outstanding Shares; (iv) the adoption by
the Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by the Company or any of its
subsidiaries of more than ten percent (10%) of the outstanding Shares; or (vi)
the acquisition by the Company or any of its subsidiaries by merger, purchase of
stock or assets, joint venture or otherwise of a direct or indirect ownership
interest or investment in any business whose annual revenues, net income or
assets is equal or greater than ten percent (10%) of the annual revenues, net
income or assets of the Company. For purposes of this Agreement, a "Superior
Proposal" means any bona fide proposal to acquire directly or indirectly for
consideration consisting of cash and/or securities more than 50% of the Shares
then outstanding or all or substantially all the assets of the Company and
otherwise on terms that the Company Board by a majority vote determines in its
good faith judgment (based on the written advice of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC or
another financial advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger.
Section 4.5. Comfort Letters.
---------------
(a) The Company shall use all reasonable efforts to cause
PricewaterhouseCoopers LLP to deliver a letter dated not more than five days
prior to the date on which the S-4 shall become effective and addressed to
itself and Parent and their respective Boards of Directors in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
agreed-upon procedures letters delivered by independent public accountants in
connection with registration statements and proxy statements similar to the S-4
and the Proxy Statement.
(b) Parent shall use all reasonable efforts to cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP to deliver a letter dated not more than five (5) days prior to the date of
the S-4 shall become effective and addressed to itself and the Company and their
respective Boards of Directors in form and substance reasonably satisfactory to
the Company and customary in scope and substance for agreed-upon procedures
letters delivered by independent accountants in connection with registration
statements and proxy statements similar to the S-4 and the Proxy Statement.
Section 4.6. Meeting of Stockholders. The Company shall take all
-----------------------
actions necessary in accordance with the DGCL and its Certificate of
Incorporation and bylaws to duly call give notice of, convene and hold a meeting
of its stockholders as promptly as practicable to consider and vote upon the
adoption and approval of this Agreement and the transactions contemplated
hereby. The stockholder vote required for the adoption and approval of the
transactions contemplated by this Agreement shall be the vote required by the
DGCL and the Company's Certificate of Incorporation and bylaws. The Company
will,
34
through the Company Board, recommend to its stockholders approval of such
matters subject to the provisions of Section 4.4(b). The Company shall promptly
prepare and file with the SEC the Proxy Statement for the solicitation of a vote
of the holders of Shares approving the Merger, which, subject to the provisions
of Section 4.4(b), shall include the recommendation of the Company Board that
stockholders of the Company vote in favor of the approval and adoption of this
Agreement and the written opinion of the Financial Advisor that the cash
consideration to be received by the stockholders of the Company pursuant to the
Merger is fair to such stockholders from a financial point of view. The Company
shall use all reasonable efforts to have the Proxy Statement cleared by the SEC
as promptly as practicable after such filing, and promptly thereafter mail the
Proxy Statement to the stockholders of the Company. Parent shall use all
reasonable efforts to obtain all necessary state securities law or "blue sky"
permits and approvals required in connection with the Merger and to consummate
the other transactions contemplated by this Agreement and will pay all expenses
incident thereto, provided that the Company shall cooperate with Parent in
obtaining such permits and approvals as reasonably requested.
