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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TELLABS, INC.
A DELAWARE CORPORATION,
CARDINAL MERGER CO.
A DELAWARE CORPORATION AND WHOLLY OWNED
SUBSIDIARY OF TELLABS, INC.,
AND
COHERENT COMMUNICATIONS SYSTEMS CORPORATION
A DELAWARE CORPORATION
DATED AS OF FEBRUARY 16, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER............................................................................ 2
Section 1.1. Merger............................................................... 2
Section 1.2. Closing; Effective Time.............................................. 2
Section 1.3. Effects of the Merger................................................ 2
Section 1.4. Directors and Officers............................................... 3
ARTICLE II CONVERSION OF SECURITIES.............................................................. 3
Section 2.1. Conversion of Capital Stock.......................................... 3
Section 2.2. Exchange of Certificates............................................. 4
Section 2.3. No Dissenters Rights................................................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................... 7
Section 3.1. Organization......................................................... 7
Section 3.2. Company Subsidiaries and Joint Ventures.............................. 7
Section 3.3. Company Capital Structure............................................ 8
Section 3.4. Authority; No Conflict; Required Filings and Consents................ 9
Section 3.5. SEC Filings; Financial Statements.................................... 10
Section 3.6. Absence of Undisclosed Liabilities................................... 11
Section 3.7. Absence of Certain Changes or Events................................. 11
Section 3.8. Taxes................................................................ 11
Section 3.9. Properties........................................................... 13
Section 3.10. Intellectual Property................................................ 13
Section 3.11. Agreements, Contracts and Commitments................................ 14
Section 3.12. Litigation........................................................... 14
Section 3.13. Environmental Matters................................................ 15
Section 3.14. Employee Benefit Plans............................................... 16
Section 3.15. Compliance with Laws................................................. 17
Section 3.16. Pooling.............................................................. 17
Section 3.17. Affiliates........................................................... 17
Section 3.18. Interested Party Transactions........................................ 18
Section 3.19. Registration Statement; Proxy Statement/Prospectus................... 18
Section 3.20. No Excess Parachute Payments......................................... 18
Section 3.21. Opinion of Financial Advisor......................................... 19
Section 3.22. Section 203 of the DGCL Not Applicable............................... 19
Section 3.23. Voting Requirements.................................................. 19
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Section 3.24. Brokers.............................................................. 19
Section 3.25. Additional Disclosure................................................ 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................................... 19
Section 4.1. Organization......................................................... 19
Section 4.2. Parent Subsidiaries.................................................. 20
Section 4.3. Parent Capital Structure............................................. 20
Section 4.4. Authority; No Conflict; Required Filings and Consents................ 20
Section 4.5. SEC Filings; Financial Statements.................................... 21
Section 4.6. Absence of Undisclosed Liabilities................................... 22
Section 4.7. Absence of Certain Changes or Events................................. 22
Section 4.8. Taxes................................................................ 23
Section 4.9. Properties........................................................... 24
Section 4.10. Intellectual Property................................................ 24
Section 4.11. Agreements, Contracts and Commitments................................ 24
Section 4.12. Litigation........................................................... 24
Section 4.13. Environmental Matters................................................ 25
Section 4.14. Pooling.............................................................. 25
Section 4.15. Affiliates........................................................... 26
Section 4.16. Compliance with Laws................................................. 26
Section 4.17. Registration Statement; Proxy Statement/Prospectus................... 26
Section 4.18. Interim Operations of Sub............................................ 26
Section 4.19. Voting Requirements.................................................. 27
Section 4.20. Brokers.............................................................. 27
ARTICLE V CONDUCT OF BUSINESS................................................................... 27
Section 5.1. Covenants of the Company............................................. 27
Section 5.2. Covenants of Parent.................................................. 30
Section 5.3. Employment Agreements................................................ 31
Section 5.4. Cooperation.......................................................... 31
Section 5.5. Material Adverse Effect.............................................. 31
ARTICLE VI ADDITIONAL AGREEMENTS................................................................. 32
Section 6.1. No Solicitation...................................................... 32
Section 6.2. Proxy Statement/Prospectus; Registration Statement................... 34
Section 6.3. Consents............................................................. 34
Section 6.4. Current Nasdaq Quotation............................................. 34
Section 6.5. Access to Information................................................ 34
Section 6.6. Stockholders Meeting................................................. 35
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Section 6.7. Legal Conditions to Merger........................................... 35
Section 6.8. Public Disclosure.................................................... 36
Section 6.9. Tax-Free Reorganization.............................................. 36
Section 6.10. Pooling Accounting................................................... 37
Section 6.11. Affiliate Letters.................................................... 37
Section 6.12. Nasdaq Quotation..................................................... 37
Section 6.13. Stock Plans and Options.............................................. 37
Section 6.14. Indemnification...................................................... 38
Section 6.15. Additional Agreements; Reasonable Efforts............................ 38
Section 6.16. Termination of Certain Agreements.................................... 39
Section 6.17. Real Estate Transfer Taxes........................................... 39
ARTICLE VII CONDITIONS TO MERGER.................................................................. 39
Section 7.1. Conditions to Each Party's Obligation to
Effect the Merger.................................................... 39
Section 7.2. Additional Conditions to Obligations of Parent and Sub............... 40
Section 7.3. Additional Conditions to Obligations of the Company.................. 42
ARTICLE VIII TERMINATION AND AMENDMENT............................................................. 44
Section 8.1. Termination.......................................................... 44
Section 8.2. Effect of Termination................................................ 46
Section 8.3. Fees and Expenses.................................................... 46
Section 8.4. Amendment............................................................ 47
Section 8.5. Extension; Waiver.................................................... 47
ARTICLE IX MISCELLANEOUS......................................................................... 48
Section 9.1. Nonsurvival of Representations, Warranties and
Agreements........................................................... 48
Section 9.2. Notices.............................................................. 48
Section 9.3. Interpretation....................................................... 49
Section 9.4. Counterparts......................................................... 49
Section 9.5. Entire Agreement; No Third Party Beneficiaries....................... 49
Section 9.6. Governing Law........................................................ 49
Section 9.7. Assignment........................................................... 50
EXHIBIT A - Form of Company Affiliate Letter........................................................... A-1
EXHIBIT B - Form of Parent Affiliate Letter............................................................ B-1
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TABLE OF DEFINED TERMS
SECTION
Agreement .................................................. Forepart
Acquisition Agreement ...................................... 8.3(b)
Alternative Transaction .................................... 8.3(f)
Approval ................................................... 6.7
Closing .................................................... 1.2
Closing Date ............................................... 1.2
Code ....................................................... Recitals
Company .................................................... Forepart
Company Affiliate Letter ................................... 6.11
Company Auditors ........................................... 3.16
Company Balance Sheet ...................................... 3.5(b)
Company Certificate ........................................ 2.2(b)
Company Certificates ....................................... 2.2(b)
Company Common Stock ....................................... Recitals
Company Employee Plans ..................................... 3.14(a)
Company Financial Statements ............................... 3.5(b)
Company Intellectual Property Rights ....................... 3.10(a)
Company Letter ............................................. 3.2(a)
Company Material Contracts ................................. 3.11
Company Preferred Stock .................................... 3.3(a)
Company SEC Reports ........................................ 3.5(a)
Company Stock Plans ........................................ 2.1(d)
Company Stock Options ...................................... 3.3(b)
Company Tax Certificate .................................... 6.9
Confidentiality Agreement .................................. 6.1(a)
Constituent Corporations ................................... 1.3(a)
DGCL ....................................................... Recitals
Effective Time ............................................. 1.2
Environmental Permits ...................................... 3.13(c)
ERISA ...................................................... 3.14(a)
Exchange Act ............................................... 3.4(c)
Exchange Agent ............................................. 2.2(a)
Exchange Fund .............................................. 2.2(a)
Exchange Ratio ............................................. 2.1(c)
GAAP ....................................................... 3.5(b)
Government Entity .......................................... 3.4(c)
Hazardous Material ......................................... 3.13(a)
Hazardous Materials Activities ............................. 3.13(b)
HSR Act .................................................... 3.4(c)
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SECTION
Joint Venture ............................................ 3.2(b)
Material Adverse Effect .................................. 5.5
Merger ................................................... Recitals
Parent ................................................... Forepart
Parent Affiliate Letter .................................. 6.11
Parent Auditors .......................................... 4.14
Parent Balance Sheet ..................................... 4.5(b)
Parent Common Stock ...................................... Recitals
Parent Letter ............................................ 4.2
Parent Material Contracts ................................ 4.11
Parent Option Plans ...................................... 4.3(a)
Parent Preferred Stock ................................... 4.3(a)
Parent SEC Reports ....................................... 4.5(a)
Parent Tax Certificate ................................... 6.9
Proxy Statement .......................................... 3.19
Registration Statement ................................... 3.19
Returns .................................................. 3.8(b)
Rule 145 ................................................. 6.11
Safeguard ................................................ 6.16
Services Agreement ....................................... 6.16
SEC ...................................................... 3.4(c)
Securities Act ........................................... 3.4(c)
Senior Officers .......................................... 5.3
Stockholders Meeting ..................................... 3.19
Sub. ..................................................... Forepart
Subsidiary ............................................... 3.2(b)
Superior Proposal ........................................ 6.1(a)
Surviving Corporation .................................... 1.3(a)
Takeover Proposal ........................................ 6.1(a)
Tax ...................................................... 3.8(a)
Taxes .................................................... 3.8(a)
Termination Fee .......................................... 8.3(b)
Third Party .............................................. 8.3(f)
Transfer Taxes ........................................... 6.17
1998 Bonus Plan .......................................... 3.14(b)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
February 16, 1998, by and among Tellabs, Inc., a Delaware corporation
("Parent"), Cardinal Merger Co., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and Coherent Communications Systems Corporation, a
Delaware corporation (the "Company").
RECITALS
WHEREAS, Sub will merge with and into the Company (the
"Merger"), pursuant to the General Corporation Law of the State of Delaware, as
amended (the "DGCL") and upon the terms and subject to the conditions herein set
forth, whereby each issued and outstanding share of Common Stock, $.01 par value
per share, of the Company ("Company Common Stock"), not owned directly or
indirectly by Parent or the Company, will be converted into shares of Common
Stock, $.01 par value per share, of Parent ("Parent Common Stock");
WHEREAS, as a result of the Merger, the Company will become a
wholly owned subsidiary of Parent and the stockholders of the Company will
become stockholders of Parent;
WHEREAS, the Board of Directors of the Company has determined
that the Merger is consistent with and in furtherance of the long-term business
strategy of the Company and is fair to, and in the best interests of, the
Company and its stockholders, has approved and adopted this Agreement and the
transactions contemplated hereby and has recommended adoption of this Agreement
by the stockholders of the Company;
WHEREAS, the Board of Directors of Parent has determined that
the Merger is consistent with and in furtherance of the long-term business
strategy of Parent and is in the best interests of Parent and its stockholders
and has approved and adopted this Agreement and the transactions contemplated
hereby;
WHEREAS, the Board of Directors of Sub has approved and
adopted this Agreement and Parent, as the sole stockholder of Sub, has adopted
this 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, for accounting purposes, it is intended that the
Merger shall be accounted for as a pooling of interests;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
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WHEREAS, simultaneously with the execution and delivery of
this Agreement, certain stockholders of the Company, including each of the
directors of the Company, in order to induce Parent and Sub to enter into this
Agreement, entered into stockholder agreements with Parent, agreeing, among
other things, to vote in favor of this Agreement and the Merger and against any
competing proposals.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
below, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. Merger. Subject to the provisions of this
Agreement and in accordance with the DGCL, Sub shall be merged with and into the
Company. As a result of the Merger, the outstanding shares of capital stock of
Sub and the Company shall be converted or canceled in the manner provided in
Article II of this Agreement, the separate corporate existence of Sub shall
cease and the Company shall be the surviving corporation in the Merger and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.
