Exhibit 2(a)
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AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 19, 1996
AMONG
DAVIDSON & ASSOCIATES, INC.,
CUC INTERNATIONAL INC.
AND
STEALTH ACQUISITION II CORP.
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TABLE OF CONTENTS
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1. The Merger . . . . . . . . . . . . . . . . . 2
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. Articles of Incorporation and Bylaws . . . . 3
SECTION 1.6. Directors . . . . . . . . . . . . . . . . . 3
SECTION 1.7. Officers . . . . . . . . . . . . . . . . . . 3
SECTION 1.8. Conversion of Shares . . . . . . . . . . . . 3
SECTION 1.9. Shares of Dissenting Holders . . . . . . . . 4
SECTION 1.10. Exchange of Certificates . . . . . . . . . . 4
SECTION 1.11. Stock Options . . . . . . . . . . . . . . . 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . 8
SECTION 2.1. Organization and Qualification; Subsidiaries 8
SECTION 2.2. Capitalization of the Company and its
Subsidiaries . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.3. Authority Relative to this Agreement;
Consents and Approvals . . . . . . . . . . . . . . . 11
SECTION 2.4. SEC Reports; Financial Statements . . . . . 11
SECTION 2.5. Information Supplied . . . . . . . . . . . . 12
SECTION 2.6. Consents and Approvals; No Violations . . . 13
SECTION 2.7. No Default . . . . . . . . . . . . . . . . . 14
SECTION 2.8. No Undisclosed Liabilities; Absence of
Changes . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.9. Litigation . . . . . . . . . . . . . . . . . 14
SECTION 2.10. Compliance with Applicable Law . . . . . . . 15
SECTION 2.11. Employee Plans . . . . . . . . . . . . . . . 15
SECTION 2.12. Environmental Laws and Regulations . . . . . 15
SECTION 2.13. Tax Matters . . . . . . . . . . . . . . . . 16
SECTION 2.14. Intangible Property . . . . . . . . . . . . 16
SECTION 2.15. Opinion of Financial Adviser . . . . . . . . 17
SECTION 2.16. Brokers . . . . . . . . . . . . . . . . . . 17
SECTION 2.17. Accounting Matters . . . . . . . . . . . . . 17
SECTION 2.18. Material Contracts . . . . . . . . . . . . . 17
SECTION 2.19. Disclosure . . . . . . . . . . . . . . . . . 18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION . . . . . . . . . . . . . 19
SECTION 3.1. Organization . . . . . . . . . . . . . . . . 19
SECTION 3.2. Capitalization of Parent and its
Subsidiaries . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.3. Authority Relative to this Agreement . . . . 20
SECTION 3.4. SEC Reports; Financial Statements . . . . . 21
SECTION 3.5. Information Supplied . . . . . . . . . . . . 22
SECTION 3.6. Consents and Approvals; No Violations . . . 22
SECTION 3.7. No Default . . . . . . . . . . . . . . . . . 23
SECTION 3.8. No Undisclosed Liabilities; Absence of
Changes . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.9. Litigation . . . . . . . . . . . . . . . . . 24
SECTION 3.10. Compliance with Applicable Law . . . . . . . 24
SECTION 3.11. Employee Plans . . . . . . . . . . . . . . . 24
SECTION 3.12. Environmental Laws and Regulations . . . . . 25
SECTION 3.13. Tax Matters . . . . . . . . . . . . . . . . 25
SECTION 3.14. No Prior Activities . . . . . . . . . . . . 25
SECTION 3.15. Brokers . . . . . . . . . . . . . . . . . . 25
SECTION 3.16. Accounting Matters . . . . . . . . . . . . . 26
SECTION 3.17. Disclosure . . . . . . . . . . . . . . . . . 26
ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.1. Conduct of Business of the Company . . . . . 26
SECTION 4.2. Conduct of Business of Parent . . . . . . . 29
SECTION 4.3. Preparation of S-4 and the Proxy Statement . 31
SECTION 4.4. Other Potential Acquirors . . . . . . . . . 31
SECTION 4.5. Letter of the Company's Accountants . . . . 32
SECTION 4.6. Meeting . . . . . . . . . . . . . . . . . . 32
SECTION 4.7. Stock Exchange Listing . . . . . . . . . . . 33
SECTION 4.8. Access to Information . . . . . . . . . . . 33
SECTION 4.9. Additional Agreements; Best Efforts . . . . 33
SECTION 4.10. Consents . . . . . . . . . . . . . . . . . . 34
SECTION 4.11. Public Announcements . . . . . . . . . . . . 34
SECTION 4.12. Indemnification; Directors' and Officers'
Insurance . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.13. Notification of Certain Matters . . . . . . 35
SECTION 4.14. Pooling . . . . . . . . . . . . . . . . . . 36
SECTION 4.15. Tax-Free Reorganization Treatment . . . . . 36
SECTION 4.16. Taxes . . . . . . . . . . . . . . . . . . . 36
SECTION 4.17. Employment and Non-Competition Agreements . 37
SECTION 4.18. Employee Matters . . . . . . . . . . . . . . 37
SECTION 4.19. Registration Rights Agreement 38
SECTION 4.20. Company Affiliates . . . . . . . . . . . . . 38
SECTION 4.21. Election to Parent Board . . . . . . . . . . 38
SECTION 4.22. SEC Filings . . . . . . . . . . . . . . . . 39
SECTION 4.23. Guarantee of Performance . . . . . . . . . . 39
SECTION 4.24. Property . . . . . . . . . . . . . . . . . . 39
SECTION 4.25. Acquisition . . . . . . . . . . . . . . . . 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
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . 43
SECTION 6.1. Termination . . . . . . . . . . . . . . . . . 43
SECTION 6.2. Effect of Termination . . . . . . . . . . . . 45
SECTION 6.3. Fees and Expenses . . . . . . . . . . . . . . 45
SECTION 6.4. Amendment . . . . . . . . . . . . . . . . . . 47
SECTION 6.5. Extension; Waiver . . . . . . . . . . . . . . 47
ARTICLE 7 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 47
SECTION 7.1. Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.2. Entire Agreement; Assignment . . . . . . . . 47
SECTION 7.3. Validity . . . . . . . . . . . . . . . . . . 48
SECTION 7.4. Notices . . . . . . . . . . . . . . . . . . 48
SECTION 7.5. Governing Law . . . . . . . . . . . . . . . 49
SECTION 7.6. Descriptive Headings . . . . . . . . . . . . 49
SECTION 7.7. Parties in Interest . . . . . . . . . . . . 49
SECTION 7.8. Arbitration . . . . . . . . . . . . . . . . 49
SECTION 7.9. Severability . . . . . . . . . . . . . . . . 50
SECTION 7.10. Specific Performance . . . . . . . . . . . . 50
SECTION 7.11. Recapitalization . . . . . . . . . . . . . . 50
SECTION 7.12. Subsidiaries . . . . . . . . . . . . . . . . 50
SECTION 7.13. Brokers . . . . . . . . . . . . . . . . . . 50
SECTION 7.14. Counterparts . . . . . . . . . . . . . . . . 50
TABLE OF DEFINED TERMS
CROSS REFERENCE
TERM IN AGREEMENT PAGE
Acquisition . . . . . . . . . Preamble . . . . . . 1
Affiliate Letter . . . . . . Recitals . . . . . . 1
Certificates . . . . . . . . Section 1.10(b) . . 5
CGCL . . . . . . . . . . . . Section 1.1 . . . . 2
Claim . . . . . . . . . . . . Section 4.12(a) . . 36
Closing . . . . . . . . . . . Section 1.3 . . . . 2
Closing Date . . . . . . . . Section 1.3 . . . . 2
Closing Price . . . . . . . . Section 1.11(a) . . 7
Code . . . . . . . . . . . . Recitals . . . . . 1
Company . . . . . . . . . . . Preamble . . . . . 1
Company Affiliate . . . . . . Recitals . . . . . 1
Company Board . . . . . . . . Section 2.3(a) . . . 11
Company Common Stock . . . . Section 1.8(a) . . . 3
Company Disclosure Schedule . Section 2.2(a) . . . 10
Company Dissenting Shares . . Section 1.9(a) . . . 4
Company ERISA Plans . . . . . Section 2.11 . . . . 16
Company Permits . . . . . . . Section 2.10 . . . . 15
Company Plans . . . . . . . . Section 1.11(a) . . 7
Company SEC Reports . . . . . Section 2.4(a) . . . 12
Company Securities . . . . . Section 2.2(a) . . . 10
Company Stock Option(s) . . . Section 1.11(a) . . 7
Condor . . . . . . . . . . . Section 4.1(b) . . . 28
Condor Transaction . . . . . Section 4.1(b) . . . 28
Contracts . . . . . . . . . . Section 2.18(a) . . 19
E&Y . . . . . . . . . . . . . Section 4.14 . . . . 38
Effective Time . . . . . . . Section 1.2 . . . . 2
Employment Agreement . . . . Section 4.17 . . . . 39
Environmental Claim . . . . . Section 2.12(a) . . 16
Environmental Laws . . . . . Section 2.12(a) . . 16
ERISA . . . . . . . . . . . . Section 2.11 . . . . 16
Exchange Act . . . . . . . . Section 2.2(c) . . . 11
Exchange Agent . . . . . . . Section 1.10(a) . . 4
Exchange Fund . . . . . . . . Section 1.10(a) . . 4
Financial Adviser . . . . . . Section 2.15 . . . . 12
First Byte . . . . . . . . . Section 2.1(b) . . . 8
GAAP . . . . . . . . . . . . Section 2.4(a) . . . 12
Governmental Entity . . . . . Section 2.6 . . . . 13
HSR Act . . . . . . . . . . . Section 2.6 . . . . 13
Sierra Agreement . . . . . . Section 4.25 . . . . 41
Lien . . . . . . . . . . . . Section 2.2(b) . . . 11
Material Adverse Effect . . . Sections 2.1(a), 3.1(a) 8, 20
Merger . . . . . . . . . . . Section 1.1 . . . . 2
Merger Agreement . . . . . . Recitals . . . . . . 1
Merger Consideration . . . . Section 1.8(a) . . . 3
Newco . . . . . . . . . . . . Recitals . . . . . . 1
NewMedia . . . . . . . . . . Section 2.1(b) . . . 9
NewMedia Agreement . . . . . Section 2.2(b) . . . 10
Non-Competition Agreements . Section 4.17 . . . . 39
NYSE . . . . . . . . . . . . Section 1.10(f) . . 6
Parent . . . . . . . . . . . Preamble . . . . . . 1
Parent Board . . . . . . . . Section 4.21 . . . . 41
Parent Common Stock . . . . . Section 1.8(a) . . . 3
Parent Disclosure Schedule . Section 3.2 . . . . 20
Parent ERISA Plans . . . . . Section 3.11 . . . . 26
Parent Option . . . . . . . . Section 1.11(a) . . 7
Parent Permits . . . . . . . Section 3.10 . . . . 25
Parent SEC Reports . . . . . Section 3.4(a) . . . 22
Parent Securities . . . . . . Section 3.2(a) . . . 21
Property . . . . . . . . . . Section 4.24 . . . . 41
Proxy Statement . . . . . . . Section 2.5 . . . . 13
Registration Rights Agreement Section 4.19 . . . . 40
S-4 . . . . . . . . . . . . . Section 2.5 . . . . 13
SEC . . . . . . . . . . . . . Section 2.4(a) . . . 12
Securities Act . . . . . . . Recitals . . . . . . 1
Shareholders Agreement . . . Section 1.8(a) . . . 1
Share(s) . . . . . . . . . . Section 1.8(a) . . . 3
Subsidiaries . . . . . . . . Section 7.12 . . . . 53
Surviving Corporation . . . . Section 1.1 . . . . 2
Taxes . . . . . . . . . . . . Section 2.13 . . . . 17
Third Party . . . . . . . . . Section 6.1(d) . . . 47
Third Party Acquisition . . . Section 6.1(d) . . . 47
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 19,
1996, is among DAVIDSON & ASSOCIATES, INC., a California corporation
(the "Company"), CUC INTERNATIONAL INC., a Delaware corporation
("Parent"), and STEALTH ACQUISITION II CORP., a Delaware corporation
and a direct wholly owned subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and
Acquisition each have, in light of and subject to the terms and
conditions set forth herein, (i) determined that the Merger (as
defined in Section 1.1) is fair to their respective shareholders and
in the best interests of such shareholders and (ii) approved the
Merger in accordance with this Agreement and an Agreement of Merger in
the form attached hereto as Exhibit A (the "Merger Agreement");
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, concurrently with the execution hereof, certain
holders of Shares (as defined in Section 1.8(a)) are entering into the
Shareholders Agreement, a copy of which is attached hereto as Exhibit
B (the "Shareholders Agreement");
WHEREAS, it is intended that the Merger shall be recorded
for accounting purposes as a "pooling-of-interests";
WHEREAS, it is anticipated that, promptly following the
execution of this Agreement, Acquisition will assign all of its rights
and obligations under this Agreement to a newly-formed direct wholly
owned California subsidiary ("Newco") of Parent (whereupon all
references in this Agreement to Acquisition shall be deemed to be
references to Newco); and
WHEREAS, the Company has delivered to Parent a letter
identifying all persons (each, a "Company Affiliate") who are, at the
date hereof, "affiliates" of the Company for purposes of Rule 145
under the Securities Act of 1933, as amended (the "Securities Act"),
and each Company Affiliate (other than those identified herein) has
delivered to Parent a letter (each, an "Affiliate Letter") relating to
(i) the transfer, prior to the Effective Time (as defined in Section
1.8(a)), of the Shares beneficially owned by such Company Affiliate on
the date hereof, (ii) the transfer of the shares of Parent Common
Stock (as defined in Section 1.8(a)) to be received by such Company
Affiliate in the Merger and (iii) the obligations of each such
Company Affiliate to deliver to Xxxxxx, Xxxx & Xxxxxxxx, counsel to
the Company, a certificate requested by such firm (if requested).