Section 4.7. Stock Exchange Listing. Parent shall use all reasonable
----------------------
efforts to cause the shares of Parent Common Stock to be issued in the Merger
and the shares of Parent Common Stock to be reserved for issuance upon exercise
of Company Stock Options to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
Section 4.8. Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the Company will
give Parent and its authorized representatives reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books and
records of the Company and its subsidiaries as Parent may reasonably require,
and will cause its officers and those of its subsidiaries to furnish Parent with
such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Parent may from
time to time reasonably request. Between the date hereof and the Effective
Time, Parent shall make available to the Company, as reasonably requested by the
Company, a designated officer of Parent to answer questions and make available
such information regarding Parent and its subsidiaries as is reasonably
requested by the Company taking into account the nature of the transactions
contemplated by this Agreement.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent (1) within two (2) business days following preparation thereof
(and in any event within twenty (20) business days after the end of each
calendar month, commencing with December 1998), an unaudited balance sheet as of
the end of such month and the related statements of earnings, stockholders'
equity (deficit) and cash flows, (2) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each fiscal quarter) an unaudited balance sheet as of the end of such
quarter and the related statements of earnings, stockholders' equity (deficit)
and cash flows for the quarter then ended, and (3) within two (2) business days
following preparation thereof
35
(and in any event within ninety (90) calendar days after the end of each fiscal
year, an audited balance sheet as of the end of such year and the related
statements of earnings, stockholders' equity (deficit) and cash flows, all of
such financial statements referred to in clauses (1), (2) and (3) to prepared in
accordance with generally accepted accounting principles in conformity with the
practices consistently applied by the Company with respect to such financial
statements. All the foregoing shall be in accordance with the books and records
of the Company and shall fairly present its financial position (taking into
account the differences between the monthly, quarterly and annual financial
statements prepared by the Company in conformity with its past practices) as of
the last day of the period then ended.
(c) Each of the parties hereto will hold, and will cause its
consultants and advisers to hold, in confidence all documents and information
furnished to it by or on behalf of another party to this Agreement in connection
with the transactions contemplated by this Agreement pursuant to the terms of
that certain Confidentiality Agreement entered into between the Company and
Parent dated December 4, 1998.
Section 4.9. Certain Filings; Reasonable Efforts.
-----------------------------------
(a) Subject to the terms and conditions herein provided, including,
without limitation, Section 4.4(b), each of the parties hereto agrees to use all
reasonable efforts to take or cause to be taken all action and to do or cause to
be done all things reasonably necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using all reasonable efforts to do the
following, (i) cooperate in the preparation and filing of the Proxy Statement
and the S-4 and any amendments thereto, any filings that may be required under
the HSR Act and any filings under similar merger notification laws or
regulations of foreign Governmental Entities; (ii) obtain consents of all third
parties and Governmental Entities necessary, proper or advisable for the
consummation of the transactions contemplated by this Agreement; (iii) contest
any legal proceeding relating to the Merger; and (iv) execute any additional
instruments necessary to consummate the transactions contemplated hereby.
Subject to the terms and conditions of this Agreement, Parent and Acquisition
agree to use all reasonable efforts to cause the Effective Time to occur as soon
as practicable after the Company stockholder vote with respect to the Merger.
The Company agrees to use all reasonable efforts to encourage its employees to
accept any offers of employment extended by Parent. If at any time after the
Effective Time any further action is necessary to carry out the purposes of this
Agreement the proper officers and directors of each party hereto shall take all
such necessary action.
(b) Parent and the Company will consult and cooperate with one
another, and consider in good faith the views of one another, in connection with
any analyses, appearances, presentations, letters, white papers, memoranda,
briefs, arguments, opinions or 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 foreign, federal, or state antitrust, competition, or fair trade
law. In this regard but without limitation, each party hereto shall promptly
inform the other of any material communication between such party and the
Federal
36
Trade Commission, the Antitrust Division of the United States Department of
Justice, or any other federal, foreign or state antitrust or competition
Governmental Entity regarding the transactions contemplated herein.
Section 4.10. Public Announcements. Parent, Acquisition and the
--------------------
Company, as the case may be, will consult with one another before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation except (i) as may be required by applicable law, or by the rules
and regulations of, or pursuant to any listing agreement with, the NYSE or the
Nasdaq National Market, as determined by Parent, Acquisition or the Company, as
the case may be, or (ii) following a change, if any, of the Company Board's
recommendation of the Merger (in accordance with Section 4.4(b)), after which
event no such consultation shall be required. Notwithstanding the preceding
sentence, the first public announcement of this Agreement and the Merger shall
be a joint press agreed upon by Parent and the Company.
Section 4.11. Indemnification and Directors' and Officers' Insurance.