Section 1.2. Closing; Effective Time. The closing of the
Merger (the "Closing") will take place at 10:00 a.m., local time, on a date to
be specified by Parent and the Company, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VII (the "Closing Date"), at the offices of Sidley & Austin, Xxx Xxxxx Xxxxxxxx
Xxxxx, Xxxxxxx, Xxxxxxxx, unless another date or place is agreed to in writing
by Parent and the Company. At or concurrently with the Closing, the parties
hereto shall cause the Merger to become effective by filing a Certificate of
Merger with the Secretary of State of the State of Delaware, in accordance with
the relevant provisions of the DGCL (the time of such filing being the
"Effective Time") and shall make all other filings or recordings required under
the DGCL.
Section 1.3. Effects of the Merger. (a) At the Effective Time,
(i) the separate existence of Sub shall cease and Sub shall be merged with and
into the Company (Sub and the Company are sometimes referred to herein as the
"Constituent Corporations" and the Company after the Effective Time is sometimes
referred to herein as the "Surviving Corporation"), (ii) the Certificate of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be amended as of the Effective Time so that Article Fourth of such
Certificate of Incorporation reads in its entirety as follows: "The total number
of shares of all classes of stock which the Corporation shall have authority to
issue is 1,000 shares of Common Stock, $.01 par value per share" and, as so
amended, such Certificate of Incorporation shall be the Certificate of
Incorporation of the Surviving Corporation, and (iii) the Bylaws of Sub as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation.
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(b) The Merger shall have the effects set forth in the DGCL.
Section 1.4. Directors and Officers. The directors of Sub
immediately prior to the Effective Time and the directors of the Company listed
in Item 1.4 of the Company Letter (as defined below) shall be the directors of
the Surviving Corporation until their resignation or removal or until their
respective successors have been elected and qualified. The officers of the
Company immediately prior to the Effective Time shall continue as officers of
the Surviving Corporation until their resignation or removal or until their
respective successors have been elected and qualified.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1. Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $.01 par value per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Any
shares of the Company Common Stock owned by the Company or by any Subsidiary (as
defined in Section 3.2(b)) of the Company and each share of Company Common Stock
owned by Parent, Sub or any other wholly owned Subsidiary of Parent shall be
canceled and retired and shall cease to exist, and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Subject to
Section 2.2, each issued and outstanding share of Company Common Stock (other
than shares to be canceled in accordance with Section 2.1(b)) shall be converted
into the right to receive seventy-two hundredths (.72) (the "Exchange Ratio") of
a fully paid and nonassessable share of Parent Common Stock. All such shares of
the Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of Parent
Common Stock and any cash in lieu of fractional shares of Parent Common Stock to
be issued or paid in consideration therefor upon the surrender of such
certificate in accordance with Section 2.2, without interest.
(d) Company Stock Options. At the Effective Time, all then
outstanding options to purchase shares of Company Common Stock issued under the
Company's 1982 Stock Option Plan and 1993 Equity Compensation Plan, as amended
and restated (collectively, the
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"Company Stock Plans"), not exercised as of the Effective Time will be assumed
by Parent in accordance with Section 6.13.
Section 2.2. Exchange of Certificates. The procedures for
exchanging outstanding shares of Company Common Stock for Parent Common Stock
upon consummation of the Merger are as follows:
(a) Exchange Agent. As soon as practicable after the Effective
Time, Parent shall deposit with a bank or trust company designated by Parent and
reasonably acceptable to the Company (the "Exchange Agent"), for the benefit of
the holders of shares of Company Common Stock, for exchange in accordance with
this Section 2.2, through the Exchange Agent, certificates representing the
shares of Parent Common Stock (such shares of Parent Common Stock, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund") issuable pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock, which shares of Parent Common Stock
shall be deemed to be issued at the Effective Time subject to the other
provisions of this Section 2.2.
(b) Exchange Procedures. 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 of Company Common Stock (each a "Company
Certificate" and, collectively, the "Company Certificates") whose shares were
converted pursuant to Section 2.1 into the right to receive shares of Parent
Common Stock (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Company Certificates shall
pass, only upon delivery of the Company Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the Company
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of a Company Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
be reasonably required by the Exchange Agent or Parent, the holder of such
Company Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II, and the Company Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock that
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a transferee if the Company Certificate representing such Company Common Stock
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
2.2, each Company 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 2.2. Parent or the
Exchange Agent shall be
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entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement such amounts as Parent or the Exchange Agent are
required to deduct and withhold under the Code, or any provision of state, local
or foreign tax law, with respect to the making of such payment. To the extent
that amounts are so withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the person in respect of whom such deduction and withholding was made by
Parent or the Exchange Agent.
(c) Distributions with Respect to Unexchanged Shares. 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 Company 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
2.2(e), until the holder of record of such Company Certificate shall surrender
such Company Certificate. Subject to the effect of applicable laws, following
surrender of any such Company 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 2.2(e)
and the amount of dividends or other distributions with a record date after the
Effective Time previously 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) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof, including any cash
paid pursuant to Sections 2.2(c) and 2.2(e), shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Company Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.2.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of the Company Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock exchanged in connection with the Merger who would
otherwise have been entitled to receive a fraction of a share of Parent Common
Stock (after taking into account all Company Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a share of Parent
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Common Stock multiplied by the average of the last reported sale prices of
Parent Common Stock on The Nasdaq National Market on the ten (10) trading days
immediately preceding the Effective Time. Parent shall make available to the
Exchange Agent the cash necessary for this purpose.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the stockholders of the Company for one year
after the Effective Time shall be delivered to Parent, upon demand, and any
stockholders of the Company who have not previously complied with this Section
2.2 shall thereafter look only to Parent for payment of their claim for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and
dividends or distributions with respect to Parent Common Stock.
(g) No Liability. Neither Parent nor the Company, nor any of
their respective directors, officers, employees or agents, shall be liable to
any holder of shares of Company Common Stock or Parent Common Stock, as the case
may be, for such shares (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(h) Adjustment of Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock between the date hereof and the Effective Time, appropriate adjustments,
if any, shall be made by Parent to the Exchange Ratio, and all references to the
Exchange Ratio in this Agreement shall be deemed to be to the Exchange Ratio as
so adjusted.
(i) Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title and interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either Constituent Corporation, all such deeds, bills
of sale, assignments and assurances and to do, in the name and on behalf of
either Constituent Corporation, all such other acts and things as may be
necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title and interest in, to and under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 2.3. No Dissenters Rights. The holders of shares of
Company Common Stock shall not be entitled to appraisal rights with respect to
the Merger.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1. Organization. The Company and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has all
requisite corporate power to own, lease and operate its property and to carry on
its business as now being conducted and as proposed to be conducted, and (iii)
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of its activities requires
it to be so qualified, except that, in the case of the clauses (i) and (ii),
with respect to Subsidiaries that in the aggregate do not constitute a
"significant subsidiary" within the meaning of Regulation S-X, Rule 1-02 (w),
such representations are being made to the best knowledge of the Company, and
except, in the case of clause (iii), where the failure to have such power or the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect on the Company (as defined below).
Section 3.2. Company Subsidiaries and Joint Ventures. (a) Item
3.2 of the letter from the Company to Parent and Sub dated and delivered as of
the date hereof (the "Company Letter"), which relates to this Agreement and is
designated therein as being the Company Letter sets forth a list of all
Subsidiaries and Joint Ventures (as defined below) of the Company, including the
name of each Subsidiary and Joint Venture and the jurisdiction in which such
Subsidiary or Joint Venture is organized. Except as set forth in Item 3.2 of the
Company Letter, there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants with respect to any such
Subsidiary's capital stock, including any right obligating any such Subsidiary
to issue, deliver, or sell additional shares of its capital stock, and no
obligations, contingent or otherwise, of the Company or any of its Subsidiaries
to repurchase, redeem, or otherwise acquire any shares of the capital stock of
any Subsidiary of the Company or make any investment (in the form of a loan,
capital contribution or otherwise) in any such Subsidiary or any other entity
other than guarantees of bank obligations of such Subsidiaries entered into in
the ordinary course of business. All of the outstanding shares of capital stock
of each Subsidiary of the Company are duly authorized, validly issued, fully
paid and nonassessable, and all such shares are owned by the Company or another
Subsidiary of the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations on the Company's voting rights, charges
or other encumbrances of any nature. Item 3.2 of the Company Letter sets forth
the nature and extent of the ownership and voting interests held by the Company
in each such Joint Venture. The Company has no obligation to make any capital
contributions, or otherwise provide assets or cash, to any Joint Venture. Except
as set forth in Item 3.2 of the Company Letter, neither the Company nor any of
its Subsidiaries directly or indirectly owns any material equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any such equity or similar interest in, any
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corporation, limited liability company, partnership, joint venture or other
business association or entity.
(b) As used in this Agreement, "Subsidiary" means, with
respect to any party, any corporation, limited liability company, partnership,
joint venture, or other business association or entity, at least a majority of
the voting securities or economic interests of which is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries. As
used in this Agreement, "Joint Venture" means, with respect to any party, any
corporation, limited liability company, partnership, joint venture or other
entity in which (i) such party, directly or indirectly, owns or controls more
than five percent (5%) and less than a majority of any class of the outstanding
voting securities or economic interests, or (ii) such party or a Subsidiary of
such party is a general partner.
Section 3.3. Company Capital Structure. (a) The authorized
capital stock of the Company consists of 100,000,000 shares of Company Common
Stock and 3,000,000 shares of Preferred Stock, $.01 par value per share
("Company Preferred Stock"). As of February 12, 1998: (i) 15,519,944 shares of
Company Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable; (ii) no shares of Company Preferred Stock
were issued or outstanding; (iii) no shares of Company Common Stock were held in
the treasury of the Company or by Subsidiaries of the Company; and (iv)
1,082,284 shares of the Company Common Stock were reserved for issuance under
Company Stock Plans (including (A) 6,925 shares reserved for issuance under the
1982 Stock Option Plan, of which 6,925 were subject to outstanding options and
none of which were reserved for future option grants and (B) 1,075,359 shares of
Company Common Stock reserved for issuance under the 1993 Equity Compensation
Plan, as amended and restated, 755,114 of which were subject to outstanding
options and 320,245 of which were reserved for future option grants. Since
February 12, 1998, (i) no additional shares of capital stock have been reserved
for issuance by the Company and (ii) the only issuances of shares of capital
stock of the Company have been issuances of Company Common Stock upon the
exercise of outstanding Company Stock Options (as defined below) listed in Item
3.3 of the Company Letter. All of the shares of Company Common Stock subject to
issuance as specified above, upon issuance pursuant to the terms and conditions
specified in the instruments pursuant to which they are issuable, shall be duly
authorized, validly issued, fully paid and nonassessable. Except as provided in
Item 3.3 of the Company Letter, there are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock.
(b) Except as set forth in this Section 3.3, there are no
equity securities of any class of the Company or any of its Subsidiaries, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except for the stock options issued
pursuant to the Company Stock Plans (the "Company Stock Options") as set forth
in this Section 3.3, there are no options, warrants, equity securities, calls,
rights, commitments or agreements of any character to which the Company or any
of its Subsidiaries is a party or by which it is bound obligating the Company or
any of its Subsidiaries to issue, deliver or sell, or
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15
cause to be issued, delivered or sold, additional shares of capital stock of the
Company or any of its Subsidiaries or any security or other instrument
convertible into shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement, and, to the best knowledge of
the Company, as of the date of this Agreement, there are no voting trusts,
proxies or other agreements or understandings with respect to the shares of
capital stock of the Company. Item 3.3 of the Company Letter sets forth for each
of the Senior Officers (as defined below) by name, and for each other holder of
options (i) the number of shares of Company Common Stock subject to each Company
Stock Option held by such holder, (ii) the dates of grant of Company Stock
Options to such holder, (iii) the vesting schedule for the Company Stock Options
held by such holder, (iv) the exercise prices for the Company Stock Options held
by such holder and (v) the expiration dates of Company Stock Options held by
such holder. Item 3.3 of the Company Letter contains all forms of stock option
agreements pursuant to which Company Stock Options have been issued.