NOW, THEREFORE, in consideration of the 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 and upon
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the terms and subject to the conditions of this Agreement and the
Merger Agreement and in accordance with the California General
Corporation Law (the "CGCL"), 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.
SECTION 1.2. Effective Time. Subject to the terms and
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conditions set forth in this Agreement, the Merger Agreement shall be
duly executed and acknowledged by Acquisition and the Company and
thereafter delivered to the Secretary of State of the State of
California for filing pursuant to the CGCL on the Closing Date (as
defined in Section 1.3). The Merger shall become effective at such
time as a properly executed and certified copy of the Merger Agreement
is duly filed by the Secretary of State of the State of California in
accordance with the CGCL (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
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Merger (the "Closing") will take place at a time and on a date to be
specified by the parties, which shall be no later than the second
business day after satisfaction (or waiver) of the conditions set
forth in Article 5 (the "Closing Date"), at the offices of Weil,
Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
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
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the effects set forth in the CGCL. 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. Articles of Incorporation and Bylaws. The
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Articles of Incorporation of the Company in effect at the Effective
Time shall be the Articles of Incorporation of the Surviving
Corporation until amended in accordance with applicable law. The
Bylaws of the Company 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
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the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles 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 the Company at the
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Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Articles 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, par
value $0.00025 per share, of the Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Time
(individually a "Share" and collectively, the "Shares") (other than
(i) Shares held by any subsidiary of the Company, (ii) Shares held by
Parent, Acquisition or any other subsidiary of Parent and
(iii) Company Dissenting Shares (as defined in Section 1.9(a)) 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 0.85 of one fully paid and nonassessable share of common
stock, $.01 par value per share, of Parent ("Parent Common Stock")
(the "Merger Consideration").
(b) At the Effective Time, each outstanding share of the
common stock, no par value, of Acquisition shall be converted into one
share of common stock, par value $0.00025 per share, of the Surviving
Corporation.
(c) At the Effective Time, 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
payment shall be made with respect thereto.
SECTION 1.9. Shares of Dissenting Holders.
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(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which dissenters'
rights, if any, are granted by reason of the Merger under the CGCL and
who does not vote in favor of the Merger and who otherwise complies
with Chapter 13 of the CGCL ("Company Dissenting Shares") shall not be
entitled to receive shares of Parent Common Stock pursuant to
Section 2.1(c) hereof, unless such holder fails to perfect,
effectively withdraws or loses his right to dissent from the Merger
under the CGCL. Such holder shall be entitled to receive only the
payment provided for by Chapter 13 of the CGCL. If any such holder so
fails to perfect, effectively withdraws or loses his or her
dissenters' rights under the CGCL, his or her Company Dissenting
Shares shall thereupon be deemed to have been converted, as of the
Effective Time, into the right to receive shares of Parent Common
Stock pursuant to Section 1.8(a).
(b) Any payments relating to Company Dissenting Shares
shall be made solely by the Surviving Corporation and no funds or
other property have been or will be provided by Acquisition or any of
Parent's other direct or indirect subsidiaries for such payment.
SECTION 1.10. Exchange of Certificates.
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(a) As of the Effective Time, Parent shall make available
to The Bank of Boston or another bank or trust company designated by
Parent and reasonably acceptable to the Company (the "Exchange
Agent"), for the benefit of the holders of Shares, for exchange in
accordance with this Article I, through the Exchange Agent:
(i) certificates representing the appropriate number of shares of
Parent Common Stock 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") issuable
pursuant to Section 1.8 in exchange for outstanding Shares.
(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 which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates") whose Shares
were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.8 and whose shares are not Company Dissenting
Shares: (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 or to such other
agent or agents as may be appointed by Parent and Acquisition,
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, which 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 which 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) at the time of such surrender, 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 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
lieu of fractional shares, if any, as may be required pursuant to this
Agreement; provided, however, that Parent 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, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation
of the Shares which 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 closing price for Parent Common Stock as reported on
the New York Stock Exchange (the "NYSE") Composite Transactions on the
business day two days prior to the Effective Date 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 problems which
would otherwise be caused by the issuance of fractional shares.
(g) Any portion of the Exchange Fund which remains
undistributed to the shareholders of the Company for six months after
the Effective Time shall be delivered to Parent, upon demand, and any
shareholders of the Company who have not theretofore complied with
this Article I shall thereafter look only to Parent for payment of
their claim for Parent Common Stock, as the case may be, any cash in
lieu of fractional shares of Parent Common Stock and any 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. (a) At the Effective Time,
-------------
each outstanding option to purchase shares of Company Common Stock (a
"Company Stock Option" or
collectively, "Company Stock Options") issued pursuant to the 1992
Incentive Stock Option Plan of the Company and the 1992 Non-Statutory
Stock Option Plan of the Company (collectively, the "Company Plans"),
whether vested or unvested, shall be cancelled and, in lieu thereof,
Parent shall issue to each holder of a Company Stock Option an option
(each, a "Parent Option"), which does not qualify under section 422 of
the Code, to acquire, on substantially the same terms and subject to
substantially the same conditions as were applicable under such
Company Stock Option, the same number of shares of Parent Common Stock
as the holder of such Company Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option
in full immediately prior to the Effective Time, at a price per share
equal to (y) the aggregate exercise price for the shares of Company
Common Stock otherwise purchasable pursuant to such Company Stock
Option divided by (z) the number of full shares of Parent Common Stock
deemed purchasable pursuant to such Company Stock Option; provided,
however, that the number of shares of Parent Common Stock that may be
purchased upon exercise of any such Parent Option shall not include
any fractional share and, upon exercise of the Parent Option, a cash
payment shall be made for any fractional share based upon the Closing
Price (as hereinafter defined) of a share of Parent Common Stock on
the trading day immediately preceding the date of exercise. "Closing
Price" shall mean, on any day, the last reported sale price of one
share of Parent Common Stock on the NYSE. The Company shall use all
reasonable efforts to cause all options issued to non-employee
directors of the Company pursuant to the Company Plans that are
outstanding prior to the Effective Time and that are vested to be
exercised by the holders thereof prior to the Effective Time.
(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 respective
Company Plans and stating that the holders will receive Parent Options
exercisable for shares of Parent Common Stock on substantially the
same terms and conditions as their Company Stock Options (subject to
the adjustments required by this Section 1.11 after giving effect to
the Merger).
(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 Parent Options in accordance with
this Section 1.11. As soon as practicable after the Effective Time,
Parent shall file a registration statement on Form S-3 or Form S-8, as
the case may be (or any successor or other appropriate forms), or
another appropriate form with respect to the shares of Parent Common
Stock subject to the Parent Options and shall use its best 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 the
Parent Options remain outstanding.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent
and Acquisition as follows:
SECTION 2.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its
businesses as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and
authority would not have a Material Adverse Effect (as defined below)
on the Company. When used in connection with the Company or its
subsidiaries (as defined in Section 7.12), the term "Material Adverse
Effect" means any change or effect (i) that is or is reasonably likely
to be materially adverse to the properties, business, results of
operations or condition (financial or otherwise) of the Company and
its subsidiaries, taken as whole, other than any change or effect
arising out of general economic conditions unrelated to any businesses
in which the Company is engaged or (ii) that may impair the ability of
the Company to consummate the transactions contemplated hereby.
(b) The Company's direct wholly-owned subsidiary, First
Byte, Inc., a California corporation ("First Byte"), is a corporation
duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have
such power and authority would not have a Material Adverse Effect on
the Company. NewMedia EXPRESS, L.L.C., a Delaware limited liability
company the majority of limited liability company interests of which
are owned directly by the Company ("NewMedia"), is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite limited liability
company power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have
such power and authority would not have a Material Adverse Effect on
the Company. Other than First Byte and NewMedia, the Company has no
subsidiaries and, except for (i) 2,000 shares of Series A Preferred
Stock and 12,500 Warrants issued by IVI Publishing, Inc. (and any
shares of common stock of IVI Publishing, Inc. issuable upon
conversion or exercise thereof) and (ii) 6,404 shares of common stock
of Sanctuary Xxxxx Multimedia Corporation, does not own,
directly or indirectly, beneficially or of record, any shares of
capital stock or other security of any other entity or any other
investment in any other entity.