------------------------------------------------------
(a) After the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless (and shall also advance expenses as
incurred to the fullest extent permitted under applicable law to), to the extent
not covered by insurance, each person who is now or has been prior to the date
hereof or who becomes prior to the Effective Time an officer or director of the
Company or any of the Company's subsidiaries (the "Indemnified Persons")
against (i) all losses, claims, damages, costs, expenses (including counsel fees
and expenses), settlement, payments or liabilities arising out of or in
connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such person is or was an officer or director of the Company or any of its
subsidiaries, whether or not pertaining to any matter existing or occurring at
or prior to the Effective Time and whether or not asserted or claimed prior to
or at or after the Effective Time ("Indemnified Liabilities"); and (ii) all
Indemnified Liabilities based in whole or in part on or arising in whole or in
part out of or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the fullest extent required or permitted under
applicable law. Nothing contained herein shall make Parent, Acquisition, the
Company or the Surviving Corporation, an insurer, a co-insurer or an excess
insurer in respect of any insurance policies which may provide coverage for
Indemnified Liabilities, nor shall this Section 4.11 relieve the obligations of
any insurer in respect thereto. The parties hereto intend, to the extent not
prohibited by applicable law, that the indemnification provided for in this
Section 4.11 shall apply without limitation to negligent acts or omissions by an
Indemnified Person. Parent hereby guarantees the payment and performance of the
Surviving Corporation's obligations in this Section 4.11. Each Indemnified
Person is intended to be a third party beneficiary of this Section 4.11 and may
specifically enforce its terms. This Section 4.11 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any agreement
with the Company or under the Company's Certificate of Incorporation or bylaws
as presently in effect.
37
(b) From and after the Effective Time, Parent will fulfill and honor
and will cause the Surviving Corporation to fulfill and honor in all respects
the obligations of the Company pursuant to any indemnification agreements
between the Company and its directors and officers as of or prior to the date
hereof (or indemnification agreements in the Company's customary form for
directors joining the Company's Board of Directors prior to the Effective Time)
and any indemnification provisions under the Company's certificate of
incorporation or bylaws as in effect immediately prior to the Effective Time.
(c) For a period of six years after the Effective Time, Parent will
maintain or cause the Surviving Corporation to maintain in effect, if available,
directors' and officers' liability insurance covering those persons who, as of
immediately prior to the Effective Time, are covered by the Company's directors'
and officers' liability insurance policy (the "Insured Parties") on terms no
less favorable to the Insured Parties than those of the Company's present
directors' and officers' liability insurance policy; provided, however, that in
no event will Parent or the Surviving Corporation be required to expend in
excess of 150% of the annual premium currently paid by the Company for such
coverage (or such coverage as is available for 150% of such annual premium);
provided further, that, in lieu of maintaining such existing insurance as
provided above, Parent may cause coverage to be provided under any policy
maintained for the benefit of Parent or any of its subsidiaries, so long as the
terms are not materially less advantageous to the intended beneficiaries thereof
than such existing insurance.
(d) The provisions of this Section 4.11 are intended to be for the
benefit of, and will be enforceable by, each person entitled to indemnification
hereunder and the heirs and representatives of such person. Parent will not
permit the Surviving Corporation to merge or consolidate with any other Person
unless the Surviving Corporation will ensure that the surviving or resulting
entity assumes the obligations imposed by this Section 4.11.
Section 4.12. Notification of Certain Matters. The Company shall
-------------------------------
give prompt notice to Parent and Acquisition, and Parent and Acquisition shall
give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which has caused or would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Company, Parent or Acquisition, as the case may be,
to comply with or satisfy in any material respect any covenant condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.12 shall not cure
such breach or non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.13. Affiliates; Pooling; Tax-Free Reorganization.
--------------------------------------------
(a) The Company shall use all reasonable efforts to obtain from all
Company Affiliates and from any person who may be deemed to have become a
Company Affiliate, after the date of this Agreement and on or prior to the
Effective Time, a letter agreement substantially in the form of Exhibit A-1
-----------
hereto as soon as practicable.