Section 3.4. Authority; No Conflict; Required Filings and
Consents. (a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate and stockholder action on the part of the Company, subject only to the
adoption of this Agreement and the approval of the Merger by the Company's
stockholders under the DGCL. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting creditors' rights generally and general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by the
Company does not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of the Company or
the comparable charter or organizational documents of any of its Subsidiaries
(in each case as heretofore amended), (ii) result in any violation or breach of,
or constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, any of the terms, conditions
or provisions of any loan, credit agreement, note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to the consents,
approvals, orders, authorizations, filings, declarations and registrations
specified in Section 3.4(c), conflict with or violate any judgment, order,
decree, statute, law, ordinance, rule or regulation or any permit, concession,
franchise or license applicable to the Company or any of its Subsidiaries or any
of their properties or assets, except in the case of clause (ii) and (iii) for
any such violations, breaches, defaults, terminations, cancellations or
accelerations which in the aggregate could not reasonably be expected to have a
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Material Adverse Effect on the Company and do not impair the ability of the
Company to perform its obligations under this Agreement or prevent the
consummation of any of the transactions contemplated hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing of pre-merger notification reports under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or
early termination of the waiting period thereunder; (ii) the filing of the
Registration Statement (as defined in Section 3.19) with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities Act of 1933,
as amended (the "Securities Act"), and the entry of an order by the SEC
permitting such registration statement to become effective; (iii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL; (iv) the filing of the Proxy Statement (as defined
in Section 3.19) and related proxy materials with the SEC in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); (v) such
consents, approvals, orders, authorizations, filings, registrations, Returns (as
defined in Section 3.8(b)) and declarations as may be required under applicable
federal and state securities and Tax (as defined in Section 3.8(a)) laws and the
laws of any foreign country; (vi) such other consents, orders, authorizations,
filings, approvals, declarations and registrations which, individually or in the
aggregate, if not obtained or made, could not reasonably be expected to have a
Material Adverse Effect on the Company or impair the ability of the Company to
perform its obligations under this Agreement.
Section 3.5. SEC Filings; Financial Statements. (a) The
Company has filed and made available to Parent or its legal counsel all forms,
reports and documents required to be filed by the Company with the SEC
(collectively, the "Company SEC Reports") since January 1, 1995. The Company SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a subsequent filing, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such Company SEC Reports or necessary in order to make the
statements in such the Company SEC Reports, in the light of the circumstances
under which they were made, not misleading. None of the Company's Subsidiaries
is required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes) contained in the Company SEC Reports, including
any Company SEC Reports filed from the date of this Agreement until the Closing
(collectively, the "Company Financial Statements"), complied or will comply in
all material respects with the applicable published rules and regulations of the
SEC with respect thereto, was or will be prepared in accordance with
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United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q or 8-K promulgated by the SEC), and fairly presented
or will fairly present the consolidated financial position of the Company and
its Subsidiaries as at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount. The unaudited consolidated balance sheet of the Company as of September
30, 1997 is referred to herein as the "Company Balance Sheet."
Section 3.6. Absence of Undisclosed Liabilities. Except as
disclosed in Item 3.6 of the Company Letter or as otherwise disclosed in the
Company SEC Reports filed and publicly available prior to the date of this
Agreement, the Company and its Subsidiaries do not have any liabilities, either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with United States generally accepted accounting
principles), and whether due or to become due, which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect on the
Company, other than liabilities reflected in the Company Balance Sheet and
normal or recurring liabilities incurred since September 30, 1997 in the
ordinary course of business consistent with past practices which would not
individually or in the aggregate have a Material Adverse Effect on the Company.
Section 3.7. Absence of Certain Changes or Events. Since the
date of the Company Balance Sheet, the Company and its Subsidiaries have
conducted their businesses only in the ordinary course in a manner consistent
with past practice (except as disclosed in the Company SEC Reports filed and
publicly available prior to the date of this Agreement), and since such date
there has not been: (a) any Material Adverse Effect on the Company or any facts
or circumstances that could reasonably be expected to result in a Material
Adverse Effect on the Company; (b) any damage, destruction or loss (whether or
not covered by insurance) with respect to the Company or any of its Subsidiaries
having a Material Adverse Effect on the Company; (c) any material change by the
Company or any of its Subsidiaries in its accounting methods, principles or
practices; (d) any revaluation by the Company or any of its Subsidiaries of any
of its assets having a Material Adverse Effect on the Company, including writing
down the value of capitalized software or inventory or writing off notes or
accounts receivable other than in the ordinary course of business consistent
with past practice; or (e) except as disclosed in Item 3.7 of the Company
Letter, any other action or event that would have required the consent of Parent
pursuant to clauses (a), (c) or (g) of Section 5.1 of this Agreement had such
action or event occurred after the date of this Agreement.
Section 3.8. Taxes. (a) For purposes of this Agreement, a
"Tax" or, collectively, "Taxes" means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities of any kind whatsoever, including, without limitation, any of
the foregoing based upon or measured by gross receipts, income, profits, sales,
use and occupation, and value added, ad valorem, transfer, franchise,
withholding,
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18
payroll, recapture, employment, excise and property taxes (in all cases,
together with all interest, penalties and additions imposed with respect to such
amounts) and including any liability for taxes of a predecessor entity.
(b) Except as disclosed in Item 3.8 of the Company Letter,
each of the Company and its Subsidiaries has prepared and timely filed (or will
so file) all federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") required to be filed at or before the
Effective Time relating to any and all Taxes concerning or attributable to the
Company or any of its Subsidiaries or to their operations, and such Returns are
true and correct in all material respects and have been completed in all
material respects in accordance with applicable law.
(c) Except as disclosed in Item 3.8 of the Company Letter,
each of the Company and its Subsidiaries as of the Effective Time will have paid
all Taxes it is required to pay prior to the Effective Time.
(d) Except as disclosed in Item 3.8 of the Company Letter,
there is no material Tax deficiency outstanding, proposed or assessed against
the Company or any of its Subsidiaries that has not been paid in full or fully
reflected as a liability on the Company Balance Sheet nor has the Company or any
of its Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any material Tax.
(e) Except as disclosed in Item 3.8 of the Company Letter,
neither the Company nor any of its Subsidiaries has any material liability for
unpaid federal, state, local or foreign Taxes that has not been accrued for or
reserved on the Company Balance Sheet, whether asserted or unasserted,
contingent or otherwise.
(f) Except as disclosed in Item 3.8 of the Company Letter, the
Returns referred to in clause (b) above, to the extent relating to federal and
state income or franchise Taxes, have been examined by the appropriate taxing
authority or the period for assessment of the Taxes in respect of which such
Returns were required to be filed has expired.
(g) Except as disclosed in Item 3.8 of the Company Letter,
there is no action, suit, investigation, audit, claim or assessment pending or
proposed or threatened in writing with respect to Taxes of the Company or any of
its Subsidiaries.
(h) Except as disclosed in Item 3.8 of the Company Letter,
there are no liens for Taxes upon the assets of the Company or any of its
Subsidiaries except liens relating to current Taxes not yet due.
(i) Except as disclosed in Item 3.8 of the Company Letter, all
Taxes which the Company or any of its Subsidiaries are required by law to
withhold or to collect for payment have
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been duly withheld and collected, and have been paid or accrued, reserved
against and entered on the books of the Company.
(j) Except as disclosed in Item 3.8 of the Company Letter,
none of the Company or any of its Subsidiaries has been a member of any group of
corporations filing Returns on a consolidated, combined, unitary or similar
basis other than each such group of which it is currently a member.
(k) Except as disclosed in Item 3.8 of the Company Letter, no
transaction contemplated by this Agreement is subject to withholding under
Section 1445 of the Code (relating to "FIRPTA").
(l) Neither the Company nor any of its Subsidiaries, nor any
of its other affiliates (i) has taken any action, agreed to take any action, or
failed to take any action, or (ii) has knowledge of any fact or circumstance
that (without regard to any action taken or agreed to be taken by Parent or any
of its affiliates), in each case, the Company, such Subsidiary or such other
affiliate has actual knowledge could reasonably be expected to cause the Merger
to fail to qualify as a "reorganization" within the meaning of Section 368(a) of
the Code.
Section 3.9. Properties. The Company and its Subsidiaries own
or have valid leasehold interests in all real property necessary for the conduct
of their businesses in all material respects as presently conducted. All
material leases to which the Company or any of its Subsidiaries is a party are
in good standing, valid and effective in accordance with their respective terms,
and neither the Company nor its Subsidiaries is in default under any of such
leases, except where the lack of such good standing, validity and effectiveness
or the existence of such default could not reasonably be expected to have a
Material Adverse Effect on the Company.
Section 3.10. Intellectual Property. (a) Except as disclosed
in Item 3.10(a) of the Company Letter, the Company and its Subsidiaries own, or
are licensed or otherwise possess, legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights and mask works, any
applications for and registrations of such patents, trademarks, trade names,
service marks, copyrights and mask works, and all processes, formulae, methods,
schematics, technology, know how, computer software programs or applications and
tangible or intangible proprietary information or material that are necessary to
conduct the business of the Company and its Subsidiaries as currently conducted
or planned to be conducted by the Company and its Subsidiaries (the "Company
Intellectual Property Rights").
(b) Except as disclosed in Item 3.10(b) of the Company Letter,
neither the Company nor any of its Subsidiaries is, or will be as a result of
the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Company Intellectual Property Rights or any
material license, sublicense or other agreement pursuant to which the Company or
any of its Subsidiaries is authorized to use any third party patents, trademarks
or copyrights, including
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software, which are incorporated in or form a part of any product of the Company
or any of its Subsidiaries that is material to the business of the Company and
its Subsidiaries taken as a whole.
(c) Except as disclosed in Item 3.10(c) of the Company Letter,
(i) all patents, registered trademarks, service marks and copyrights which are
held by the Company or any of its Subsidiaries, and which are material to the
business of the Company and its Subsidiaries, taken as a whole, are to the best
knowledge of the Company valid and subsisting; (ii) the Company has not been
sued in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party; and (iii) to the best
knowledge of the Company the manufacturing, marketing, licensing or sale of the
Company's products does not infringe any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of any third party, which
infringement, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on the Company.
(d) Item 3.10(d) of the Company Letter contains a list of (i)
all registered United States, state and foreign trademarks, service marks,
logos, trade dress and trade names and pending applications to register the
foregoing, (ii) all United States and foreign patents and patent applications
and (iii) all registered United States and foreign copyrights and pending
applications to register the same, in each case owned by the Company and its
Subsidiaries.
Section 3.11. Agreements, Contracts and Commitments. Neither
the Company nor any of its Subsidiaries has breached, or received in writing any
claim or threat (for which there is a reasonable basis) that it has breached,
any of the terms or conditions of any material agreement, contract or commitment
to which it is a party or to which any of its assets and properties is subject
("Company Material Contracts") in such a manner as would permit any other party
to cancel, modify the terms of or terminate the same or would permit any other
party to collect material damages from the Company or any of its Subsidiaries
under any Company Material Contract. Each Company Material Contract that has not
expired or been terminated is in full force and effect and is not subject to any
material default thereunder of which the Company is aware by any party obligated
to the Company or any of its Subsidiaries pursuant to such Company Material
Contract. All Company Material Contracts are filed as exhibits to the Company
SEC Reports or are listed in Item 3.11 of the Company Letter. Except as set
forth in Item 3.11 of the Company Letter, neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or any
other agreement or obligation which purports to limit in any material respect
the manner in which, or the localities in which, the Company or any such
Subsidiary is entitled to conduct all or any material portion of the business of
the Company and its Subsidiaries taken as whole.
Section 3.12. Litigation. There is no action, suit or
proceeding, claim, arbitration or, to the knowledge of the Company,
investigation against the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened, or as to which the Company or any of its
Subsidiaries has received any written notice of assertion, which, if decided
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adversely to the Company or such Subsidiary, could reasonably be expected to
have a Material Adverse Effect on the Company or impair the ability of the
Company to consummate the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Company or any of its Subsidiaries having
or which, insofar as reasonably can be foreseen, in the future would have any
such effect.
Section 3.13. Environmental Matters. (a) Except as set forth
in Item 3.13 of the Company Letter, the Company has no reason to believe (i)
that any underground storage tanks are present under any property that the
Company or any of its Subsidiaries has at any time owned, operated, occupied or
leased or (ii) that any amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws (a "Hazardous Material"), is present, as a result of actions of the
Company or any of its Subsidiaries or actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water, that the Company or any of its Subsidiaries has at any
time owned, operated, occupied or leased, where the presence of such underground
storage tanks or Hazardous Material would be reasonably likely to have a
Material Adverse Effect on the Company; provided that the handling or use of a
Hazardous Material in compliance with applicable standards or permits shall not
be included in this representation.