(c) 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 have a
Material Adverse Effect on the Company.
(d) The Company has heretofore delivered to Parent accurate
and complete copies of the articles of incorporation and by-laws, as
currently in effect, of each of the Company and First Byte.
SECTION 2.2. Capitalization of the Company and its
-------------------------------------
Subsidiaries.
------------
(a) The authorized capital stock of the Company consists
of: 100,000,000 shares of Company Common Stock, of which, as of
January 31, 1996, 34,967,904 Shares were issued and outstanding, and
1,000,000 shares of preferred stock, without par value, no shares of
which are outstanding. All of the issued and outstanding shares of
Company Common Stock have been validly issued, and are fully paid,
nonassessable and free of preemptive rights. As of January 31, 1996,
approximately 2,288,200 shares of Company Common Stock were reserved
for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Company Stock Options issued pursuant
to the Company Plans. Except as described in the Company SEC Reports
(as defined in Section 2.4(a)), as of the date hereof, since January
31, 1996, 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, since January 31, 1996, no stock options have been
granted. Except as set forth above, 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 its subsidiaries
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to acquire
from the Company or its subsidiaries, and no obligations of the
Company or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, and (iv) no equity
equivalents, interests in the ownership or earnings of the Company or
its subsidiaries or other similar rights (including stock appreciation
rights) (collectively, "Company Securities"). There are no
outstanding obligations of the Company or its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. Except
as set forth in Section 2.2(a) of the Disclosure Schedule previously
delivered by the Company to Parent (the "Company Disclosure
Schedule"), there are no stockholder agreements (other than the
Shareholders Agreement), voting trusts or other
agreements or understandings to which the Company is a party or to
which it is bound relating to the voting or registration of any shares
of capital stock of the Company. The Company has not taken any action
that would result in any Company Stock Options that are unvested
becoming vested in connection with or as a result of the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(b) All of the outstanding capital stock of First Byte is
owned by the Company, directly or indirectly, free and clear of any
Lien (as defined below) 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). The Company owns 750
"Units" issued by NewMedia, as such term is defined in that certain
Amended and Restated Limited Liability Company Agreement of NewMedia,
dated as of April 5, 1995, between the Company and Mattel, Inc. (the
"NewMedia Agreement"), an accurate and complete copy of which has been
provided to Parent. The 750 Units of NewMedia issued to the Company
pursuant to the NewMedia Agreement constitute 75% of the issued and
outstanding Units issued by NewMedia and are owned by the Company free
and clear of any Liens 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), except for any
limitations, restrictions or encumbrances on such Units provided for
in the NewMedia Agreement. Except as contemplated by the NewMedia
Agreement with respect to Units of NewMedia, there are no securities
of the Company or its subsidiaries convertible into or exchangeable
for, no options or other rights to acquire from the Company or its
subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or
sale, directly or indirectly, of any capital stock or other ownership
interests in, or any other securities of, any subsidiary of the
Company. 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, without
limitation, any security) any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
(c) The Company Common Stock constitutes the only class of
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; Consents
----------------------------------------------
and Approvals.
-------------
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and the Merger
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Merger Agreement and
the consummation of the transactions contemplated hereby and thereby
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
the Merger Agreement or to consummate the transactions contemplated
hereby or thereby (other than, with respect to the Merger, the
approval and adoption of this Agreement and the Merger Agreement by
the holders of a majority of the then outstanding shares of Company
Common Stock). This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in
accordance with its terms.
(b) The Company Board has unanimously and duly and validly
approved, and taken all corporate actions required to be taken by the
Company Board for the consummation of, the transactions, including the
Merger, contemplated hereby and by the Merger Agreement and resolved
to recommend that the shareholders of the Company approve and adopt
this Agreement and the Merger Agreement; provided, however, that such
approval and recommendation may be withdrawn, modified or amended in
the event that the Company Board by majority vote determines in its
good faith judgment, after consultation with independent legal
counsel, that it is necessary to do so in order to comply with its
fiduciary duties to shareholders under applicable law. No state
takeover statute or similar statute or regulation applies or purports
to apply to the Merger, this Agreement or any of the transactions
contemplated hereby.
SECTION 2.4. SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC")
since March 31, 1993, each of which has complied in all material
respects with all applicable requirements of the Securities Act and
the Exchange Act, each as in effect on the dates such forms, reports
and documents were filed. The Company has heretofore delivered to
Parent, in the form filed with the SEC (including any amendments
thereto), (i) its Annual Reports on Form 10-K for each of the fiscal
years ended December 31, 1993 and 1994, (ii) all definitive proxy
statements relating to the Company's meetings of shareholders (whether
annual or special) held since March 31, 1993 and (iii) all other
reports or registration statements filed by the Company with the SEC
since March 31, 1993 (the "Company SEC Reports"). None of such forms,
reports or documents,
including, without limitation, 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. The
consolidated financial statements of the Company included in the
Company SEC Reports complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated in the notes
thereto), the consolidated financial position of the Company and its
consolidated subsidiary as of the dates thereof and their consolidated
results of operations and changes in financial position for the
periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments and except that,
in the case of financial statements included therein which were later
restated to account for one or more business combinations accounted
for as poolings-of-interests, such original financial statements do
not reflect such restatements). Since December 31, 1994, there has
not been any change, or any application or request for any change, by
the Company or any of its subsidiaries in accounting principles,
methods or policies for financial accounting or tax purposes (subject,
in the case of the unaudited interim financial statements, to normal
year-end adjustments).
(b) The Company has heretofore made available to Parent a
complete and correct copy of any material amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents
or other instruments which 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 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, and (ii) the proxy statement relating to the
meeting of the Company's shareholders, and, if required, a meeting of
Parent's shareholders, to be held in connection with the Merger (the
"Proxy Statement") will, at the date mailed to shareholders and at the
times of the meeting or meetings of shareholders 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. If at any
time prior to the Effective Time any event with respect to the
Company, its officers
and directors or any of its subsidiaries should occur which is
required to be described in an amendment of, or a supplement to, the
S-4 or the Proxy Statement, the Company shall promptly so advise
Parent and such event shall be so described, and such amendment or
supplement (which Parent shall have a reasonable opportunity to
review) shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of the Company. The Proxy Statement,
insofar as it relates to the meeting of the Company's shareholders 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.
SECTION 2.6. 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 Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the filing and recordation of the Merger Agreement as
required by the CGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any 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 Merger Agreement or the
consummation by the Company of the transactions contemplated hereby or
thereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect on the Company.
Neither the execution, delivery and performance of this Agreement or
the Merger Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby or thereby will (i)
conflict with or result in any breach of any provision of the
respective Articles of Incorporation or Bylaws (or similar governing
documents) of the Company or any of its 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 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) 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 (ii) or (iii)
for violations, breaches or defaults which would not have a Material
Adverse Effect on the Company. The Company has complied in full with
all of its obligations under Article III, Section 2.1 of the agreement
described in Section 2.6 of the Company Disclosure Schedule, and the
other party to such agreement has no further rights under Article III,
Section 2.1 thereof.
SECTION 2.7. No Default. None of the Company or its
----------
subsidiaries is in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its
Articles of Incorporation or Bylaws (or similar governing documents)
or the NewMedia Agreement, (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation
to which the Company or either 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 the Company, its
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 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, as of December 31, 1994, none of
the Company or its subsidiaries had any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be
required by GAAP to be reflected in, reserved against or otherwise
described in the consolidated balance sheet of the Company (including
the notes thereto) as of such date or which could reasonably be
expected to have a Material Adverse Effect on the Company. Except as
publicly disclosed by the Company in the Company SEC Reports, since
December 31, 1994, the business of the Company and its subsidiaries
has been carried on only in the ordinary and usual course, none of the
Company or its subsidiaries has incurred any liabilities of any
nature, whether or not accrued, contingent or otherwise, which could
reasonably be expected to have, and there have been no events, changes
or effects with respect to the Company or its subsidiaries having or
which could reasonably be expected to have, a Material Adverse Effect
on the Company.
SECTION 2.9. Litigation. Except as publicly disclosed by
----------
the Company in the Company SEC Reports, 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 which (a) if adversely
determined, could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company or (b) as of
the date hereof, questions the validity of this Agreement or any
action to be taken by the Company in connection with the consummation
of the transactions contemplated hereby or could otherwise prevent or
delay the consummation of the transactions contemplated by this
Agreement. Except as publicly disclosed by the Company, none of the
Company or its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen in
the future, could reasonably be expected to have a Material Adverse
Effect on the Company or would 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 which could not
reasonably be expected to 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 could not reasonably be expected to 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 any Governmental Entity except that no
representation or warranty is made in this Section 2.10 with respect
to Environmental Laws (as defined in Section 2.12(a)) and except for
violations or possible violations which do not, and, insofar as
reasonably can be foreseen, in the future will not, have a Material
Adverse Effect on the Company. 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 its subsidiaries is
pending or, to the best knowledge of the Company, threatened, nor, to
the best knowledge of the Company, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case,
those which the Company reasonably believes will not have a Material
Adverse Effect on the Company.
SECTION 2.11. Employee Plans. Except as disclosed in
--------------
Section 2.11 of the Company Disclosure Schedule, there are no
"employee benefit plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained or contributed to by the Company or its subsidiaries
("Company ERISA Plans"). The Company ERISA Plans are in compliance
with the applicable provisions of ERISA, the Code and other applicable
law, except for instances of non-compliance that could not reasonably
be expected to have a Material Adverse Effect on the Company. A
complete and correct copy of each Company Benefit Plan has been
provided to Parent.
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 compliance with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliance that could not
reasonably be expected to 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) none of the Company or its subsidiaries has received
written notice of, or, to the best knowledge of the Company, is the
subject of, any action, cause of action, claim, investigation, demand
or notice by any person or entity alleging liability under or non-
compliance with any Environmental Law (an "Environmental Claim") that
could reasonably be expected to have a Material Adverse Effect on the
Company; and (iii) to the best knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with
such material compliance in the future.
(b) Except as publicly disclosed by the Company in the
Company SEC Reports, there are no Environmental Claims which could
reasonably be expected to have a Material Adverse Effect on the
Company that are pending or, to the best knowledge of the Company,
threatened against the Company or its subsidiaries or, to the best
knowledge of the Company, against any person or entity 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. Tax Matters. The Company and its
-----------
subsidiaries have accurately prepared and duly filed with the
appropriate federal, state, local and foreign taxing authorities all
tax returns, information returns and reports required to be filed with
respect to the Company and its subsidiaries and have paid in full or
made adequate provision for the payment of all Taxes (as defined
below). Neither the Company nor any of its subsidiaries is delinquent
in the payment of any Taxes. As used herein, the term "Taxes" means
all federal, state, local and foreign taxes, including, without
limitation, income, profits, franchise, employment, transfer,
withholding, property, excise, sales and use taxes (including interest
penalties thereon and additions thereto).