38
(b) Parent shall use all reasonable efforts to obtain from each of its
directors, officers and any other person who may be deemed to be an affiliate of
Parent pursuant to Rule 145 under the Securities Act, as soon as practicable
after the date of this Agreement and on or prior to the Effective Time, a letter
agreement substantially in the form of Exhibit A-2 hereto.
-----------
(c) Parent shall not be required to maintain the effectiveness of the
S-4 for the purpose of resale of shares of Parent Common Stock by stockholders
of the Company who may be affiliates of the Company or Parent pursuant to Rule
145 under the Securities Act.
(d) Each party hereto shall use all reasonable efforts to cause the
Merger to be treated for financial accounting purposes as a Pooling Transaction
and shall not take and shall use all reasonable efforts to prevent any affiliate
of such party from taking any actions that could prevent the Merger from being
treated for financial accounting purposes as a Pooling Transaction, and shall
take all reasonable actions to remedy the effects of any prior actions so as to
permit such treatment.
(e) The Company, on the one hand, and Parent and Acquisition, on the
other hand, shall execute and deliver to legal counsel to the Company and Parent
certificates substantially in the form attached hereto as Exhibits B-1 and B-2,
------------ ---
respectively, at such time or times as reasonably requested by such legal
counsel in connection with its delivery of an opinion with respect to the
transactions contemplated hereby and the Company and Parent shall each provide a
copy thereof to the other parties hereto. Prior to the Effective Time, none of
the Company, Parent or Acquisition shall take or cause to be taken any action
that would cause to be untrue (or fail to take or cause not to be taken any
action that would cause to be untrue) any of the representations in Exhibits B-1
------------
or B-2.
---
4.14. Additions to and Modification of Company Disclosure Schedule.
------------------------------------------------------------
Concurrently with the execution and delivery of this Agreement, the Company has
delivered a Company Disclosure Schedule that includes all of the information
required by the relevant provisions of this Agreement. In addition, the Company
shall deliver to Parent and Acquisition such additions to or modifications of
any Sections of the Company Disclosure Schedule necessary to make the
information set forth therein true, accurate and complete in all material
respects as soon as practicable after such information is available to the
Company after the date of execution and delivery of this Agreement; provided,
however, that such disclosure shall not be deemed to constitute an exception to
its representations and warranties under Article 2, nor limit the rights and
remedies of Parent and Acquisition under this Agreement for any breach by the
Company of such representation and warranties.
4.15. Company Rights Agreement. The Company shall not redeem any of
------------------------
the Company Rights issued pursuant to the Company Rights Agreement nor will the
Company take any action to amend the Company Rights Agreement to facilitate the
acquisition of Shares by any person other than Parent or Acquisition unless this
Agreement is first terminated in accordance with Article 6 of this Agreement.
39
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger. The respective obligations of each party hereto to effect the Merger
------
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental Entity that prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired;
(d) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby and to
operate the Business after the Effective Time in all material respects as it was
operated prior thereto (other than under the HSR Act) shall have been given,
obtained or complied with, as applicable;
(e) the S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop order
and Parent shall have received all state securities laws or "blue sky" permits
and authorizations necessary to issue shares of Parent Common Stock in exchange
for Shares in the Merger; and
(f) The Company shall have received from PricewaterhouseCoopers LLP
and Parent shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent accountants
for the Company and Parent, respectively, a copy of a letter addressed to the
Company and Parent, respectively, each dated the Closing Date, in substance
reasonably satisfactory to Parent and the Company (and which may contain
customary qualifications and assumptions), to the effect that such independent
accountants concur with the Company's and Parent's managements' conclusions that
no conditions exist related to the Company or Parent, respectively, that would
preclude Parent from accounting for the Merger as a "pooling of interests."