(b) At no time has the Company or any of its Subsidiaries
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company or any of its Subsidiaries
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (collectively, "Hazardous Materials Activities") in violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Entity to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity, which violation has had or is reasonably likely to have a
Material Adverse Effect on the Company.
(c) The Company and its Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Hazardous Material
Activities and other businesses of the Company and its Subsidiaries as such
activities and businesses are currently being conducted in all material
respects.
(d) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to the knowledge of the
Company, threatened concerning any Environmental Permit or any Hazardous
Materials Activity of the Company or any of its
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Subsidiaries and the Company is not aware of any fact or circumstance which
could (i) involve the Company or any of its Subsidiaries in any environmental
litigation which, if decided adversely to the Company and its Subsidiaries,
could have a Material Adverse Effect on the Company, or (ii) impose upon the
Company or any of its Subsidiaries any environmental liability which would have
a Material Adverse Effect on the Company.
Section 3.14. Employee Benefit Plans. (a) The Company has made
available to Parent all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all
employment, termination and consulting agreements, all bonus, stock option,
stock appreciation right, restricted stock, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar employee
benefit plans and agreements, and all unexpired severance plans and agreements,
written or otherwise, for the benefit of, or relating to, any current or former
employee of the Company or any of its Subsidiaries or any trade or business
(whether or not incorporated) or other organization that together with the
Company is treated as a single employer under Section 414 of the Code
(collectively, the "Company Employee Plans"). Neither the Company nor any of its
Subsidiaries, nor any trade or business (whether or not incorporated) or other
organization that together with the Company is treated as a single employer
under Section 414 of the Code maintains or has ever in the past maintained or
contributed to any employee benefit plan subject to Title IV of ERISA (including
a multiemployer plan as defined in Section 3(37) of ERISA). Item 3.14 of the
Company Letter contains a list of all of the Company Employee Plans.
(b) With respect to each Company Employee Plan, the Company
has made available to Parent, a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the Internal Revenue Service if such
Company Employee Plan is subject to such filing requirement, (ii) such Company
Employee Plan, (iii) any trust agreement or group annuity contract relating to
such Company Employee Plan and (iv) the most recent determination letter issued
with respect to any Company Employee Plan which is intended to be qualified
under Section 401(a) of the Code.
(c) With respect to the Company Employee Plans, no event has
occurred, and to the knowledge of the Company there exists no condition or set
of circumstances, in connection with which, individually or in the aggregate,
the Company or any of its Subsidiaries could be subject to any material
liability, including the loss of income Tax deductions under ERISA, the Code or
any other applicable law.
(d) With respect to the Company Employee Plans, individually
and in the aggregate, there are no material funded benefit obligations for which
contributions have not been made or properly accrued and there are no material
unfunded benefit obligations that have not been accounted for by reserves, or
otherwise properly footnoted in accordance with United States generally accepted
accounting principles, on the Company Financial Statements.
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(e) Except as disclosed in Item 3.14 of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any oral or
written (i) union or collective bargaining agreement, (ii) agreement with any
officer or other key employee of the Company or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of any of the transactions contemplated by this Agreement or
upon such occurrence coupled with a subsequent event, (iii) agreement with any
officer or key employee of the Company or any of its Subsidiaries providing any
term of employment or compensation guarantee, or (iv) agreement or plan,
including any Company Employee Plan, any of the benefits of which will be
increased, or the vesting or exercisability of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. Except as set
forth in Item 3.14 of the Company Letter, Section 162(m) of the Code does not
limit the deductibility of any compensation payable to any officer of the
Company, including compensation or benefits under any plan or agreement
disclosed pursuant to the preceding sentence.
Section 3.15. Compliance with Laws. The Company and its
Subsidiaries have complied with, are not in violation of, and have not received
any notices of violations with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of their business, or
ownership or operation of their business, except for failures to comply or
violations which could not reasonably be expected to have a Material Adverse
Effect on the Company or impair the ability of the Company to consummate the
transactions contemplated by this Agreement. There are no situations with
respect to the Company which involved or involve (i) the use of any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to political activity, (ii) the making of any direct or
indirect unlawful payments to government officials or others from corporate
funds or the establishment or maintenance of any unlawful or unrecorded funds,
(iii) the violation of any of the provisions of The Foreign Corrupt Practices
Act of 1977, or any rules or regulations promulgated thereunder, or (iv) the
receipt of any illegal discounts or rebates or any other violation of the
antitrust laws.
Section 3.16. Pooling. Neither the Company nor any of its
Subsidiaries, nor, to the knowledge of the Company, any of its affiliates, has
taken or agreed to take any action that would prevent the Merger from being
treated as a "pooling of interests" for financial accounting purposes in
accordance with GAAP and applicable SEC regulations. The factual information to
be provided by the Company to KPMG Peat Marwick LLP (the "Company Auditors"), in
connection with their written opinion to be delivered pursuant to Section 7.1(f)
will be correct in all material respects and will be provided to Parent.
Section 3.17. Affiliates. Except for the persons listed on
Item 3.17 of the Company Letter, there are no persons who, to the knowledge of
the Company, may be deemed to be affiliates of the Company under Rule 1-02 of
Regulation S-X of the SEC.
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Section 3.18. Interested Party Transactions. Except as set
forth in the Company SEC Reports or by virtue of the Merger, since the date of
the Company's last proxy statement to its stockholders, no event has occurred
that would be required to be reported by the Company pursuant to paragraphs (a),
(b) or (c) of Item 404 of Regulation S-K promulgated by the SEC. Other than the
Services Agreement (as defined below) there are no agreements between the
Company and any of its affiliates which are not required to be listed in Item
3.14 of the Company Letter. The loan agreement between the Company and Safeguard
referenced in the Company's Proxy Statement for its 1997 Annual Meeting of
Stockholders has terminated and is of no force or effect and there are no
amounts outstanding thereunder.
Section 3.19. Registration Statement; Proxy
Statement/Prospectus. The information supplied by the Company for inclusion in
the registration statement of Parent on Form S-4 pursuant to which shares of
Parent Common Stock issued in the Merger will be registered with the SEC (the
"Registration Statement") shall not contain, at the time the Registration
Statement is declared effective by the SEC, any untrue statement of a material
fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion in
the proxy statement/prospectus (the "Proxy Statement") to be sent to the
stockholders of the Company in connection with the special meeting of the
Company's stockholders to consider this Agreement and the Merger (the
"Stockholders Meeting") shall not, on the date the Proxy Statement is first
mailed to stockholders of the Company, at the time of the Stockholders Meeting
or at the Effective Time, contain any statement which, at such time and in light
of the circumstances under which it was made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made in the Proxy Statement not false or misleading
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to the Company or any of its affiliates
should be discovered by the Company which should be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement, the Company
shall promptly inform Parent.
Section 3.20. No Excess Parachute Payments. Any amount that
could be received (whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in Proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Company Employee Plan currently in
effect would not be characterized as an "excess parachute payment" (as such term
is defined in Section 280G of the Code).
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Section 3.21. Opinion of Financial Advisor. The financial
advisor to the Company, Xxxxxx X. Xxxxx & Co., Inc., has delivered to the
Company an opinion dated as of the date of this Agreement to the effect that the
Exchange Ratio is fair from a financial point of view to the holders of the
Company Common Stock and a copy of such opinion has been made available to
Parent.
Section 3.22. Section 203 of the DGCL Not Applicable. The
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in Section 203) will not apply to the execution,
delivery or performance of this Agreement or the consummation of the Merger or
the other transactions contemplated hereby.
Section 3.23. Voting Requirements. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
approving this Agreement is the only vote of holders of any class or series of
the Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
Section 3.24. Brokers. No broker, investment banker, financial
advisor or other person, other than Xxxxxx X. Xxxxx & Co., Inc., the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. A true and complete copy of the Company's
engagement letter with Xxxxxx X. Xxxxx & Co., Inc. has been made available to
Parent.
Section 3.25. Additional Disclosure. The information set forth
in Item 3.25 of the Company Letter is complete and correct in all material
respects as of the date hereof and the Company will use its reasonable best
efforts to cause such information to continue to be so correct and complete as
of the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
Section 4.1. Organization. Parent and each of its material
Subsidiaries (i) is a corporation or other business entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation, (ii) has all requisite corporate or similar power to own, lease and
operate its property and to carry on its business as now being conducted and as
proposed to be conducted, and (iii) is duly qualified to do business and is in
good standing as a foreign corporation or other business entity in each
jurisdiction in which the nature of its activities requires it to be so
qualified, except where the failure to have such power or the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect on
Parent.
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Section 4.2. Parent Subsidiaries. Except as set forth in Item
4.2 of the letter from Parent to the Company dated and delivered as of the date
hereof (the "Parent Letter"), which relates to this Agreement and is designated
therein as being the Parent Letter, there are no outstanding subscriptions,
options, calls, voting trusts, proxies or warrants with respect to any capital
stock of any of the material Subsidiaries of Parent, including any right
obligating any such material Subsidiary to issue, deliver, or sell additional
shares of its capital stock, in each case other than with Parent or one of its
Subsidiaries. Except as required by applicable law and except for director or
qualifying shares, all of the outstanding shares of capital stock of each
material Subsidiary listed on Item 4.2 of the Parent Letter are duly authorized,
validly issued, fully paid and nonassessable, and all such shares are owned by
Parent or another Subsidiary of Parent.
Section 4.3. Parent Capital Structure. (a) The authorized
capital stock of Parent consists of 500,000,000 shares of Parent Common Stock
and 5,000,000 shares of Preferred Stock, $.01 par value per share ("Parent
Preferred Stock"). As of January 2, 1998: (i) 181,626,660 shares of Parent
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable; (ii) no shares of Parent Preferred Stock are issued or
outstanding; (iii) no shares of Parent Common Stock or Parent Preferred Stock
were held in the treasury of Parent or by Subsidiaries of Parent; and (iv)
10,903,494 shares of Parent Common Stock were reserved for issuance pursuant to
stock options granted and outstanding under Parent's stock option plans (the
"Parent Option Plans"). Between January 2, 1998 and the date hereof, (i) no
additional shares of capital stock have been reserved for issuance by Parent and
(ii) the only issuances of shares of capital stock of Parent Common Stock have
been issuances of Parent Common Stock upon the exercise of outstanding stock
options. All shares of Parent Common Stock subject to issuance as specified
above, upon issuance pursuant to the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Parent Common Stock.
(b) Except as set forth in this Section 4.2 or as reserved for
future grants of options under the Parent Option Plans, there are no equity
securities of any class of Parent, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding.
Section 4.4. Authority; No Conflict; Required Filings and
Consents. (a) Parent has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and constitutes the valid and binding obligations of
Parent, enforceable in accordance with the terms hereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law.
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(b) The execution and delivery of this Agreement by Parent and
Sub do not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Parent or Sub (in
each case as heretofore amended), (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, any of the terms, conditions or
provisions of any loan, credit agreement, note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Parent or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to the consents, approvals,
orders, authorizations, filings, declarations and registrations specified in
Section 4.3(c), conflict with or violate any judgment, order, decree, statute,
law, ordinance, rule or regulation or any permit, concession, franchise or
license applicable to Parent or any of its Subsidiaries or any of their
properties or assets, except in the case of clause (ii) and (iii) for any such
violations, breaches, defaults, terminations, cancellations or accelerations
which in the aggregate could not reasonably be expected to have a Material
Adverse Effect on Parent and do not impair the ability of Parent to perform its
obligations under this Agreement or prevent the consummation of any of the
transactions contemplated hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of pre-merger notification
reports under the HSR Act and the expiration or early termination of the waiting
period thereunder; (ii) the filing of the Registration Statement with the SEC in
accordance with the Securities Act and the entry of an order by the SEC
permitting the Registration Statement to become effective; (iii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL; (iv) the filing of the Proxy Statement and related
proxy materials with the SEC in accordance with the Exchange Act; (v) such
consents, approvals, orders, authorizations, filings, registrations, Returns,
and declarations as may be required under applicable federal and state
securities and Tax laws and the laws of any foreign country; and (vi) such other
consents, approvals, orders, authorizations, filings, declarations and
registrations which, in the aggregate, if not obtained or made, could not
reasonably be expected to have a Material Adverse Effect on Parent or impair the
ability of Parent to perform its obligations under this Agreement.