SECTION 2.14. Intangible Property.
-------------------
The Company and its subsidiaries own or possess adequate
licenses or other valid rights to use all material patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks
and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of
the Company and its subsidiaries as currently conducted or as
contemplated to be conducted, and the Company is unaware of any
assertion or claim challenging the validity of any of the foregoing
which, individually or in the aggregate, would have a Material Adverse
Effect on the Company. The conduct of the business of the Company
and its subsidiaries as heretofore and currently conducted has not and
does not conflict in any way with any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service xxxx
or copyright of any third party that, individually or in the
aggregate, would have a Material Adverse Effect on the Company. To
the best knowledge of the Company, there are no infringements of any
proprietary rights owned by or licensed by or to the Company or any
subsidiary which, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
SECTION 2.15. Opinion of Financial Adviser. Xxxxx Xxxxxx
----------------------------
Inc. (the "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 to the holders of
Shares from a financial point of view, a signed, true and complete
copy of which opinion has been delivered to Parent, and such opinion
has not been modified in any material respect or withdrawn.
SECTION 2.16. Brokers. No broker, finder or investment
-------
banker (other than Xxxxx Xxxxxx and Xxxxxx Capital Group, LLC, a true
and correct copy of whose engagement agreements have been provided to
Acquisition or Parent) is entitled to any brokerage, finder's or other
fee or commission or expense reimbursement in connection with the
transactions contemplated by this Agreement based upon arrangements
made by and on behalf of the Company or any of its affiliates or
shareholders (including the Company Affiliates). The Company shall be
responsible for all such fees and expenses, except as otherwise
provided in Section 6.3.
SECTION 2.17. Accounting Matters. Neither the Company nor,
------------------
to the best of its knowledge, any of its affiliates or shareholders
(including the Company Affiliates), has taken or agreed to take any
action that would prevent Parent from accounting for the business
combination to be effected by the Merger as a "pooling-of-interests."
The Company has not failed to bring to the attention of Parent any
actions, or agreements or understandings, whether written or oral, to
act that would be reasonably likely to prevent Parent from accounting
for the Merger as a "pooling-of-interests."
SECTION 2.18. Material Contracts.
------------------
(a) The Company has delivered or otherwise made available
to Parent true, correct and complete copies of all contracts and
agreements (and all amendments, modifications and supplements thereto
and all side letters to which the Company is a party affecting the
obligations of any party thereunder) to which the Company or any of
its subsidiaries is a party or by which any of its properties or
assets are bound that are material to
the business, properties or assets of the Company and its subsidiaries
taken as a whole, including, without limitation, all: (i) employment,
consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any contract
to which the Company is a party involving employees of the Company);
(ii) material licensing, merchandising or distribution
agreements; (iii) contracts granting a right of first refusal or first
negotiation; (iv) partnership or joint venture agreements; (v)
agreements for the acquisition, sale or lease of material properties
or assets of the Company (by merger, purchase or sale of assets or
stock or otherwise) entered into since January 1, 1993; (vi) contracts
or agreements with any Governmental Entity; (vii) all agreements
described in Section 2.2(a) of the Company Disclosure Schedule; and
(viii) all commitments and agreements to enter into any of the
foregoing (collectively, together with any such contracts entered into
in accordance with Section 4.1 hereof, the "Contracts").
(b) Except as set forth in Section 2.18(b) of the Company
Disclosure Schedule:
(i) There is no default under any Contract either by the
Company or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by the
Company or, to the knowledge of the Company, any other party, in any
such case in which such default or event could reasonably be expected
to have a Material Adverse Effect on the Company.
(ii) No party to any such Contract has given notice to the
Company of or made a claim against the Company with respect to any
breach or default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Material Adverse Effect
on the Company.
SECTION 2.19. Disclosure. No representation or warranty by
----------
the Company contained in this Agreement and no statement contained in
any certificate delivered by the Company to Acquisition or Parent
pursuant to this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading when taken
together in light of the circumstances in which they were made.
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 its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties
and to carry on its businesses as now being conducted, except where
the failure to be so organized, existing and in good standing or to
have such power and authority would not have a Material Adverse Effect
(as defined below) on Parent. When used in connection with Parent or
Acquisition, the term "Material Adverse Effect" means any change or
effect that is (i) materially adverse to the properties, business,
results of operations or condition (financial or otherwise) of Parent
and its subsidiaries, taken as a whole, other than any change or
effect arising out of general economic conditions unrelated to any
businesses in which Parent and its subsidiaries are engaged or
(ii) that may impair the ability of Parent and/or Acquisition to
consummate the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate
and complete copies of the certificate or articles of incorporation
and bylaws, as currently in effect, of Parent and Acquisition. Each
of Parent 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 have a Material Adverse
Effect on Parent.
SECTION 3.2. Capitalization of Parent and its Subsidiaries.
---------------------------------------------
(a) The authorized capital stock of Parent consists of
(i) 400,000,000 shares of Parent Common Stock, of which, as of January
31, 1996, approximately 189,000,000 shares of Parent Common Stock were
issued and outstanding and 3,000,000 shares of Parent Common Stock
were held in treasury and (ii) 1,000,000 shares of preferred stock,
$.01 par value per share, none of which is issued or outstanding. All
of the shares of Parent Common Stock have been validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of
January 31, 1996, approximately 29.7 million shares of Parent Common
Stock were
reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding options. Except as
described in the Parent SEC Reports (as defined in Section 3.4(a)) and
except as set forth in Section 3.2 of the Disclosure Schedule
previously delivered by Parent to the Company (the "Parent Disclosure
Schedule"), as of the date hereof, since January 31, 1996, no shares
of Parent's capital stock have been issued other than pursuant to
stock options already in existence on January 31, 1996, and no stock
options have been granted. Except (i) as described in the Parent SEC
Reports, and (ii) as set forth above, as of the date hereof, there are
outstanding (A) no shares of capital stock or other voting securities
of Parent, (B) no securities of Parent or its subsidiaries convertible
into or exchangeable for shares of capital stock or voting securities
of Parent, (C) except as provided in the Sierra Agreement or as
disclosed in Section 3.2 of the Parent Disclosure Schedule, 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 (D) no equity
equivalents, interests in the ownership or earnings of Parent or its
subsidiaries or other similar rights (including stock appreciation
rights) (collectively, "Parent Securities"). There are no outstanding
obligations of Parent or any of its subsidiaries to repurchase, redeem
or otherwise acquire any Parent Securities. Except as set forth in
the Parent SEC Reports, there are no stockholder agreements, voting
trusts or other agreements or understandings to which Parent is a
party or to which it is bound relating to the voting of any shares of
capital stock of Parent.
(b) All of the outstanding capital stock of Parent's
subsidiaries (including Acquisition) is owned by Parent, 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
securities of Parent or its subsidiaries convertible into or
exchangeable for, no options or other rights to acquire from Parent or
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or
sale, directly or indirectly, of any capital stock or other ownership
interests in, or any other securities of, any subsidiary of Parent.
There are no outstanding contractual obligations of Parent or its
subsidiaries to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock or other ownership interests in
any subsidiary of Parent.
(c) The Parent Common Stock constitutes the only class of
equity securities of Parent or 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 and the Merger Agreement and to
consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the boards of
directors of Parent and Acquisition and by Parent as the sole
shareholder of Acquisition, and no other corporate proceedings
(including any meeting of Parent's shareholders) on the part of Parent
or Acquisition are necessary to authorize this Agreement or the Merger
Agreement or to consummate the transactions contemplated hereby or
thereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Acquisition and constitutes a valid,
legal and binding agreement of each of Parent and Acquisition,
enforceable against each of Parent and Acquisition in accordance with
its terms.
SECTION 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) Parent has filed all required forms, reports and
documents with the SEC since February 1, 1993, each of which has
complied in all material respects with all applicable requirements of
the Securities Act and the Exchange Act, each as in effect on the
dates such forms, reports and documents were filed. Parent has
heretofore delivered to the Company, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Reports on Form 10-
K for each of the fiscal years ended January 31, 1993, 1994 and 1995,
(ii) all definitive proxy statements relating to Parent's meetings of
shareholders (whether annual or special) held since February 1, 1993
and (iii) all other reports or registration statements filed by Parent
with the SEC since February 1, 1993 (the "Parent SEC Reports"). None
of such forms, reports or documents, including, without limitation,
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. The consolidated financial statements
of Parent included in the Parent SEC Reports complied as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto and
fairly present, in conformity 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 (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and
except that, in the case of financial statements included therein
which were later restated to account for one or more business
combinations accounted for as poolings-of-interests, such original
financial statements do not reflect such restatements). Since January
31, 1995, there has not been any change, or any application or request
for any change,
by Parent or any of its subsidiaries in accounting principles, methods
or policies for financial accounting or tax purposes.
(b) Parent has heretofore made available to the Company a
complete and correct copy of any material amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents
or other instruments which 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 (including
information with respect to Sierra (as defined in Section 4.25)) for
inclusion or incorporation by reference in (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 and
(ii) the Proxy Statement will, at the date mailed to shareholders and
at the times of the meeting of shareholders 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. If at
any time prior to the Effective Time any event with respect to Parent,
its officers and directors or any of its subsidiaries should occur
which is required to be described in an amendment of, or a supplement
to, the S-4 or the Proxy Statement, Parent shall promptly so advise
the Company and such event shall be so described, and such amendment
or supplement (which the Company shall have a reasonable opportunity
to review) shall be promptly filed with the SEC. 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.
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 the filing and recordation of the Merger Agreement as required by
the CGCL, 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 Merger Agreement or the consummation by Parent or Acquisition of
the transactions contemplated hereby or thereby, except where the
failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not have a Material
Adverse Effect on Parent. Except as set forth in Section 4.2(f) of
the Parent Disclosure Schedule, neither the execution, delivery and
performance of this Agreement or the Merger Agreement by Parent or
Acquisition nor the consummation by Parent or Acquisition of the
transactions contemplated hereby or thereby will (i) conflict with or
result in any breach of
any provision of the respective certificate or articles of
incorporation or bylaws (or similar governing documents) of Parent or
Acquisition or any of Parent's 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 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 subsidiaries or
any of their respective properties or assets, except in the case of
(ii) or (iii) for violations, breaches or defaults which would not
have a Material Adverse Effect on Parent.