Section 5.2. Conditions to the Obligations of the Company. The
--------------------------------------------
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
contained in this Agreement or in the Stock Option Agreement of even date
herewith between Parent
40
and the Company (the "Stock Option Agreement") shall be true and correct (except
to the extent that the aggregate of all breaches thereof would not have a
Material Adverse Effect on Parent) at and as of the Effective Time with the same
effect as if made at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date, and in any
event, subject to the foregoing Material Adverse Effect qualification) and, at
the Closing, Parent and Acquisition shall have delivered to the Company a
certificate to that effect, executed by two (2) executive officers of Parent and
Acquisition;
(b) each of the covenants and obligations of Parent and Acquisition to
be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Acquisition shall have
delivered to the Company a certificate to that effect, executed by two (2)
executive officers of Parent and Acquisition;
(c) the shares of Parent Common Stock issuable to the Company's
stockholders pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have been authorized
for listing on the NYSE upon official notice of issuance;
(d) the Company shall have received the opinion of tax counsel to the
Company to the effect that (i) the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and (ii) each of Parent, Acquisition and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, which opinion
may rely on the representations set forth in Exhibits B-1 and B-2 and such other
representations as such counsel reasonably deems appropriate and such opinion
shall not have been withdrawn or modified in any material respect;
(e) the Company shall have received the opinion of legal counsel to
Parent as to the matters set forth in Exhibit C;
---------
(f) Parent shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not, in the reasonable
opinion of the Company, individually or in the aggregate, have a Material
Adverse Effect on Parent; and
(g) there shall have been no events, changes or effects with respect
to Parent or its subsidiaries having or that would reasonably be expected to
have a Material Adverse Effect on Parent,
Section 5.3. Conditions to the Obligations of Parent and Acquisition.
-------------------------------------------------------
The respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
41
(a) the representations and warranties of the Company contained in
this Agreement (other than those contained in Section 2.24) and in the Stock
Option Agreement shall be true and correct (except to the extent that the
aggregate of all breaches thereof would not have a Material Adverse Effect on
the Company) at and as of the Effective Time with the same effect as if made at
and as of the Effective Time (except to the extent such representations
specifically related to an earlier date, in which case such representations
shall be true and correct as of such earlier date, and in any event, subject to
the foregoing Material Adverse Effect qualification) and the representations and
warranties of the Company contained in Section 2.24 shall be true and correct in
all respects at and as of the Effective Time, and, at the Closing, the Company
shall have delivered to Parent and Acquisition a certificate to that effect,
executed by two (2) executive officers of the Company;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect, executed by two (2)
executive officers of the Company;
(c) Parent shall have received from each affiliate of the Company
referred to in Sections 2.21 and 4.13(a) an executed copy of the letter attached
hereto as Exhibit A-1;
------------
(d) there shall have been no events, changes or effects with respect
to the Company or its subsidiaries having or that, individually or in the
aggregate, would reasonably be expected to have, a Material Adverse Effect on
the Company;
(e) Parent shall have received the opinion of tax counsel to Parent to
the effect that (i) the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and (ii)
each of Parent, Acquisition and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, which opinion
may rely on the representations set forth in Exhibits B-1 and B-2 and such other
------------ ---
representations as such counsel reasonably deems appropriate, and such opinion
shall not have been withdrawn or modified in any material respect;
(f) Parent shall have received the opinion of legal counsel to the
Company as to the matters set forth in Exhibit D;
---------
(g) the Company shall have obtained the consent or approval of each
person whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any obligation
right or interest of the Company or any subsidiary of the Company the agreements
and instruments, set forth in Section 5.3(g) of the Company Disclosure Schedule;
and
(h) ▇▇▇▇▇ ▇. ▇▇▇▇ shall not have questioned the validity or
enforceability of the employment or non-competition agreement dated the date
hereof with Parent or otherwise expressed his intent not to continue his
employment with the Surviving Corporation.