Section 4.5. SEC Filings; Financial Statements. (a) Parent has
filed and made available to the Company or its legal counsel all forms, reports
and documents required to be filed by Parent with the SEC (collectively, the
"Parent SEC Reports") since January 1, 1995. The Parent SEC Reports (i) at the
time filed, complied in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and (ii) did not
at the time they were filed (or if amended or superseded by a subsequent filing,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required
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to be stated in such Parent SEC Reports or necessary in order to make the
statements in such Parent SEC Reports, in the light of the circumstances under
which they were made, not misleading. None of Parent's Subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes) contained in the Parent SEC Reports, including
any Parent SEC Reports filed from the date of this Agreement until the Closing,
complied or will comply in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q or 8-K
promulgated by the SEC), and fairly presented or will fairly present the
consolidated financial position of Parent and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The unaudited
consolidated balance sheet of Parent as of September 30, 1997 is referred to
herein as the "Parent Balance Sheet."
Section 4.6. Absence of Undisclosed Liabilities. Except as
disclosed in Item 4.6 of the Parent Letter or as otherwise disclosed in the
Parent SEC Reports filed and publicly available prior to the date of this
Agreement, Parent and its Subsidiaries do not have any liabilities, either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with United States generally accepted accounting
principles), and whether due or to become due, which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect on
Parent, other than (i) liabilities reflected in the Parent Balance Sheet, and
(ii) normal or recurring liabilities incurred since September 30, 1997 in the
ordinary course of business consistent with past practices which would not
individually or in the aggregate have a Material Adverse Effect on Parent.
Section 4.7. Absence of Certain Changes or Events. Between the
date of the Parent Balance Sheet and the date hereof, Parent and its
Subsidiaries have conducted their businesses only in the ordinary course in a
manner consistent with past practice (except as disclosed in the Parent SEC
Reports filed and publicly available prior to the date of this Agreement).
Except with respect to the matters set forth in Item 4.6 of the Parent Letter,
since the Parent Balance Sheet Date there has not been: (a) any Material Adverse
Effect on Parent or any facts or circumstances that could reasonably be expected
to result in a Material Adverse Effect on Parent; (b) any damage, destruction or
loss (whether or not covered by insurance) with respect to Parent or any of its
Subsidiaries having a Material Adverse Effect on Parent; (c) any material change
by Parent or any of its Subsidiaries in its accounting methods, principles or
practices; or (d) any revaluation by Parent or any of its Subsidiaries of any of
its assets having a Material Adverse Effect on Parent, including writing down
the value of capitalized software or
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inventory or writing off notes or accounts receivable other than in the ordinary
course of business consistent with past practice.
Section 4.8. Taxes. (a) Except as disclosed in Item 4.8 of the
Parent Letter, each of Parent and its Subsidiaries has prepared and timely filed
(or will so file) all United States federal, state and local Returns required to
be filed at or before the Effective Time relating to any and all Taxes
concerning or attributable to Parent or any of its Subsidiaries or to their
operations, and such Returns are true and correct and have been completed in
accordance with applicable law, except where any such failure to prepare or file
timely or any such failure to be true and correct, or any such failure to be
completed in accordance with applicable law would not individually, or in the
aggregate, have a Material Adverse Effect on Parent.
(b) Except as disclosed in Item 4.8 of the Parent Letter, each
of Parent and its Subsidiaries as of the Effective Time will have paid all Taxes
it is required to pay prior to the Effective Time, except where any such failure
to pay would not have a Material Adverse Effect on Parent.
(c) Except as disclosed in Item 4.8 of the Parent Letter,
there is no material United States federal or state income Tax deficiency
outstanding or assessed against Parent or any of its Subsidiaries that has not
been paid in full or fully reflected as a liability on the Parent Balance Sheet
nor has Parent or any of its Subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
material United States federal or state income Tax.
(d) Except as disclosed in Item 4.8 of the Parent Letter,
there is no action, suit, investigation, audit, claim or assessment pending or
proposed or threatened in writing with respect to Taxes of Parent or any of its
Subsidiaries that, if decided adversely to Parent, would have a Material Adverse
Effect on Parent.
(e) Except as disclosed in Item 4.8 of the Parent Letter,
there are no liens for Taxes upon the assets of Parent or any of its
Subsidiaries except liens relating to current Taxes not yet due and except where
such liens would not have a Material Adverse Effect on Parent.
(f) Except as disclosed in Item 4.8 of the Parent Letter, all
Taxes which Parent or any of its Subsidiaries are required by law to withhold or
to collect for payment have been duly withheld and collected, and have been paid
or accrued, reserved against and entered on the books of Parent, except where
any such failure to withhold or collect or such failure to pay or accrue,
reserve against and enter would not individually, or in the aggregate, have a
Material Adverse Effect on Parent.
(g) Except as disclosed in Item 4.8 of the Parent Letter,
neither Parent nor any of its Subsidiaries has any material liability for unpaid
federal, state, local or foreign Taxes that has not been accrued for or reserved
on the Parent Balance Sheet, whether asserted or unasserted,
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contingent or otherwise, except where such liability would not have a Material
Adverse Affect on Parent.
(h) Neither Parent nor any of its Subsidiaries, nor any of its
other affiliates (i) has taken any action, agreed to take any action, or failed
to take any action, or (ii) has knowledge of any fact or circumstance that
(without regard to any action taken or agreed to be taken by the Company or any
of its affiliates), in each case, Parent, such Subsidiary or such other
affiliate has actual knowledge could reasonably be expected to cause the Merger
to fail to qualify as a "reorganization" within the meaning of Section 368(a) of
the Code.
Section 4.9. Properties. Parent and its Subsidiaries own or
have valid leasehold interests in all real property necessary for the conduct of
their businesses in all material respects as presently conducted. All material
leases to which Parent or any of its Subsidiaries is a party are in good
standing, valid and effective in accordance with their respective terms, and
neither Parent nor its Subsidiaries is in default under any of such leases,
except where the lack of such good standing, validity and effectiveness or the
existence of such default could not reasonably be expected to have a Material
Adverse Effect on Parent.
Section 4.10. Intellectual Property. Except with respect to
the matters set forth in Item 4.6 of the Parent Letter, Parent and its
Subsidiaries own, or are licensed or otherwise possess, legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and mask works, any applications for and registrations of such patents,
trademarks, trade names, service marks, copyrights and mask works, and all
processes, formulae, methods, schematics, technology, know how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Parent and
its Subsidiaries as currently conducted or planned to be conducted by Parent and
its Subsidiaries except where the failure to have such ownership or possession
could not reasonably be expected to have a Material Adverse Effect on Parent.
Section 4.11. Agreements, Contracts and Commitments. Neither
Parent nor any of its Subsidiaries has breached, or received in writing any
claim or threat (for which there is a reasonable basis) that it has breached,
any of the terms or conditions of any material agreement, contract or commitment
to which it is a party or to which any of its assets is subject ("Parent
Material Contracts") in such a manner as would permit any other party to cancel,
modify the terms of or terminate the same or would permit any other party to
collect material damages from Parent or any of its Subsidiaries under any Parent
Material Contract. Each Parent Material Contract that has not expired or been
terminated is in full force and effect and is not subject to any material
default thereunder of which Parent is aware by any party obligated to Parent or
any of its Subsidiaries pursuant to such Parent Material Contract.
Section 4.12. Litigation. Except with respect to the matters
set forth in Item 4.6 of the Parent Letter, there is no action, suit or
proceeding, claim, arbitration or, to the knowledge of Parent, investigation
against Parent or any of its Subsidiaries pending or, to the knowledge of
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Parent, threatened, or as to which Parent or any of its Subsidiaries has
received any written notice of assertion, which, if decided adversely to Parent
or such Subsidiary, could reasonably be expected to have a Material Adverse
Effect on Parent or impair the ability of Parent to consummate the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Parent or any of its Subsidiaries having or which, insofar as reasonably can be
foreseen, in the future would have any such effect.
Section 4.13. Environmental Matters. (a) Except as set forth
in Item 4.13 of the Parent Letter, Parent has no reason to believe (i) that any
underground storage tanks are present under any property that Parent or any of
its Subsidiaries has at any time owned, operated, occupied or leased or (ii)
that any Hazardous Material is present, as a result of actions of Parent or any
of its Subsidiaries or actions of any third party or otherwise, in, on or under
any property, including the land and the improvements, ground water and surface
water, that Parent or any of its Subsidiaries has at any time owned, operated,
occupied or leased, where the presence of such underground storage tanks or
Hazardous Material would be reasonably likely to have a Material Adverse Effect
on Parent; provided that the handling and use of a Hazardous Material in
compliance with applicable standards or permits shall not be included in this
representation.
(b) At no time has Parent or any of its Subsidiaries
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has Parent or any of its Subsidiaries engaged in
Hazardous Materials Activities in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Materials Activity, which violation has had
or is reasonably likely to have a Material Adverse Effect on Parent.
(c) Parent and its Subsidiaries currently hold all
Environmental Permits necessary for the conduct of the Hazardous Materials
Activities and other businesses of Parent and its Subsidiaries as such
activities and businesses are currently being conducted.
(d) Parent is not aware of any fact or circumstance which
could (i) involve Parent or any of its Subsidiaries in any environmental
litigation which, if decided adversely to Parent and its Subsidiaries, could
have a Material Adverse Effect on Parent, or (ii) impose upon Parent or any of
its Subsidiaries any environmental liability which would have a Material Adverse
Effect on Parent.
Section 4.14. Pooling. Neither Parent nor any of its
Subsidiaries, nor, to the knowledge of Parent, any of its affiliates has taken
or agreed to take any action that would prevent the Merger from being treated as
a "pooling of interests" for financial accounting purposes in accordance with
GAAP and applicable SEC regulations. The factual information to be provided by
Parent to the Ernst & Young LLP, ("Parent Auditors") in connection with their
written opinion to be delivered pursuant to Section 7.1(f) will be correct in
all material respects.
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Section 4.15. Affiliates. Except for the persons listed on
Item 4.15 of the Parent Letter, there are no persons who, to the knowledge of
Parent, may be deemed to be affiliates of Parent under Rule 1-02 of Regulation
S-X of the SEC.
Section 4.16. Compliance with Laws. Parent and its
Subsidiaries have complied with, are not in violation of, and have not received
any notices of violations with respect to, any federal, state, local or foreign
statute, law or regulation with respect to the conduct of their business, or
ownership or operation of their business, except for failures to comply or
violations which could not reasonably be expected to have a Material Adverse
Effect on Parent or impair the ability of Parent to consummate the transactions
contemplated by this Agreement. There are no situations with respect to Parent
which involved or involve (i) the use of any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, (ii) the making of any direct or indirect unlawful payments
to government officials or others from corporate funds or the establishment or
maintenance of any unlawful or unrecorded funds, (iii) the violation of any of
the provisions of The Foreign Corrupt Practices Act of 1977, or any rules or
regulations promulgated thereunder, or (iv) the receipt of any illegal discounts
or rebates or any other violation of the antitrust laws.
Section 4.17. Registration Statement; Proxy
Statement/Prospectus. The information supplied by Parent for inclusion in the
Registration Statement shall not contain, at the time the Registration Statement
is declared effective by the SEC, any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement to be sent to the stockholders of the Company in connection with the
Stockholders Meeting shall not, on the date the Proxy Statement is first mailed
to stockholders of the Company, at the time of the Stockholders Meeting or at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it was made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement not false or misleading or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meeting which has become false or misleading. If at any time prior to the
Effective Time any event relating to Parent or any of its affiliates should be
discovered by Parent which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Parent shall
promptly inform the Company.
Section 4.18. Interim Operations of Sub. Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities, and has conducted its operations
only as contemplated by this Agreement.
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Section 4.19. Voting Requirements. No action by the
stockholders of Parent is required to approve this Agreement and the
transactions contemplated hereby.