SECTION 3.7. No Default. None of Parent or any of its
----------
subsidiaries is in default or violation (and no event has occurred
which with notice or the lapse of time or both would constitute a
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, its 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 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, as
-------
of January 31, 1995, none of Parent or its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted
or unasserted, which would be required by GAAP to be reflected in,
reserved against or otherwise described in the consolidated balance
sheet of Parent and its consolidated subsidiaries (including the notes
thereto) as of such date or which could reasonably be expected to have
a Material Adverse Effect on Parent. Except as publicly disclosed by
Parent in the Parent SEC Reports, since January 31, 1995, the business
of Parent and its subsidiaries has been carried on only in the
ordinary and usual course, none of Parent or its subsidiaries has
incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted
or unasserted, which could reasonably be expected to have, and there
have been no events, changes or effects with respect to Parent or its
subsidiaries having or which could 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 which (a) if adversely determined,
could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or (b) as of the date
hereof, questions the validity of this Agreement or any action to be
taken by Parent in connection with the consummation of the
transactions contemplated hereby or could otherwise prevent or delay
the consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by Parent in the Parent SEC Reports, none
of Parent or its subsidiaries is subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably
foreseen in the future, could reasonably be expected to have a
Material Adverse Effect on Parent or would 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 which could not reasonably be expected to 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 could not reasonably be expected to 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
which do not, and, insofar as reasonably can be foreseen, in the
future will not, 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 best knowledge of
Parent, threatened, nor, to the best knowledge of Parent, has any
Governmental Entity indicated an intention to conduct the same, other
than, in each case, those which Parent reasonably believes will not
have a Material Adverse Effect on Parent.
SECTION 3.11. Employee Plans. All "employee benefit plans"
--------------
as defined in Section 3(3) of ERISA, maintained or contributed to by
Parent and its subsidiaries ("Parent ERISA Plans") are in compliance
with the applicable provisions of ERISA and the Code, except for
instances of non-compliance that could not reasonably be expected to
have a Material Adverse Effect on Parent.
SECTION 3.12. 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 compliance
with all Environmental Laws, except for non-compliance that could not
reasonably be expected to have a Material Adverse Effect on Parent,
which compliance includes, but is not limited to, the possession by
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) none
of Parent or its subsidiaries has received written notice of, or, to
the best knowledge of Parent, is the subject of, any Environmental
Claim that could reasonably be expected to have a Material Adverse
Effect on Parent; and (iii) to the best knowledge of Parent, there are
no circumstances that are reasonably likely to prevent or interfere
with such material compliance in the future.
(b) Except as publicly disclosed by Parent in the Parent
SEC Reports, there are no Environmental Claims which could reasonably
be expected to have a Material Adverse Effect on Parent that are
pending or, to the best knowledge of Parent, threatened against Parent
or any of its subsidiaries or, to the best knowledge of Parent,
against any person or entity whose liability for any Environmental
Claim Parent or its subsidiaries has or may have retained or assumed
either contractually or by operation of law.
SECTION 3.13. Tax Matters. Parent and its subsidiaries
-----------
have accurately prepared and duly filed with the appropriate federal,
state, local and foreign taxing authorities all tax returns,
information returns and reports required to be filed with respect to
Parent and its subsidiaries and have paid in full or made adequate
provision for the payment of all Taxes. Neither Parent nor any of its
subsidiaries is delinquent in the payment of any Taxes.
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 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 or entity.
SECTION 3.15. Brokers. No broker, finder or investment
-------
banker (other than Xxxxxxx, Xxxxx & Co.) 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 and on behalf of Parent or Acquisition.
SECTION 3.16. Accounting Matters. Neither Parent nor, to
------------------
the best of its knowledge, any of its affiliates, has taken or agreed
to take any action that would prevent Parent from accounting for the
business combination to be effected by the Merger as a "pooling-of-
interests." Parent has not failed to bring to the attention of the
Company any actions, or agreements or understandings, whether written
or oral, to act that would be reasonably likely to prevent Parent from
accounting for the Merger as a "pooling-of-interests."
SECTION 3.17. Disclosure. No representation or warranty by
----------
Parent contained in this Agreement and no statement contained in any
certificate delivered by Acquisition or Parent to the Company pursuant
to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading when taken together in
light of the circumstances in which they were made.
ARTICLE 4
COVENANTS
SECTION 4.1. Conduct of Business of the Company. Except as
----------------------------------
contemplated by this Agreement, 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 to the end that
goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective
Time, neither the Company nor any of its subsidiaries will, without
the prior written consent of Parent:
(a) amend its certificate or articles of incorporation or
bylaws (or other similar governing instrument);
(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
or equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except for (i) the issuance of
shares of Company Common Stock having a market value of up to $5.5
million in connection with the proposed agreement by the Company to
acquire
Condor, Inc. ("Condor") (the "Condor Transaction"), (ii) the grant of
options to acquire up to 200,000 shares of Company Common Stock to
employees of Condor who become employees of the Company in connection
with the Condor Transaction and (iii) the grant of options to purchase
up to 100,000 shares of Company Common Stock to employees under the
Company Plans and the issuance or sale of shares of Company Common
Stock pursuant to options granted to employees under the Company Plans
(in each case, in the ordinary course of business and consistent with
past practice);
(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 any shares 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 in any other fashion the corporate structure or
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 and in amounts not
material to the Company and its subsidiaries taken as a whole; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other person except in connection with the Condor Transaction,
except in the ordinary course of business consistent with past
practice and in amounts not material to the Company and its
subsidiaries, taken as a whole, except for obligations of the wholly
owned subsidiaries of the Company and except for guarantees by the
Company of the payment of certain obligations of NewMedia pursuant to
the provisions of the NewMedia Agreement; (iii) except for the Condor
Transaction, make any loans, advances or capital contributions to, or
investments in, any other person (other than to the wholly owned
subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or
advance); (iv) pledge or otherwise encumber shares of capital stock of
the Company or 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 or as contemplated by
this Agreement, 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, severance or other employee benefit
agreement, trust, plan, fund, award or other arrangement for the
benefit or welfare of any director, officer or employee in any manner,
or (except for the grant of options in connection with the Condor
Transaction and except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to
the Company, and as required under existing agreements or in the
ordinary course of business generally consistent with past practice)
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,
without limitation, the granting of stock appreciation rights or
performance units);
(h) except in connection with the Condor Transaction (which
shall be effected, in all material respects, only on the terms
described in Section 4.1(h) of the Company Disclosure Schedule),
acquire, sell, lease or dispose of any assets outside the ordinary
course of business or any assets which in the aggregate are material
to the Company and its subsidiaries taken as a whole, or enter into
any commitment or transaction outside the ordinary course of business
consistent with past practice;
(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 or practices used by it;
(j) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary
course of business;
(k) except in connection with the Condor Transaction, (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 or amend any of the Contracts or the
agreements referred to in Section 2.18; (iii) authorize any new
capital expenditure or expenditures which, individually, is in excess
of $500,000 or, in the aggregate, are in excess of $5 million;
provided, that none of the foregoing shall limit any capital
expenditure already included in the Company's 1996 capital expenditure
budget provided to Parent prior to the date hereof; or (iv) enter into
or amend any contract,
agreement, commitment or arrangement providing for the taking of any
action that would be prohibited hereunder;
(l) make or revoke any tax election or settle or compromise
any tax liability material to the Company and its subsidiaries taken
as a whole or change (or make a request to any taxing authority to
change) any material aspect of its method of accounting for tax
purposes;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved
against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company and its subsidiaries or incurred
in the ordinary course of business consistent with past practice;
(n) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby; or
(o) take, propose to any Third Party to take or agree in
writing or otherwise to take, any of the actions described in Sections
4.1(a) through 4.1(n) or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue or incorrect.
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 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 to the end that
goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective
Time, Parent will not, without the prior written consent of the
Company, which consent shall not be unreasonably withheld:
(a) amend its certificate of incorporation (other than to
increase the number of authorized shares of Parent Common Stock) or
bylaws;
(b) 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 any shares
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;
(c) adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization
of Parent;
(d) 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 Parent Common Stock or any preferred stock
or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights) totaling,
or exercisable for or convertible into shares of Parent Common Stock
totaling, in the aggregate, more than 30% of the total number of
shares of Parent Common Stock outstanding on the date hereof, except
for the grant of options to purchase shares of Parent Common Stock to
employees under Parent's employee stock option plans and the issuance
or sale of shares of Parent Common Stock pursuant to options granted
to employees under Parent's employee stock option plans (in each case,
in the ordinary course of business and consistent with past practice)
and except for the issuance of shares of Parent Common Stock and
options pursuant to the Sierra Agreement or as contemplated by Item 4
set forth in Section 3.2 of the Parent Disclosure Schedule;
(e) grant options to purchase, or make restricted stock
grants with respect to, in excess of 1,000,000 shares of Parent Common
Stock under Parent's employee stock option plans or stock purchase
plans, except in connection with any acquisition (by merger,
consolidation, or acquisition of stock or assets) of any corporation,
partnership or other business organization or division thereof or any
equity interest therein (including, without limitation, in connection
with the transactions contemplated by the Sierra Agreement);
(f) except as set forth in Section 4.2(f) of the Parent
Disclosure Schedule, 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 and in amounts not
material to Parent and its subsidiaries taken as a whole and except
for other indebtedness not exceeding $100,000,000 in the aggregate; or
(g) take, or agree in writing or otherwise to take, any of
the actions described in Sections 4.2(a) through 4.2(f).
SECTION 4.3. Preparation of S-4 and the Proxy Statement.
------------------------------------------
Parent will, as promptly as practicable, prepare and, following
receipt of notification from the SEC that it has no further comments
on the Proxy Statement, file with the SEC the S-4, containing a proxy
statement/prospectus and a form of proxy, in connection with the
registration under the Securities Act of the shares of Parent Common
Stock issuable upon conversion of the Shares and the other
transactions contemplated hereby. The Company will, as promptly as
practicable (but in any event not later than 45 days after this
Agreement), prepare and file with the SEC the Proxy Statement that
will be the same proxy statement/prospectus contained in the S-4 and a
form of proxy, in connection with the vote of the Company's
stockholders with respect to the Merger. Parent will cooperate with
the Company in such preparation and filing and will provide the
Company with all financial and other data (including pro forma
financial statements and financial and other data regarding Sierra) as
is necessary in order to enable the Company to comply with the
foregoing time schedule. Parent and the Company will, and will cause
their accountants and lawyers to, use their best efforts to have or
cause the S-4 declared effective as promptly as practicable,
including, without limitation, causing their accountants to deliver
necessary or required instruments such as opinions, consents and
certificates, and will take any other action required or necessary to
be taken under federal or state securities laws or otherwise in
connection with the registration process, it being understood and
agreed that Xxxxxx, Xxxx & Xxxxxxxx, counsel to the Company, will
render the tax opinion referred to in Section 5.2(d) not later than
the date the S-4 is required to be filed with the SEC and (ii) the
date the S-4 is filed with the SEC. The Company will use its best
efforts to cause the Proxy Statement to be mailed to its shareholders
at the earliest practicable date.