42
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time whether before
or after approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States federal or
state Governmental Entity shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by June 30,
1999 (the "Final Date"); provided that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been the reason that the Effective
Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement or if any representation or warranty of Parent or Acquisition
shall have become untrue such that the conditions set forth in Section 5.2(a)
would be incapable of being satisfied by the Final Date, provided that the
Company has not breached any of its obligations hereunder in any material
respect; (ii) there shall have been a breach by Parent or Acquisition of any of
their respective covenants or agreements hereunder having a Material Adverse
Effect on Parent or materially adversely affecting (or materially delaying) the
consummation of the Merger, and Parent or Acquisition, as the case may be, has
not cured such breach within twenty (20) business days after notice by the
Company thereof, provided that the Company has not breached any of its
obligations hereunder in any material respect; (iii) the Company shall have
convened a meeting of its stockholders to vote upon the Merger and shall have
failed to obtain the requisite vote of its stockholders at such meeting
(including any adjournments thereof); or (iv) the Company Board has received a
Superior Proposal, has complied with the provisions of Section 4.4(b), and has
made the payment called for by Section 6.3(a); or
(d) by Parent and Acquisition if (i) there shall have been a breach of
any representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Company shall have become
untrue such that the conditions set forth in Section 5.3(a) would be incapable
of being satisfied by the Final Date, provided that neither Parent nor
Acquisition has breached any of their respective obligations hereunder in any
material respect; (ii) there shall have been a breach by the Company of its
covenants or agreements hereunder having a Material Adverse Effect on the
Company or materially adversely affecting (or materially delaying) the
consummation of the Merger, and the Company has not cured such breach within
twenty (20) business days after notice by Parent or Acquisition thereof,
provided that neither Parent nor Acquisition has breached any of their
43
respective obligations hereunder in any material respect; (iii) the Company
Board shall have recommended to the Company's stockholders a Superior Proposal;
(iv) the Company Board shall have withdrawn or adversely modified its approval
or recommendation of this Agreement or the Merger; (v) the Company shall have
ceased using all reasonable efforts to call, give notice of, or convene or hold
a stockholders' meeting to vote on the Merger as promptly as practicable after
the date hereof or shall have adopted a resolution not to effect any of the
foregoing; or (vi) the Company shall have convened a meeting of its stockholders
to vote upon the Merger and shall have failed to obtain the requisite vote of
its stockholders at such meeting (including any adjournments thereof).
Section 6.2. Effect of Termination. In the event of the termination
---------------------
and abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 6.2 and Sections 4.8(c) and 6.3 hereof.
Nothing contained in this Section 6.2 shall relieve any party from liability for
any breach of this Agreement prior to such termination.
Section 6.3. Fees and Expenses.
-----------------
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Section 6.1(c)(iv) or 6.1(d)(iii), (iv) or (v);
(ii) Section 6.1(d)(i) or (ii) and within twelve (12) months
thereafter the Company enters into an agreement with respect to a Company
Acquisition or a Company Acquisition occurs involving any party (or any
affiliate thereof) (x) with whom the Company (or its agents) had negotiations
with a view to a Company Acquisition, (y) to whom the Company (or its agents)
furnished information with a view to a Company Acquisition or (z) who had
submitted a proposal or expressed an interest in a Company Acquisition, in the
case of each of clauses (x), (y) and (z), prior to such termination; or
(iii) Section 6.1(c)(iii) or 6.1(d)(vi) and at the time of the
Company stockholders' meeting at which the Company failed to obtain the
requisite vote there shall be outstanding at that time an offer by a Third Party
to consummate, or a third party shall have publicly announced (and not
withdrawn) a plan or proposal with respect to, a Company Acquisition;
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent
and Acquisition for such damages the Company shall pay to Parent the amount of
$10,557,000 as liquidated damages immediately upon the occurrence of the event
described in this Section 6.3(a) giving rise to such damages. It is
specifically agreed that the amount to be paid pursuant to this Section 6.3(a)
represents liquidated damages and not a penalty. The Company hereby waives any
right to set-off or counterclaim against such amount.