Section 4.20. Brokers. No broker, investment banker, financial
advisor or other person, other than Xxxxxxx, Xxxxx & Co., the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1. Covenants of the Company. During the period from
the date of this Agreement to the Effective Time, the Company agrees as to
itself and its Subsidiaries (except to the extent that Parent shall otherwise
consent in writing), to carry on its business in the usual, regular and ordinary
course in substantially the same manner as previously conducted, to pay its
debts and Taxes when due subject to good faith disputes over such debts or
Taxes, to pay or perform its other obligations when due, and, to the extent
consistent with the foregoing, to use all reasonable best efforts consistent
with past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and key
employees, and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with it.
The Company shall notify Parent promptly after becoming aware of any event or
occurrence that would result in a material breach of any covenant or agreement
of the Company set forth in this Agreement or cause any representation or
warranty of the Company set forth in this Agreement to be untrue if made as of
the date of, and giving effect to, such event or occurrence, which if uncured,
could reasonably be expected to cause any condition set forth in Section 7.2(a)
or 7.2(b) not to be satisfied. Except as expressly contemplated by this
Agreement, the Company shall not (and shall not permit any of its Subsidiaries
to), without the prior written consent of Parent:
(a) accelerate, amend or change the period of exercisability
of options or restricted stock granted under any of the Company Stock Plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Company Intellectual Property Rights
other than licenses to customers in the ordinary course of business consistent
with past practices on a non-exclusive basis;
(c) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property, other than dividends or
distributions by a direct or indirect wholly owned subsidiary of the Company to
its parent) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in
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respect of, in lieu of or in substitution for shares of its capital stock, or
purchase or otherwise acquire, directly or indirectly, any shares of its capital
stock;
(d) issue, deliver, sell, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, pledge or encumbrance of, any
shares of its capital stock or securities convertible into shares of its capital
stock, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the issuance of the Company
Common Stock upon the exercise of Company Stock Options outstanding on the date
of this Agreement and in accordance with their present terms, except for
issuances of Company Stock Options pursuant to the Company Stock Plans relating
to not more than one hundred fifty thousand (150,000) shares of Company Common
Stock in the aggregate, in connection with the hiring of new employees or the
promotion of officers and employees (other than Senior Officers), in each case
in the ordinary course of business, consistent with past practice;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing any equity interest in or the assets of, or by any other
means, any business or any corporation, partnership, limited liability company
or other business organization or division or any interest therein;
(f) sell, lease, license, mortgage, encumber or otherwise
dispose of any of its properties or assets, except for sales, leases or licenses
of products or services in the ordinary course of business in accordance with
past practices;
(g) take any action to: (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees, except
for regularly scheduled increases in salary or wages (not in excess of ten
percent (10%) in the aggregate for each person) of employees (other than Senior
Officers) in accordance with past practices, (ii) grant any severance or
termination pay to, or enter into any employment or severance agreements with,
directors or Senior Officers, (iii) grant any severance or termination pay to,
or enter into any employment or severance agreement with, any other employees,
except in the ordinary course of business consistent with past practice,
provided that the aggregate of such payments shall not be in excess of one
hundred thousand dollars ($100,000), (iv) enter into any collective bargaining
agreement, or (v) establish, adopt or enter into any bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan, trust,
fund, policy or arrangement for the benefit of any directors, officers or
employees or amend any Company Employee Plan;
(h) revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable, other than in
the ordinary course of business pursuant to arm's length transactions on
commercially reasonable terms;
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(i) (y) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities or guarantee any debt securities of others, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the economic
effect of any of the foregoing, or (z) make any loans, advances or capital
contributions to, or investments in, any other person, other than to the Company
or any of its wholly owned Subsidiaries;
(j) amend or propose to amend its Certificate of Incorporation
or Bylaws or other comparable charter or organizational documents;
(k) incur or commit to incur capital expenditures in excess of
five hundred thousand dollars ($500,000) individually, or four million dollars
($4,000,000) in the aggregate;
(l) make any material amendments to any OEM agreement or enter
into or make any amendments to any agreements pursuant to which any third party
is granted exclusive marketing, manufacturing or other rights with respect to
any Company product, process or technology, other than granting to specific
customers non-territorial exclusive rights to physical packaging and related
interfaces developed by the Company for such customer's equipment;
(m) amend in any respect that, taken as a whole, is material
and adverse to the Company or terminate any material contract, agreement or
license to which it is a party;
(n) (y) waive or release any material right or claim (except
in connection with amendments that comply with clause (m) immediately above), or
(z) pay, discharge or satisfy any material 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
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent Company
Financial Statements (or the notes thereto) filed prior to the date hereof, or
incurred in the ordinary course of business consistent with past practice;
(o) settle or compromise Tax liabilities in excess of five
hundred thousand dollars ($500,000) in the aggregate, or prepare or file any
Return inconsistent with past practice or, on any such Return, take any
position, make any election, or adopt any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing similar
Returns in prior periods;
(p) initiate any litigation or arbitration proceeding, other
than litigation involving Parent relating to this Agreement and counterclaims or
other proceedings responsive to litigation filed by a third party; or
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(q) take, or agree in writing or otherwise to take, any of the
actions described in the foregoing clauses (a) through (p), or any action (other
than actions of the type contemplated by clauses (a) through (p) above which are
permitted thereby) which (i) would make any of the Company's representations or
warranties in this Agreement, if made on and as of the date of such action or
agreement, untrue or incorrect in any material respect, or (ii) could prevent it
from performing, or cause it not to perform, its obligations under this
Agreement.
Section 5.2. Covenants of Parent. Parent shall notify the
Company promptly after becoming aware of any event or occurrence that would
result in a material breach of any covenant or agreement of Parent set forth in
this Agreement or cause any representation or warranty of Parent set forth in
this Agreement to be untrue if made as of the date of, and giving effect to,
such event or occurrence, which if uncured, could reasonably be expected to
cause any condition set forth in Section 7.2(a) or 7.2(b) not to be satisfied.
Between the date hereof and April 16, 1998, except as expressly contemplated by
this Agreement, Parent shall not (and shall not permit any of its Subsidiaries
to), without the prior written consent of the Company:
(a) declare or pay any dividends on or make any other
distributions (whether in cash, stock or property, other than dividends or
distributions by a direct or indirect wholly owned subsidiary of Parent to its
parent) in respect of any of its capital stock, or split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or spend more than $50,000,000 to purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock;
(b) issue or authorize the issuance or delivery of, any shares
of its capital stock or securities convertible into shares of its capital stock,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than (i) the issuance of the Parent Common Stock
upon the exercise of Parent stock options outstanding on the date of this
Agreement and (ii) issuances not involving more than five percent (5%) of the
currently issued and outstanding Parent Common Stock;
(c) acquire or agree to acquire, by merging or consolidating
with, by purchasing any equity interest in or the assets of, or by any other
means, any business or any corporation, partnership, limited liability company
or other business organization or division or any interest therein to the extent
all such acquisitions together involve purchase prices in excess of five hundred
million dollars ($500,000,000) in the aggregate, it being agreed that nothing in
this Agreement shall prohibit Parent or any of its Subsidiaries from engaging in
discussions or negotiations or from furnishing information in connection with
any acquisitions or transactions;
(d) sell, lease, license, mortgage, encumber or otherwise
dispose of any of its properties or assets, except for sales, leases or licenses
of products or services (i) in the ordinary
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course of business or (ii) to the extent involving sale prices of less than five
hundred million dollars ($500,000,000) in the aggregate;
(e) amend or propose to amend its Certificate of Incorporation
or Bylaws or other comparable charter or organizational documents;
(f) (x) incur any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities or guarantee any debt securities of others, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the economic
effect of any of the foregoing, or (y) make any loans, advances or capital
contributions to, or investments in, any other person, other than to the Parent
or any of its wholly owned Subsidiaries, to the extent involving in the case of
all of the matters described in clauses (x) and (y) more than two hundred fifty
million dollars ($250,000,000) in the aggregate; or
(g) take, or agree in writing or otherwise to take, any of the
actions described in the foregoing clauses (a) through (f), or any action (other
than actions of the type contemplated by clauses (a) through (f) above which are
permitted thereby) which (i) would make any of Parent's representations or
warranties in this Agreement, if made on and as of the date of such action or
agreement, untrue or incorrect in any material respect, or (ii) could prevent it
from performing, or cause it not to perform, its obligations under this
Agreement. Nothing contained in this Agreement shall prohibit Parent from
adopting a stockholders rights plan or issuing securities pursuant thereto.
Section 5.3. Employment Agreements. The Company may enter into
employment agreements, effective as of the Effective Time, with the officers of
the Company listed in Item 5.3(a) of the Parent Letter (the "Senior Officers"),
which employment agreements shall be in the form attached as Item 5.3(b) of the
Parent Letter and shall be subject to the terms specified in Item 5.3(c) of the
Parent Letter.
Section 5.4. Cooperation. Subject to compliance with
applicable law, from the date hereof until the Effective Time, (i) the Company
shall confer on a regular and frequent basis with one or more representatives of
Parent to report operational matters of materiality and the general status of
ongoing operations and (ii) each of Parent and the Company shall promptly
provide the other party or its counsel with copies of all filings made by the
Company with any Governmental Entity in connection with this Agreement, the
Merger and the other transactions contemplated hereby.
Section 5.5. Material Adverse Effect For purposes of this
Agreement, "Material Adverse Effect" means, when used in connection with the
Company or Parent, any change or effect that is materially adverse to the
business, properties, assets, condition (financial or otherwise), or results of
operations of such party and its Subsidiaries taken as a whole but excluding (i)
any change resulting from general economic conditions or general industry
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conditions or (ii) any change caused by the transactions contemplated by this
Agreement and the public announcement thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1. No Solicitation. (a) The Company agrees that,
from the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement in accordance with Section 8.1, it shall not,
directly or indirectly, and shall cause its officers, directors, employees,
representatives, agents, and affiliates, to not (i) solicit, initiate, or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, sale or
purchase of substantial assets or stock, tender or exchange offer, or other
business combination or change in control or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated or
permitted by this Agreement (any of the foregoing inquiries or proposals being
referred to in this Agreement as a "Takeover Proposal"), (ii) engage in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Takeover Proposal, or (iii) enter into any
agreement with respect to, agree to, approve or recommend any Takeover Proposal;
provided, however, that nothing contained in this Agreement shall prevent the
Company or its Board of Directors, directly or through representatives or agents
on behalf of the Board of Directors, from (A) furnishing non-public information
to, or entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written Takeover Proposal by such
person or entity, if and only to the extent that (1) such Takeover Proposal
would, if consummated, result in a transaction that would, in the reasonable
good faith judgment of the Board of Directors of the Company, after consultation
with its financial advisors, result in a transaction more favorable to the
Company's stockholders from a financial point of view than the Merger (any such
more favorable Takeover Proposal being referred to in this Agreement as a
"Superior Proposal") and, in the reasonable good faith judgment of the Board of
Directors of the Company, after consultation with its financial advisors, the
person or entity making such Superior Proposal has the financial means to
conclude such transaction, (2) the failure to take such action would in the
reasonable good faith judgment of the Board of Directors of the Company, on the
basis of the advice of the outside corporate counsel of the Company, be contrary
to the fiduciary duties of the Board of Directors of the Company to the
Company's stockholders under applicable law; (3) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, such Board of Directors receives from such person or
entity an executed confidentiality agreement with provisions not less favorable
to the Company than those contained in the Confidentiality and Non Disclosure
Agreement dated December 29, 1997 between Parent and the Company, except for the
provision of Section 7 thereof (the "Confidentiality Agreement") and (4) the
Company shall have fully complied with this Section 6.1; or (B) complying with
Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to a
Takeover Proposal.
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(b) The Company shall notify Parent no later than twenty-four
(24) hours after receipt by the Company (or its advisors) of any Takeover
Proposal or any request for nonpublic information in connection with a Takeover
Proposal or for access to the properties, books or records of the Company by any
person or entity that informs the Company that it is considering making, or has
made, a Takeover Proposal. Such notice to Parent shall be made orally and in
writing and shall indicate in reasonable detail the identity of the person or
entity making the Takeover Proposal and the terms and conditions of such
proposal, inquiry or contact. If the financial terms of such Takeover Proposal
are modified, then the Company shall notify Parent of the terms and conditions
of such modification within twenty-four (24) hours of the receipt of such
modification. The Company shall also notify Parent simultaneously with the
delivery of notice to the directors of the Company of, and in any event at least
twenty-four (24) hours prior to (unless a longer period is required by Section
6.1(c)), each meeting of the Board of Directors at which the Company will
consider taking definitive action with respect to withdrawing or modifying, in a
manner adverse to Parent, its recommendation to the Company's stockholders in
favor of approval of the Merger.