SECTION 4.4. Other Potential Acquirors. The Company, its
-------------------------
affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted
heretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, the Company or
its subsidiaries or any business combination with the Company or its
subsidiaries. The Company may, directly or indirectly, furnish
information and access, in each case only in response to unsolicited
requests therefor, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may
participate in discussions and negotiate with such entity or group
concerning any merger, sale of assets, sale of shares of capital stock
or similar transaction involving the Company or any subsidiary or
division of the Company, if such entity or group has submitted a
written proposal to the Company Board relating to any such transaction
and the Company Board by a majority vote determines in its good faith
judgment, after consultation with independent legal counsel, that it
is necessary to do so to comply with its fiduciary duties to
shareholders under applicable law. The Company Board shall (i)
provide a copy of any such written proposal and a summary of any oral
proposal to Parent or Acquisition immediately after receipt thereof
(and shall specify
the material terms and conditions of such proposal and identify the
person making such proposal), (ii) afford Parent a reasonable
opportunity to respond to such proposal and (iii) keep Parent and
Acquisition promptly advised of any development with respect thereto.
Except as set forth above, neither the Company nor any of its
affiliates 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
information to, any corporation, partnership, person or other entity
or group (other than Parent and Acquisition, any affiliate or
associate of Parent and Acquisition or any designees of Parent and
Acquisition) concerning any merger, sale of assets, sale of shares of
capital stock or similar transaction involving the Company or any
subsidiary or division of the Company; provided, however, that nothing
herein shall prevent the Company Board from taking, and disclosing to
the Company's shareholders, a position contemplated by Rules 14d-9 and
14e-2 promulgated under the Exchange Act with regard to any tender
offer; provided, further, that nothing herein shall prevent the
Company Board from making such disclosure to the Company's
shareholders as, in the good faith judgment of the Company Board,
after consultation with independent legal counsel, is necessary to
comply with its fiduciary duties to shareholders under applicable law.
SECTION 4.5. Letter of the Company's Accountants. The
-----------------------------------
Company shall use its best efforts to cause to be delivered to Parent
a letter of KPMG Peat Marwick, the Company's independent auditors,
dated a date within two business days before the date on which the S-4
shall become effective and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
SECTION 4.6. Meeting. The Company shall call a meeting of
-------
its shareholders to be held as promptly as practicable for the purpose
of voting upon this Agreement and related matters. The Company and
Acquisition will, through their respective Boards of Directors
recommend to their respective shareholders approval of such matters;
provided, however, that the Company Board may withdraw its
recommendation if the Company Board by a majority vote determines in
its good faith judgment, after consultation with independent legal
counsel, that it is necessary to do so to comply with its fiduciary
duties to shareholders under applicable law. Notwithstanding the
foregoing (but without limiting the provisions of Section 6.1(c)(iv)),
the Company Board may not withdraw its recommendation because of the
trading price of Parent Common Stock between the date hereof and the
date of the Company's shareholders' meeting. The Company and Parent
shall coordinate and cooperate with respect to the timing of such
meeting and, subject to Section 4.25(c), the Company shall use its
best efforts to hold such meeting as soon as practicable after the
date hereof.
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 Closing Date.
SECTION 4.8. Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the
Company will give Parent and Acquisition and their 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, will permit Parent and Acquisition to
make such inspections as Parent and Acquisition may reasonably require
and will cause the Company's officers and those of its subsidiaries to
furnish Parent and Acquisition with such financial and operating data
and other information with respect to the business, properties and
personnel of the Company and its subsidiaries as Parent or Acquisition
may from time to time reasonably request, provided that no
investigation pursuant to this Section 4.8(a) shall affect or be
deemed to modify any of the representations or warranties made by the
Company.
(b) Between the date hereof and the Effective Time, the
Company shall furnish to Parent and Acquisition within 25 business
days after the end of each calendar month (commencing with January
1996), an unaudited balance sheet of the Company as of the end of such
month and the related statements of earnings, stockholders' equity
(deficit) and, within 25 business days after the end of each calendar
quarter, cash flows for the quarter then ended, each prepared in
accordance with GAAP in conformity with the practices consistently
applied by the Company with respect to its monthly financial
statements. All the foregoing shall be in accordance with the books
and records of the Company and fairly present the financial position
of the Company (taking into account the differences between the
monthly and quarterly statements prepared by the Company in conformity
with its past practices) as of the last day of the period then ended.
(c) Each of Parent and Acquisition will hold and will cause
its consultants and advisors to hold in confidence all documents and
information concerning the Company and its subsidiaries furnished to
Parent or Acquisition 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 September 17, 1995.
SECTION 4.9. Additional Agreements; Best Efforts. Subject
-----------------------------------
to the terms and conditions herein provided, each of the parties
hereto agrees to use best 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, without limitation, (i)
cooperation in the preparation and filing of the Proxy Statement and
the S-4, any filings that may be required under the HSR Act, and any
amendments to any thereof; (ii) the taking of all action reasonably
necessary, proper or advisable to secure any necessary consents under
existing debt obligations of the Company and its subsidiaries or amend
the notes, indentures or agreements relating thereto to the extent
required by such notes, indentures or agreements or redeem or
repurchase such debt obligations; (iii) contesting any legal
proceeding relating to the Merger; and (iv) the execution of any
additional instruments, including the Merger Agreement, 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 shareholder vote with respect to the Merger. In
case 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.
SECTION 4.10. Consents. Parent, Acquisition and the
--------
Company each will use all reasonable efforts to obtain consents of all
third parties and Governmental Entities necessary, proper or advisable
for the consummation of the transactions contemplated by this
Agreement.
SECTION 4.11. 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, without limitation, the Merger, and shall not
issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or
by obligations pursuant to any listing agreement with the NYSE or the
Nasdaq Stock Market, as determined by Parent, Acquisition or the
Company, as the case may be.
SECTION 4.12. Indemnification; Directors' and Officers'
-----------------------------------------
Insurance.
---------
(a) Parent and Acquisition agree that all rights to
indemnification or exculpation now existing in favor of the directors,
officers, employees and agents of the Company and its subsidiaries as
provided in their respective charters or bylaws (or other similar
governing instruments) or otherwise in effect as of the date hereof
with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect for a
period of six (6) years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claim (a "Claim")
asserted or made within such period shall
continue until the disposition of such Claim. To the maximum extent
permitted by the CGCL, such indemnification shall be mandatory rather
than permissive and the Surviving Corporation shall advance expenses
in connection with such indemnification to the fullest extent
permitted under applicable law, provided that the person to whom
expenses are advanced provides an undertaking to repay such advances
if it is ultimately determined that such person is not entitled to
indemnification); provided, however, the indemnification provided
hereunder shall not be greater than the indemnification permissible
pursuant to the Company's or its subsidiaries' respective charters and
bylaws (or other similar governing instruments), as in effect as of
the date hereof.
(b) Parent shall cause the Surviving Corporation to
maintain in effect for not less than three years from the Effective
Time the policies of the directors' and officers' liability and
fiduciary insurance currently maintained by the Company with respect
to matters occurring prior to the Effective Time to cover the types of
actions and omissions currently covered by such policies (provided
that (i) the Surviving Corporation may substitute therefor policies of
substantially the same coverage containing terms and conditions which
are no less advantageous, in any material respect, to the
beneficiaries thereof so long as such substitution does not result in
gaps or lapses in coverage and (ii) the Surviving Corporation shall
not be required to pay an annual premium for such insurance in excess
of $250,000, but in such case shall purchase as much coverage as
possible for such amount).
SECTION 4.13. 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 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, (ii) any material
failure of the Company, Parent or Acquisition, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, (iii) any notice of, or
other communication relating to, a default or event which, with notice
or lapse of time or both, would become a default, received by it or
any of its subsidiaries subsequent to the date of this Agreement and
prior to the Effective Time, under any contract or agreement material
to the financial condition, properties, businesses or results of
operations of it and its subsidiaries taken as a whole to which it or
any of its subsidiaries is a party or is subject, (iv) any notice or
other communication from any third party alleging that the consent of
such third party is or may be required in connection with the
transactions contemplated by this Agreement, or (v) any material
adverse change in their respective financial condition, properties,
businesses, results of operations or prospects, taken as a whole,
other than changes resulting from general economic conditions;
provided, however, that the delivery of any notice pursuant to this
Section 4.13 shall not cure such breach or non-
compliance or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 4.14. Pooling. The Company and Parent each agrees
-------
that it will not take any action which could prevent the Merger from
being accounted for as a "pooling-of-interests" for accounting
purposes and the Company will bring to the attention of Parent, and
Parent will bring to the attention of the Company, any actions, or
agreements or understandings, whether written or oral, that could be
reasonably likely to prevent Parent from accounting for the Merger as
a "pooling-of-interests." Parent shall use commercially reasonable
efforts to cause Ernst & Young LLP ("E&Y") to deliver to Parent a
letter to the effect that pooling-of-interests accounting is
appropriate for the Merger if it is closed and consummated in
accordance with the terms of this Agreement, and the Company shall use
commercially reasonable efforts to cause KPMG Peat Marwick to
cooperate fully with E&Y (including, without limitation, sharing
information, analysis and work product, engaging in active discussions
and delivering to the Company a letter substantially similar to E&Y's
letter to Parent) in connection with E&Y's delivery of such letter.
The Company will cause KPMG Peat Marwick to inform all Company
Affiliates and other relevant employees as to those actions that
should or should not be taken by such persons so that the Merger will
be accounted for as a "pooling-of-interests."
SECTION 4.15. Tax-Free Reorganization Treatment. The
---------------------------------
Company, and Parent and Acquisition shall execute and deliver to
Xxxxxx, Xxxx & Xxxxxxxx, counsel to the Company, certificates
substantially in the form attached hereto as Exhibits C-1 and C-2,
respectively, at such time or times as reasonably requested by such
law firm 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 which would cause to be untrue (or
fail to take or cause not to be taken any action which would cause to
be untrue) any of the representations in Exhibits C-1 or C-2.
SECTION 4.16. Taxes. In respect of income Tax returns of
-----
the Company or any subsidiary not required to be filed prior to the
date hereof, the Company shall, to the extent permitted by law without
any penalty, delay (and cause its subsidiaries to delay) the filing of
any such Tax returns until after the Effective Time; provided,
however, that the Company shall notify Parent of its intention to
delay (or cause any subsidiary to delay) any such filing and shall not
so delay the filing of a Tax return if Parent and the Company agree
that so delaying the filing of such Tax return is not in the best
interests of either the Company or Parent. If any such Tax return is
required to be filed on or prior to the Effective Time, the Company or
its subsidiaries, as the case may be, shall prepare and timely file
such Tax return
in a manner consistent with prior years and all applicable laws and
regulations; provided, however, that Parent shall be notified and
given an opportunity to review and to comment, prior to the filing
thereof, on any such Tax return (a) which relates to a Tax which is
based upon or measured by income, (b) which is not regularly filed by
the Company or a subsidiary thereof in connection with the conduct of
its business in the ordinary course, or (c) for which Parent requests
such opportunity, although neither Parent's approval nor consent shall
be required prior to the filing of any such Tax return.