44
(b) Upon the termination of this Agreement pursuant to Section
6.1(c)(iii), (iv) or 6.1(d)(i), (ii), (iv), (v) or (vi), in addition to any
other remedies that Parent, Acquisition or their affiliates may have as a result
of such termination, the Company shall pay to Parent the amount of $3,500,000 as
reimbursement for the costs, fees and expenses incurred by any of them or on
their behalf in connection with this Agreement, the Merger and the consummation
of all transactions contemplated by this Agreement (including fees payable to
investment bankers, counsel to any of the foregoing and accountants).
(c) Upon the termination of this Agreement pursuant to Section
6.1(c)(i) or (ii), in addition to any other remedies that the Company or its
affiliates may have as a result of such termination, Parent shall pay to the
Company the amount of $3,500,000 as reimbursement for the costs, fees and
expenses incurred by any of them or on their behalf in connection with this
Agreement, the Merger and the consummation of all transactions contemplated by
this Agreement (including fees payable to investment bankers, counsel to any of
the foregoing and accountants).
(d) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
Section 6.4. Amendment. This Agreement may be amended by action
---------
taken by the Company, Parent and Acquisition at any time before or after
approval of the Merger by the stockholders of the Company but after any such
approval no amendment shall be made that requires the approval of such
stockholders under applicable law without such approval. This Agreement
(including, subject to Section 4.15, the Company Disclosure Schedule) may be
amended only by an instrument in writing signed on behalf of the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective
-----------------
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any 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. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Nonsurvival of Representations and Warranties. The
---------------------------------------------
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto that by its terms requires
performance after the Effective Time.
45
Section 7.2. Entire Agreement; Assignment. This Agreement (including
----------------------------
the Company Disclosure Schedule) (a) constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings both written and oral between the
parties with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise; provided, however, that Acquisition may assign
any or all of its rights and obligations under this Agreement to any wholly
owned subsidiary of Parent, but no such assignment shall relieve Acquisition of
its obligations hereunder if such assignee does not perform such obligations.
Section 7.3. Validity. If any provision of this Agreement or the
--------
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 7.4. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to each other party as follows:
if to Parent or Acquisition: Cadence Design Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
if to the Company to: Quickturn Design Systems, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
46
with a copy to: Wilson, Sonsini, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of law thereof.
Section 7.6. Descriptive Headings. The descriptive headings herein
--------------------
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as expressly provided herein, including in
Sections 4.12 and 7.2, nothing in this Agreement is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement
-------------------
the term:
(a) "affiliate" means (except as otherwise provided in Sections
2.21 and 4.14) a person that, directly or indirectly, through one or more
intermediaries controls, is controlled by or is under common control with the
first-mentioned person;
(b) "business day" means any day other than a day on which the NYSE is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "Company Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any Third
Party; (ii) the acquisition by a Third Party of any material portion of the
assets of the Company and its subsidiaries taken as a whole; or (iii) the
acquisition by a Third Party of thirty percent (30%) or more of the outstanding
Shares or any securities convertible into or exchangeable for such number of
Shares;
47
(e) "knowledge" or "known" means, with respect to any matter in
question, the actual knowledge of such matter of any executive officer of the
Company or Parent, as the case may be;
(f) "include" or "including" means "include, without limitation" or
"including, without limitation," as the case may be, and the language following
"include" or "including" shall not be deemed to set forth an exhaustive list.
(g) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity including any Governmental Entity; and
(h) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
Section 7.9. Personal Liability. This Agreement shall not create or
------------------
be deemed to create or permit any personal liability or obligation on the part
of any direct or indirect stockholder of the Company or Parent or Acquisition or
any officer, director, employee, agent, representative or investor of any party
hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge
--------------------
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if a party
hereto is entitled to receive any payment or reimbursement of expenses pursuant
to Section 6.3(a), (b) or (c) it shall not be entitled to specific performance
to compel the consummation of the Merger.
Section 7.11. Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
(Remainder of page intentionally left blank)
48
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
CADENCE DESIGN SYSTEMS, INC.
By: /s/ H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
QUICKTURN DESIGN SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Executive Officer
CDSI ACQUISITION, INC.
By: /s/ H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