(c) Notwithstanding the foregoing, in the event that there
exists a Superior Proposal before the Board of Directors of the Company and in
the reasonable good faith judgment of the Company, on the basis of the advice of
the outside corporate counsel of the Company, the failure to accept such
Superior Proposal would be contrary to the fiduciary duties of the Board of
Directors of the Company to the Company's stockholders under applicable law, the
Board of Directors of the Company may pursuant to Section 8.1(h) (subject to
this and the following sentences) terminate this Agreement prior to the
Stockholders Meeting (and concurrently with such termination, cause the Company
to enter into an acquisition agreement with respect to such Superior Proposal),
but only at a time that is (i) after the third day following Parent's receipt of
written notice advising Parent that the Board of Directors of the Company is
prepared to accept a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal; (ii) after the payment by the Company to Parent of the
Termination Fee in full and in immediately available funds; and (iii) after the
Company shall have, and shall have caused its financial and legal advisors to,
negotiate in good faith with Parent to make such changes to the terms and
conditions of this Agreement as would enable the Company to proceed with the
transactions contemplated hereby.
(d) During the period from the date of this Agreement through
the Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement (other than any entered
into in the ordinary course of business not in connection with any possible
Takeover Proposal) to which it or any of its Subsidiaries is a party (other than
any between the Company and its Subsidiaries). During such period, the Company
shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including, but not limited to, by obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of the United States
of America or of any state having jurisdiction.
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Section 6.2. Proxy Statement/Prospectus; Registration
Statement. (a) As promptly as practicable after the execution of this Agreement,
Parent and the Company shall prepare and file with the SEC the Proxy Statement,
and Parent shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement will be included. Parent and the Company shall use all
reasonable best efforts to cause the Registration Statement to become effective
as soon after such filing as reasonably practicable. The Proxy Statement shall
include the recommendation of the Board of Directors of the Company to the
stockholders of the Company in favor of approval and adoption of this Agreement
and the Merger; provided, however, that such Board of Directors shall not be
required to make, and shall be entitled to withdraw or modify, such
recommendation if (i) the Company has complied with Section 6.1 and (ii) in the
reasonable good faith judgment of such Board of Directors, on the basis of the
advice of outside corporate counsel of the Company, the making of, or the
failure to withdraw or modify, such recommendation would be contrary to the
fiduciary duties of such Board of Directors to the Company's stockholders under
applicable law. The Board of Directors of the Company shall not rescind its
declaration that this Agreement and the Merger are advisable unless, in any such
case, each of the conditions set forth in clauses (i) and (ii) immediately above
is satisfied.
(b) Each of Parent and the Company shall make all necessary
filings with respect to the Merger under the Securities Act and the Exchange Act
and applicable state securities laws and the rules and regulations thereunder,
and shall use its reasonable best efforts to obtain all permits and other
authorizations required under applicable state securities laws for the issuance
of the shares of Parent Common Stock pursuant to the Merger.
Section 6.3. Consents. Each of Parent and the Company shall
use reasonable best efforts to obtain all necessary consents, waivers and
approvals under its respective material agreements, contracts, licenses or
leases required for the consummation of the Merger and the other transactions
contemplated by this Agreement.
Section 6.4. Current Nasdaq Quotation. Parent shall continue
the quotation of Parent Common Stock, and the Company shall continue the
quotation of the Company Common Stock, on The Nasdaq National Market during the
term of this Agreement to the extent necessary so that appraisal rights will not
be available to stockholders of the Company under Section 262 of the DGCL.
Section 6.5. Access to Information. Upon reasonable notice,
the Company shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, financial advisors, counsel and other
representatives of Parent, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments, Returns, and records and, during such period, the Company shall
(and shall cause each of its Subsidiaries to) furnish promptly to Parent (i) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of federal
securities laws and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request; provided, however,
that the
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Company's obligation to provide information pursuant to this Section 6.5 shall
be subject to Item 6.5 of the Company Letter. During the period prior to the
Effective Time, Parent shall provide the financial advisor of the Company
identified in Section 3.24 and the Chief Executive Officer of the Company
reasonable access to senior executive officers of Parent, as appropriate, in
connection with the transactions contemplated by this Agreement. No information
or knowledge obtained in any investigation pursuant to this Section 6.5 shall
affect or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger. Unless otherwise required by law, Parent and the Company will hold, and
will use its reasonable best efforts to cause their respective officers,
employees, affiliates and representatives to hold, any nonpublic information
received from the other party to this Agreement, any of their respective
Subsidiaries or any of their respective representatives (other than information
already in the possession of such party at the time of receipt of such
information from the other party) in confidence until such time as such
information becomes publicly available (otherwise than through the wrongful act
of any such person) and shall use its reasonable best efforts to ensure that
such officers, employees, affiliates and representatives do not disclose such
information to others without the prior written consent of the Company or
Parent, as the case may be. In the event of termination of this Agreement for
any reason, Parent and the Company shall promptly return or destroy all
documents containing nonpublic information so obtained from the Company, Parent
or any of their Subsidiaries and any copies of such documents.
Section 6.6. Stockholders Meeting. (a) The Company shall call
and hold the Stockholders Meeting as promptly as practicable after the date
hereof for the purpose of voting upon the adoption of this Agreement and the
approval of the Merger. Subject to Section 6.1, the Company, through its Board
of Directors, shall recommend that the Company's stockholders vote in favor of
the adoption of this Agreement and the approval of the Merger (and shall not
withdraw or modify such recommendation) and shall otherwise use its best efforts
to solicit from its stockholders proxies in favor of such matters and to obtain
the requisite approval of the Company's stockholders; provided, however, that
such Board of Directors shall not be required to make, and shall be entitled to
withdraw or modify, such recommendation if (i) the Company has complied with
Section 6.1 and (ii) in the reasonable good faith judgment of such Board of
Directors, on the basis of advice of outside corporate counsel of the Company,
the making of, or the failure to withdraw or modify, such recommendation would
be contrary to the fiduciary duties of such Board of Directors to the Company's
stockholders under applicable law.
Section 6.7. Legal Conditions to Merger. (a) Each of Parent
and the Company shall take reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on such party with respect to the
Merger (which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and shall promptly cooperate with
and, subject to applicable law, furnish information to each other in connection
with any such requirements imposed upon either of them or any of their
Subsidiaries in connection with the Merger. Each of Parent and the Company
shall, and shall cause its Subsidiaries to take reasonable
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actions necessary to obtain (and shall cooperate with each other in obtaining)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other third party, required to be obtained or made by the
Company, Parent or any of their Subsidiaries for any of the conditions set forth
in Article VII to be satisfied (any of the foregoing, an "Approval") or the
taking of any action required in furtherance thereof or otherwise contemplated
thereby or by this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Company shall have any obligation to oppose,
challenge or appeal any suit, action or proceeding by any Governmental Entity
before any court or governmental authority, agency or tribunal, domestic or
foreign or any order or ruling by any such body, (i) seeking to restrain or
prohibit or restraining or prohibiting the consummation of the Merger or any of
the other transactions contemplated by this Agreement, (ii) seeking to prohibit
or limit or prohibiting or limiting the ownership, operation or control by the
Company, Parent or any of their respective Subsidiaries of any portion of the
business or assets of the Company, Parent or any of their respective
Subsidiaries, or (iii) seeking to compel or compelling the Company, Parent or
any of their respective Subsidiaries to dispose of, grant rights in respect of,
or hold separate any portion of the business or assets of the Company, Parent or
any of their respective Subsidiaries. Further, notwithstanding anything to the
contrary contained in this Agreement, Parent shall have no obligation to dispose
of, grant rights in respect of, or hold separate any portion of the business or
assets of the Company, Parent or any of their respective Subsidiaries or to
agree to any of the foregoing. Neither the Company nor any of its Subsidiaries
shall take any of the actions described in preceding sentences of this Section
6.7(b) without the prior written consent of Parent.
Section 6.8. Public Disclosure. Except as otherwise required
by applicable law or the rules or regulations of any securities exchange or
market on which the securities of such party are listed or traded, no party or
any of its affiliates shall issue or cause the publication of any press release
or other public announcement or disclosure with respect to the transactions
contemplated by this Agreement without the consent of each other party, and in
any event, each party agrees that it shall give each other party reasonable
opportunity to review and comment upon any such release or announcement prior to
publication of the same.
Section 6.9. Tax-Free Reorganization. Parent and the Company
shall each use its reasonable best efforts to cause the Merger to be treated as
a "reorganization" within the meaning of Section 368(a) of the Code, and to
enable its respective counsel to render the opinions contemplated by Sections
7.2(e) and 7.3(d). Each party shall make (to the extent it can truthfully do
so), and shall use all reasonable best efforts to cause those of its respective
stockholders that counsel to the parties shall reasonably request to make, such
representations and certifications as counsel to the parties shall reasonably
request to enable them to render such opinions including, without limitation,
the representations of Parent contained in a certificate of Parent (the "Parent
Tax Certificate") substantially in the form of the Parent Tax Certificate
attached as Item 6.9 of the Parent Letter and representations of the Company
contained in a certificate of the Company (the
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"Company Tax Certificate") substantially in the form of the Company Tax
Certificate attached as Item 6.9 of the Company Letter.
Section 6.10. Pooling Accounting. Parent and the Company shall
each use its reasonable best efforts to cause the business combination to be
effected by the Merger to be accounted for as a pooling of interests. The
Company shall use its reasonable best efforts to cause its affiliates not to
take any action that would adversely affect the ability of Parent to account for
the business combination to be effected by the Merger as a pooling of interests.
Section 6.11. Affiliate Letters. Between the date of this
Agreement and the Effective Time, the Company will use its reasonable best
efforts to cause each of the persons listed on Item 3.17 of the Company Letter
to execute and deliver to Parent an executed letter agreement, substantially in
the form of Exhibit A hereto (the "Company Affiliate Letter"), and Parent will
use its reasonable best efforts to cause each of the persons listed on Item 4.15
of the Parent Letter to execute and deliver to Parent an executed letter
agreement, substantially in the form of Exhibit B hereto (the "Parent Affiliate
Letter"). Between the date of this Agreement and the Effective Time, the Company
shall, if requested, promptly provide Parent such information and documents as
Parent shall reasonably request for purposes of determining the affiliates of
the Company and upon the request of Parent use its reasonable best efforts to
cause any person who may in the reasonable judgment of Parent be deemed an
affiliate of the Company to execute and deliver to Parent the Company Affiliate
Letter. Parent shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by affiliates of
the Company pursuant to this Agreement and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of the Company Affiliate Letter.
Section 6.12. Nasdaq Quotation. Parent shall use its
reasonable best efforts to cause the shares of Parent Common Stock to be issued
in the Merger to be approved for quotation on The Nasdaq National Market,
subject to official notice of issuance, prior to the Closing Date.
Section 6.13. Stock Plans and Options. (a) The Company shall
provide to each holder of an outstanding Company Stock Option to purchase the
Company Common Stock under the Company Stock Plans the notice (if any) required
pursuant to such plans in connection with the Merger.
(b) From and after the Effective Time, each outstanding
Company Stock Option (including both vested and unvested Company Stock Options)
shall be assumed by Parent and shall pursuant to the terms of such options, be
deemed to constitute an option to acquire, on the same terms and 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 in the Merger pursuant to this Agreement had such holder
exercised such option in full immediately prior to the Effective Time (rounded
down to the nearest whole
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number), at a price per share (rounded up to the nearest whole cent) equal to
the quotient of (i) the exercise price per share of Company Common Stock
pursuant to such Company Stock Option divided by (ii) the Exchange Ratio. All
other terms of such Company Stock Options shall remain in effect.