SECTION 4.17. Employment and Non-Competition Agreements.
-----------------------------------------
The Company and Parent shall, as of or prior to the Effective Time,
enter into employment agreements and non-competition agreements with
Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx on substantially the terms
set forth in the forms of Employment Agreement and Non-Competition
Agreement agreed to as of the date hereof (respectively, the
"Employment Agreements" and the "Non-Competition Agreements").
SECTION 4.18. Employee Matters.
----------------
(a) Employees of the Company and its subsidiaries shall be
treated after the Merger no less favorably under the Parent ERISA
Plans than other similarly situated employees of Parent and its
subsidiaries.
(b) For a period of one year following the Merger, Parent
shall and shall cause its subsidiaries to maintain with respect to
their employees who had been employed by the Company or any of its
subsidiaries (i) base salary or regular hourly wage rates for each
such employee at not less than the rate applicable immediately prior
to the Merger to such employee, and (ii) employee benefits (as defined
for purposes of Section 3(3) of ERISA), other than stock option plans)
which are substantially comparable in the aggregate to such employee
benefits provided by the Company and its subsidiaries immediately
prior to the Merger.
(c) Parent and its subsidiaries shall credit employees of
the Company and its subsidiaries for purposes of determining
eligibility to participate or vesting under the Parent ERISA Plans
with their service prior to the Merger with the Company and its
subsidiaries to the same extent such service was counted under similar
benefit plans of the Company prior to the Merger.
(d) Nothing contained herein shall be construed as
requiring Parent or the Surviving Corporation to continue any specific
plans or to continue the employment of any specific person.
SECTION 4.19. Registration Rights Agreement. Parent agrees
-----------------------------
at the Closing to enter into a Registration Rights Agreement with the
parties to the Shareholders Agreement (other than Parent and the
Company) in substantially the form attached to this Agreement as
Exhibit D (the "Registration Rights Agreement").
SECTION 4.20. Company Affiliates. The Company has
------------------
identified to Parent each Company Affiliate and, except as set forth
in Section 4.20 of the Company Disclosure Schedule, each Company
Affiliate has delivered to Parent on or prior to the date hereof, a
written agreement (i) that such Company Affiliate will not sell,
pledge, transfer or otherwise dispose of any shares of Parent Common
Stock issued to such Company Affiliate pursuant to the Merger, except
in compliance with Rule 145 promulgated under the Securities Act or an
exemption from the registration requirements of the Securities Act and
(ii) that on or prior to the earlier of (x) the mailing of the Proxy
Statement/Prospectus or (y) the thirtieth day prior to the Effective
Time such Company Affiliate will not thereafter sell or in any other
way reduce such Company Affiliate's risk relative to any shares of
Parent Common Stock received in the Merger (within the meaning of the
SEC's Financial Reporting Release No. 1, "Codification of Financing
Reporting Policies," Section 201.01 47 F.R. 21028 (April 15, 1982)),
until such time as financial results (including combined sales and net
income) covering at least 30 days of post-merger operations have been
published, except as permitted by Staff Accounting Bulletin No. 76
issued by the SEC. The Company will use its best efforts to cause the
Company Affiliate listed in Section 4.20 of the Company Disclosure
Schedule to execute and deliver the Affiliate Letter as promptly as
practicable (and, in all events, prior to the Effective Time).
SECTION 4.21. Election to Parent Board. Effective as of
------------------------
the Closing Date, Parent shall increase the size of its Board of
Directors (the "Parent Board") by two directors and shall cause Xxxxxx
X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx to be appointed to the Parent Board
to fill the vacancies created, for initial terms expiring two years
and one year, respectively, following the date of Parent's first
annual meeting of shareholders following the date hereof, and shall
cause Xxxxxx X. Xxxxxxxx to be elected to the position of Vice
Chairman of the Parent Board. From and after the Closing Date, and
for so long as the parties to the Shareholders Agreement (other than
Parent and the Company) collectively beneficially own (as such term is
defined in Section 13 of the Exchange Act and the rules and
regulations thereunder) 25% of the shares of Parent Common Stock
received by them in the Merger, Parent shall cause at least one of
Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx to be included in the slate
of nominees for election to the Parent Board at each annual meeting of
shareholders of Parent and at any special meeting of shareholders of
Parent at which directors are to be elected (unless one of them is
then a member of a director class whose term does not expire at such
meeting).
SECTION 4.22. SEC Filings. Each of Parent and the Company
-----------
shall promptly provide the other party (or its counsel) with copies of
all filings made by the other party or any of its subsidiaries with
the SEC or any other state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated
hereby.
SECTION 4.23. Guarantee of Performance. Parent hereby
------------------------
guarantees the performance by Acquisition of its obligations under
this Agreement and the indemnification obligations of the Surviving
Corporation pursuant to Section 4.12(a) hereof.
SECTION 4.24. Property. At the Closing, Parent will
--------
purchase, or cause an affiliate to purchase, the real property
described in Section 4.24 of the Company Disclosure Schedule (the
"Property") from the owners thereof in accordance with the terms of
the letter agreement, dated the date hereof, between Parent and such
owners.
SECTION 4.25. Acquisition. (a) The Company hereby
-----------
acknowledges that it has been advised by Parent that Parent is,
substantially simultaneously with the execution and delivery of this
Agreement, entering into an Agreement and Plan of Merger (the "Sierra
Agreement"), dated as of the date hereof, among Parent, Sierra
Acquisition Corp. ("Merger Sub") and Sierra On-Line, Inc. ("Sierra")
pursuant to which Merger Sub will merge with and into Sierra and
Sierra will become a wholly-owned subsidiary of Parent (the "Sierra
Merger") and the shareholders and stock option holders of Sierra will
receive, respectively, shares of Parent Common Stock and options to
purchase shares of Parent Common Stock in the Sierra Merger.
(b) The parties hereto expressly acknowledge and agree that
it shall not be a condition to the respective obligations of any party
hereto to effect the Merger that the transactions contemplated by the
Sierra Agreement shall have been approved by the shareholders of
Parent or Sierra or that such transactions shall have been
consummated.
(c) Notwithstanding anything to the contrary contained
herein (including, without limitation, in Sections 4.3, 4.6 and 4.9
hereof), the Company will cooperate with all reasonable requests of
Parent to coordinate the timing of the shareholders meetings with
respect to the transactions contemplated by this Agreement and the
Sierra Agreement; provided, however, that the Company shall not be
-------- -------
required to agree to a material delay of its shareholders meeting for
any reason related to the timing of the Sierra shareholders meeting or
any other matters related to the Sierra transaction. In addition, the
Company will provide Parent with all financial and other data
regarding the Company as may be reasonably requested by Parent in
connection with the preparation of the proxy statement and Form S-4
relating to the Sierra Merger.
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 shareholders 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 court or United States governmental
authority which 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, and any other governmental
or regulatory notices or approvals required with respect to the
transactions contemplated hereby shall have been either filed or
received;
(d) 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 the
Shares in the Merger;
(e) Parent shall have received a letter from E&Y stating
that the Merger will be accounted for under GAAP as a "pooling-of-
interests," and such opinion shall not have been withdrawn or modified
in any material respect; and
(f) Parent or an affiliate shall have purchased the
Property as contemplated by Section 4.24 hereof.
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 of Parent and Acquisition contained
in this Agreement or in any other document delivered pursuant hereto
shall be true and correct in all material respects at and as of the
Effective Time with the same effect as if made at and as of the
Effective Time, and at the Closing Parent and Acquisition shall have
delivered to the Company a certificate to that effect;
(b) each of the 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;
(c) the shares of Parent Common Stock issuable to the
Company shareholders 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 opinion of Xxxxxx, Xxxx & Xxxxxxxx, counsel to the
Company, addressed to the Company and its shareholders to the effect
that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code shall
have been delivered and such opinion shall not have been withdrawn or
modified in any material respect;
(e) 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
(f) there shall have been no events, changes or effects
with respect to Parent or its subsidiaries having or which could
reasonably be expected to have a Material Adverse Effect on Parent,
and at the Closing Parent shall have delivered to the Company a
certificate to that effect.
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:
(a) the representations of the Company contained in this
Agreement or in any other document delivered pursuant hereto shall be
true and correct in all material respects at and as of the Effective
Time with the same effect as if made 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;
(b) each of the 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;
(c) each Company Affiliate and each shareholder which is a
party to the Shareholders Agreement shall have performed his or its
respective obligations under the applicable Affiliate Letter and/or
the Shareholders Agreement (if applicable), and Parent shall have
received a certificate signed by each of them to such effect;
(d) 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 under any loan or credit agreement, note,
mortgage, indenture, lease or other agreement or instrument, except
for those for which failure to obtain such consents and approvals
would not, in the reasonable opinion of Parent, individually or in the
aggregate, have a Material Adverse Effect on the Company;
(e) the number of Company Dissenting Shares as of the
Effective Time shall not exceed 5% of the then issued and outstanding
shares;
(f) there shall have been no events, changes or effects
with respect to the Company or its subsidiaries having or which could
reasonably be expected to have, a Material Adverse Effect on the
Company and at the Closing the Company shall have delivered to Parent
a certificate to that effect;
(g) the Employment Agreements shall be in full force and
effect, and each of Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxxx shall be
in good physical and mental health and capable of performing his or
her obligations under their respective Employment Agreements;
(h) the Non-Competition Agreements shall be in full force
and effect; and
(i) the Company Affiliate listed in Section 4.20 of the
Company Disclosure Schedule shall have executed an Affiliate Letter.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. Termination. This Agreement may be terminated
-----------
and the Merger may be abandoned at any time, but prior to the
Effective Time:
(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 governmental authority 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 September 30, 1996; 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, in either case such
that the conditions set forth in Section 5.2(a) would be incapable of
being satisfied by September 30, 1996 (or as otherwise extended),
(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 the 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 business days after notice by the Company thereof, provided
that the Company has not breached any of its obligations hereunder,
(iii) the Company Board by a majority vote determines in its good
faith judgment, after consultation with independent legal counsel,
that it is necessary to do so to comply with its fiduciary duties to
shareholders, provided that such termination under this clause (iii)
shall not be effective unless at the time of such determination the
Company has received a bona fide proposal to effect a Third Party
Acquisition that had not been withdrawn as of the time of such
termination and until payment of the fee required by Section 6.3(a)
hereof, or (iv) prior to the meeting of shareholders of the Company,
the Average Stock Price (as defined below) is less than $29.00. The
term "Average Stock Price" means a fraction, the numerator of which is
the sum of the Closing Price (as
hereinafter defined) for each trading day during the 15 consecutive
trading days ending on the first trading day that is at least 10
calendar days prior to the scheduled date of such meeting of
shareholders of the Company and the denominator of which is 15. For
purposes hereof, with respect to any trading day, the Closing Price
shall be equal to the per share closing price on the NYSE of Parent
Common Stock on such day, as reported in the New York Stock Exchange
Composite Transactions; 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, in either case such that the
conditions set forth in Section 5.3(a) would be incapable of being
satisfied by September 30, 1996 (or as otherwise extended), (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 business days after notice by Parent or Acquisition
thereof, provided that neither Parent nor Acquisition has breached any
of their respective obligations hereunder, (iii) the Company shall
engage in negotiations with any entity or group (other than Parent or
Acquisition) that has proposed a Third Party Acquisition (as defined
below) and such negotiations shall have continued for more than 15
business days after the Company has first furnished information to
such entity or group or commenced negotiations with such party
(whichever is earlier), (iv) the Company Board shall have withdrawn,
modified or changed its approval or recommendation of this Agreement
or the Merger, shall have recommended to the Company's shareholders a
Third Party Acquisition or shall have failed to call, give notice of,
convene or hold a shareholders' meeting to vote upon the Merger, or
shall have adopted any resolution to effect any of the foregoing, or
(v) the Company shall have convened a meeting of its shareholders to
vote upon the Merger and shall have failed to obtain the requisite
vote of its shareholders.
"Third Party Acquisition" means the occurrence of any of the
following events (i) the acquisition of the Company by merger or
otherwise by any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) or entity other than
Parent, Acquisition or any affiliate thereof (a "Third Party"); (ii)
the acquisition by a Third Party of more than 30% of the total assets
of the Company and its subsidiaries, taken as a whole; or (iii) the
acquisition by a Third Party of 30% or more of the outstanding shares
of Company Common Stock. "Significant Acquisition" means the
acquisition by the Company or any subsidiary, 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 to or greater than 40% of the
annual revenues, net income or assets of the Company.
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 shareholders, other than the provisions of this
Section 6.2 and Sections 4.8(c), 6.3, 7.5, 7.8, 7.10 and 7.13 hereof.
Nothing contained in this Section 6.2 shall relieve any party from
liability for any breach of this Agreement.
SECTION 6.3. Fees and Expenses.
-----------------
(a) In the event that this Agreement shall be terminated
pursuant to:
(i) Section 6.1(c)(iii);
(ii) Sections 6.1(d)(i) or (ii) as a result of a
willful breach of any representation, warranty, covenant or
agreement of the Company and, within twelve months
thereafter, the Company enters into an agreement with
respect to a Third Party Acquisition or a Significant
Acquisition, or a Third Party Acquisition or a Significant
Acquisition occurs, involving any party (or any affiliate
thereof) (x) with whom the Company (or its agents) had
negotiations with a view to a Third Party Acquisition or a
Significant Acquisition, (y) to whom the Company (or its
agents) furnished information with a view to a Third Party
Acquisition or a Significant Acquisition or (z) who had
submitted a proposal or expressed an interest in a Third
Party Acquisition or a Significant Acquisition, in the case
of each of clauses (x), (y) and (z) after the date hereof
and prior to such termination;
(iii) Section 6.1(d)(iii) and, within twelve months
thereafter, the Company enters into an agreement with
respect to a Third Party Acquisition or a Significant
Acquisition, or a Third Party Acquisition or a Significant
Acquisition occurs, involving any party (or any affiliate
thereof) (x) with whom the Company (or its agents) had
negotiations with a view to a Third Party Acquisition or a
Significant Acquisition, (y) to whom the Company (or its
agents) furnished information with a view to a Third Party
Acquisition or a Significant Acquisition or (z) who had
submitted a proposal or expressed an interest in a Third
Party Acquisition or a Significant Acquisition, in the case
of each of clauses (x), (y) and (z) after the date hereof
and prior to such termination; or
(iv) Section 6.1(d)(iv) (in the absence of an event or
circumstance described in Section 5.2(f)); or
(v) Section 6.1(d)(v);
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 $25 million as liquidated damages (A) in
the case of Sections 6.3(a)(i), (iv) and (v), immediately upon such a
termination and (B) in the case of Sections 6.3(a)(iii) and (iv),
simultaneously with the earlier of entering into or consummating the
Third Party Acquisition or Significant Transaction referred to
therein. It is specifically agreed that the amount to be paid
pursuant to this Section 6.3(a) represents liquidated damages and not
a penalty.
(b) Upon the termination of this Agreement pursuant to
Sections 6.1(d)(i), (ii), (iii), (iv) or (v), the Company shall
reimburse Parent, Acquisition and their affiliates (not later than ten
business days after submission of statements therefor) for all actual
documented out-of-pocket fees and expenses, not to exceed $2,500,000
(unless such termination is not covered by Section 3(a)), actually and
reasonably incurred by any of them or on their behalf in connection
with the Merger and the consummation of all transactions contemplated
by this Agreement (including, without limitation, fees payable to
investment bankers, counsel to any of the foregoing, and accountants).
If Parent or Acquisition shall submit a request for reimbursement
hereunder, Parent or Acquisition will provide the Company in due
course with invoices or other reasonable evidence of such expenses
upon request. The Company shall in any event pay the amount requested
(not to exceed $2,500,000, except as provided above) within ten
business days of such request, subject to the Company's right to
demand a return of any portion as to which invoices are not received
in due course.
(c) Upon the termination of this Agreement pursuant to
Sections 6.1(c)(i) or (ii), Parent shall reimburse the Company and
their affiliates (not later than ten business days after submission of
statements therefor) for all actual documented out-of-pocket fees and
expenses actually and reasonably incurred by any of them or on their
behalf in connection with the Merger and the consummation of all
transactions contemplated by this Agreement (including, without
limitation, fees payable to investment bankers, counsel to any of the
foregoing, and accountants). If the Company shall submit a request
for reimbursement hereunder, the Company will provide Parent in due
course with invoices or other reasonable evidence of such expenses
upon request. Parent shall in any event pay the amount requested
within ten business days of such request, subject to Parent's right to
demand a return of any portion as to which invoices are not received
in due course.
(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. The cost of
printing the S-4 and the Proxy Statement shall be borne equally by the
Company and Parent.
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 shareholders of the Company (if
required by applicable law) but, after any such approval, no amendment
shall be made which requires the approval of such shareholders under
applicable law without such approval. This Agreement may not be
amended except 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 (for these purposes, Parent and
Acquisition shall together be deemed one party and the Company shall
be deemed the other party) 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 either 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 either 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.
SECTION 7.2. Entire Agreement; Assignment. This Agreement
----------------------------
(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 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 cable, telegram, facsimile or
telex, or by registered or certified mail (postage prepaid, return
receipt requested), to the other party as follows:
if to Parent or Acquisition: CUC International Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
if to the Company to: Davidson & Associates, Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may
have previously furnished to the other 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
California, 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 provided in
Sections 4.12 and 7.2, nothing in this Agreement, express or implied,
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. Arbitration. Any controversy, dispute or
-----------
claim arising out of or relating to this Agreement or the breach
hereof which cannot be settled by mutual agreement (except for actions
by Parent or the Company seeking equitable, injunctive or other relief
under Section 7.10) shall be finally settled by arbitration as
follows: Any party who is aggrieved shall deliver a notice to other
party setting forth the specific points in dispute. Any points
remaining in dispute twenty (20) days after the giving of such notice
shall be submitted to arbitration in New York, New York, or
Los Angeles, California, whichever the complaining party may choose,
to Endispute, before a single arbitrator appointed in accordance with
Endispute's Arbitration Rules, modified only as herein expressly
provided. The arbitrator may enter a default decision against any
party who fails to participate in the arbitration proceedings. The
decision of the arbitrator on the points in dispute will be final,
unappealable and binding and judgment on the award may be entered in
any court having jurisdiction thereof. The arbitrator will be
authorized to apportion its fees and expenses and the reasonable
attorney's fees and expenses of Parent and the Company as the
arbitrator deems appropriate. In the absence of any such
apportionment, the fees and expense of the arbitrator will be borne
equally by each party, and each party will bear the fees and expenses
of its own attorney. The parties agree that this clause has been
included to rapidly and inexpensively resolve any disputes between
them with respect to this Agreement, and that this clause shall be
grounds for dismissal of any court action commenced by either party
with respect to this Agreement, other than post-arbitration actions
seeking to enforce an arbitration award. The parties shall keep
confidential, and shall not disclose to any person, except as may be
required by law, the existence of any controversy hereunder, the
referral of any such controversy to arbitration or the status or
resolution thereof.
SECTION 7.9. Severability. If any term or other provision
------------
of this Agreement is invalid, illegal or unenforceable, all other
provisions of this Agreement shall remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse
to any party.
SECTION 7.10. Specific Performance. The parties hereto
--------------------
acknowledge that irreparable damage would result if this Agreement
were not specifically enforced, and they therefore consent that the
rights and obligations of the parties under this Agreement may be
enforced by a decree of specific performance issued by a court of
competent jurisdiction. Such remedy shall, however, not be exclusive
and, subject to Section 7.8, shall be in addition to any other
remedies, including arbitration, which any party may have under this
Agreement or otherwise.
SECTION 7.11. Recapitalization. Whenever (a) the number of
----------------
outstanding shares of Parent Common Stock is changed by reason of a
subdivision or combination of shares, whether effected by a
reclassification of shares or otherwise or (b) Parent pays a cash or
stock dividend or makes a similar distribution, each specified number
of shares referred to in this Agreement and each specified per share
amount (other than par values) shall be adjusted accordingly.
SECTION 7.12. Subsidiaries. The term "subsidiary" shall
------------
mean, when used with reference to any entity, any entity more than
fifty percent (50%) of the outstanding voting securities or interests
(including membership interests) of which are owned directly or
indirectly by such former entity.
SECTION 7.13. Brokers. Except as otherwise provided in
-------
Section 6.3, the Company agrees to indemnify and hold harmless Parent
and Acquisition, and Parent and Acquisition agree to indemnify and
hold harmless the Company, from and against any and all liability to
which Parent and Acquisition, on the one hand, or the Company, on the
other hand, may be subjected by reason of any brokers, finders or
similar fees or expenses with respect to the transactions contemplated
by this Agreement to the extent such similar fees and expenses are
attributable to any action undertaken by or on behalf of the Company,
or Parent or Acquisition, as the case may be.
SECTION 7.14. 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.
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.
DAVIDSON & ASSOCIATES, INC.
ATTEST: By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
By: /s/ Xxxxxx X. Xxxxxxxx Officer
--------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
CUC INTERNATIONAL INC.
ATTEST: By: /s/ E. Xxxx Xxxxxxx
-------------------------------------
Name: E. Xxxx Xxxxxxx
Title: President
By: /s/ Xxx X. Xxxxxx
---------------------------
Name: Xxx X. Xxxxxx
Title: Assistant Secretary
STEALTH ACQUISITION II CORP.
ATTEST: By: /s/ E. Xxxx Xxxxxxx
-------------------------------------
Name: E. Xxxx Xxxxxxx
Title: President
By: /s/ Xxx X. Xxxxxx
---------------------------
Name: Xxx X. Xxxxxx
Title: Secretary