(c) The Company shall take all actions necessary so that
following the Effective Time no holder of a Company Stock Option or any
participant in any Company Benefit Plan shall have any right thereunder to
acquire capital stock of the Company, Sub, or the Surviving Corporation. The
Company shall take all actions necessary so that, as of the Effective Time, none
of Sub, the Company, the Surviving Corporation or any of their respective
Subsidiaries is or will be bound by any Company Stock Options, other options,
warrants, rights or agreements which would entitle any person, other than
Parent, Sub or its affiliates, to own any capital stock of the Company, Sub, the
Surviving Corporation or any of their respective subsidiaries or to receive any
payment in respect thereof, except as otherwise provided in Article I and
Section 6.13(b).
Section 6.14. Indemnification. All rights to indemnification
for acts or omissions occurring prior to the Effective Time now existing in
favor of the current or former directors or officers of the Company provided in
the Company's Certificate of Incorporation and Bylaws shall survive the Merger
and shall continue in full force and effect in accordance with their terms for a
period of not less than six (6) years from the Effective Time and to the extent
the Surviving Corporation fails to perform its obligations with respect thereto,
Parent shall perform such obligations. Parent and the Surviving Corporation will
cause to be maintained for a period of not less than six (6) years from the
Effective Time the Company's current directors and officers insurance and
indemnification policy (a copy of which has been provided to Parent) to the
extent that it provides coverage for events occurring prior to the Effective
Time for all persons who are directors and officers of the Company on the date
of this Agreement; provided, however, that in no event shall the Surviving
Corporation be required to pay a premium in any one year in excess of one
hundred fifty thousand dollars ($150,000), and provided, further, that if the
annual premiums of such insurance coverage exceed such amount or if such
existing directors' and officers' insurance and indemnification policy expires,
is terminated or canceled during such six-year period, the Surviving Corporation
shall be obligated to obtain a policy with the greatest coverage available for a
cost not exceeding one hundred fifty thousand dollars ($150,000).
Section 6.15. Additional Agreements; Reasonable Efforts.
Subject to the terms and conditions of this Agreement, each of the parties
agrees to use all reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate vote of
the stockholders of the Company described in Section 6.6, including cooperating
fully with the other party, providing information and making all necessary
filings under the HSR Act.
Section 6.16. Termination of Certain Agreements. The Company
shall cause the Administrative Services Agreement (the "Services Agreement"),
dated as of May 7, 1997 between the Company and Safeguard Scientifics, Inc.
("Safeguard"), to be terminated effective as of the Effective Time (or such
later time thereafter as may be requested by Parent, not to exceed one
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hundred eighty (180) days following the Effective Time) on terms that are
reasonably satisfactory to Parent, which terms shall include that the Company
shall have no continuing obligations under such agreement following such
termination and that Safeguard shall not be entitled to receive any
consideration in connection with such termination other than a termination fee
equal to the Services Fee (as defined in Section 3 of the Services Agreement)
payable with respect to the period commencing on the date of such termination
and ending on December 31, 1998.
Section 6.17. Real Estate Transfer Taxes. Either the Company
or the Surviving Corporation shall pay all state or local real property
transfer, gains or similar Taxes, if any (collectively, the "Transfer Taxes"),
attributable to the transfer of the beneficial ownership of the Company's and
its Subsidiaries' real properties, and any penalties or interest with respect
thereto, payable in connection with the consummation of the Merger. The Company
shall cooperate with Parent in the filing of any returns with respect to the
Transfer Taxes, including supplying in a timely manner a complete list of all
real property interests held by the Company and its Subsidiaries and any
information with respect to such properties that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the real
properties of the Company and its Subsidiaries shall be determined by Parent and
the Company in their reasonable discretion. The shareholders of the Company (who
are intended third-party beneficiaries of this Section 6.17) shall be deemed to
have agreed to be bound by the allocation established pursuant to this Section
6.17 in the preparation of any Return with respect to the Transfer Taxes.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals. This Agreement and the Merger shall
have been adopted and approved by the requisite vote of holders of the Company
Common Stock pursuant to the DGCL and the Certificate of Incorporation of the
Company.
(b) HSR Act. The waiting period applicable to the consummation
of the Merger under the HSR Act and any other material waiting periods under
applicable foreign laws (if any) shall have expired or been terminated, and no
action by the Department of Justice or Federal Trade Commission or any foreign
Governmental Entity challenging or seeking to enjoin the consummation of the
Merger shall have been instituted and be pending.
(c) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
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(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition shall have been issued and be in effect (i) restraining or
prohibiting the consummation of the Merger or any of the transactions
contemplated hereby or (ii) prohibiting or limiting the ownership, operation or
control by the Company, Parent or any of their respective Subsidiaries of any
portion of the business or assets of the Company, Parent or any of their
respective Subsidiaries, or compelling the Company, Parent or any of their
respective Subsidiaries to dispose of, grant rights in respect of, or hold
separate any portion of the business or assets of the Company, Parent or any of
their respective Subsidiaries; nor shall any action have been taken or any
statute, rule, regulation or order have been enacted, entered or enforced or be
deemed applicable to the Merger which makes the consummation of the Merger
illegal or prevents or prohibits the Merger.
(e) Nasdaq. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for quotation on The Nasdaq National Market.
(f) Pooling. The Company shall have received the written
opinion, dated as of the Effective Time, of the Company Auditors that the
Company Auditors concur with management's conclusion that the Company is
eligible to be a party to a business combination accounted for as a pooling of
interests in accordance with GAAP and applicable published rules and regulations
of the SEC. Parent shall have received the written opinion, dated as of the
Effective Time, of the Parent Auditors that the Parent Auditors concur with
management's conclusion that Parent is eligible to be a party to a business
combination accounted for as a pooling of interests in accordance with GAAP and
applicable published rules and regulations of the SEC, and that the Merger will
qualify for pooling of interests accounting. Each of such written opinions will
be in form and substance reasonably satisfactory to the Company and Parent.
Section 7.2. Additional Conditions to Obligations of Parent
and Sub. The obligations of Parent and Sub to effect the Merger are subject to
the satisfaction or waiver of each of the following conditions, any of which may
be waived in writing exclusively by Parent and Sub:
(a) Representations and Warranties. Each of the
representations and warranties of the Company set forth in this Agreement that
is qualified by materiality shall be true and correct at and as of the Closing
Date as if made at and as of the Closing Date and each of such representations
and warranties that is not so qualified shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of the
Closing Date, in each case except as contemplated by this Agreement, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer or chief financial officer of the Company to such effect.
(b) Performance of Obligations. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to
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the Closing Date, and Parent shall have received a certificate signed on behalf
of the Company by the chief executive officer or chief financial officer of the
Company to such effect.
(c) Certain Agreements. A Company Affiliate Letter shall have
been executed and delivered to Parent by or on behalf of each director and
executive officer of the Company, and each such Company Affiliate Letter shall
be in full force and effect.
(d) Absence of the Material Adverse Effect on the Company. No
Material Adverse Effect with respect to the Company shall have occurred, and no
fact or circumstance shall exist which could reasonably be expected to result in
a Material Adverse Effect with respect to the Company; provided, that if the
event resulting in such Material Adverse Effect was beyond the control of the
Company, such event shall not be deemed to have occurred for purposes of this
Section 7.2(d) unless Parent pays the Company two million dollars ($2,000,000)
in immediately available funds.
(e) Tax Opinion. Parent shall have received an opinion of
Sidley & Austin, in form and substance reasonably satisfactory to Parent, dated
the Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are consistent
with the state of facts existing as of the Effective Time, for federal income
tax purposes:
(i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Company, Sub
and Parent will each be a party to such reorganization within the
meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Parent,
Sub or the Company as a result of the Merger;
(iii) no gain or loss will be recognized by the
stockholders of the Company upon the exchange of their Company Common
Stock solely for shares of Parent Common Stock pursuant to the Merger,
except with respect to cash, if any, received in lieu of fractional
shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for Company Common Stock
pursuant to the Merger (including fractional shares of Parent Common
Stock for which cash is received) will be the same as the aggregate tax
basis of the Company Common Stock exchanged therefor;
(v) the holding period for shares of Parent Common
Stock received solely in exchange for Company Common Stock pursuant to
the Merger will include the holding period of the Company Common Stock
exchanged therefor, provided such Company Common Stock was held as a
capital asset by the stockholder at the Effective Time; and
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(vi) a stockholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will recognize
gain or loss equal to the difference, if any, between such
stockholder's tax basis in such fractional share (as described in
clause (iv) above) and the amount of cash received.
In rendering such opinion, counsel may rely upon
representations of Parent (including, without limitation, representations
contained in the Parent Tax Certificate), representations of the Company
(including, without limitation, representations contained in the Company Tax
Certificate) and representations by others.
(f) No Litigation. There shall not be pending or threatened
any suit, action or proceeding by any Governmental Entity before any court or
governmental authority, agency or tribunal, domestic or foreign, (i) seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company, Parent or Sub any damages in connection therewith, (ii) seeking to
prohibit or limit the ownership, operation or control by the Company, Parent or
any of their respective Subsidiaries of any portion of the business or assets of
the Company, Parent or any of their respective Subsidiaries, or to compel the
Company, Parent or any of their respective Subsidiaries to dispose of, grant
rights in respect of, or hold separate any portion of the business or assets of
the Company, Parent or any of their respective Subsidiaries, or (iii) which
otherwise is reasonably likely to have a Material Adverse Effect on the Company.
Section 7.3. Additional Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger is subject to the
satisfaction of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub set forth in this Agreement
that is qualified by materiality shall be true and correct at and as of the
Closing Date and each of such representations and warranties that is not so
qualified shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of the Closing Date, in each case except as
contemplated by this Agreement, and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer or chief
financial officer of Parent to such effect.
(b) Performance of Obligations. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent by the chief executive
officer or chief financial officer of Parent to such effect.
(c) Absence of the Material Adverse Effect on Parent. No
Material Adverse Effect with respect to Parent shall have occurred, and no fact
or circumstance shall exist which could reasonably be expected to result in a
Material Adverse Effect with respect to Parent; provided, that, if the event
resulting in such Material Adverse Effect was beyond the control of
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Parent, such event shall not be deemed to have occurred for purposes of this
Section 7.3(c) unless the Company pays the Parent two million dollars
($2,000,000) in immediately available funds.
(d) Tax Opinion. The Company shall have received an opinion of
Xxxxxx, Xxxxx & Xxxxxxx LLP, in form and substance reasonably satisfactory to
the Company, dated the Effective Time, substantially to the effect that, on the
basis of facts, representations and assumptions set forth in such opinion that
are consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Company, Sub
and Parent will each be a party to such reorganization within the
meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Parent,
Sub or the Company as a result of the Merger;
(iii) no gain or loss will be recognized by the
stockholders of the Company upon the exchange of their Company Common
Stock solely for shares of Parent Common Stock pursuant to the Merger,
except with respect to cash, if any, received in lieu of fractional
shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for Company Common Stock
pursuant to the Merger (including fractional shares of Parent Common
Stock for which cash is received) will be the same as the aggregate tax
basis of the Company Common Stock exchanged therefor;
(v) the holding period for shares of Parent Common
Stock received solely in exchange for Company Common Stock pursuant to
the Merger will include the holding period of the Company Common Stock
exchanged therefor, provided such Company Common Stock was held as a
capital asset by the stockholder at the Effective Time; and
(vi) a stockholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will recognize
gain or loss equal to the difference, if any, between such
stockholder's tax basis in such fractional share (as described in
clause (iv) above) and the amount of cash received.
In rendering such opinion, counsel may rely upon
representations of Parent (including, without limitation, representations
contained in the Parent Tax Certificate), representations of the Company
(including, without limitation, representations contained in the Company Tax
Certificate) and representations by others.
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ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1. Termination. This Agreement may be terminated at
any time prior to the Effective Time (with respect to Sections 8.1(b) through
8.1(g), by written notice by the terminating party to the other party), whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not
have been consummated by August 15, 1998 (provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date); or
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a final order,
decree or ruling, or taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, and all appeals with
respect to such order, decree, ruling or action have been exhausted or the time
for appeal of such order, decree, ruling or action shall have expired (provided,
however, that the right to terminate this Agreement under this Section 8.1(c)
shall not be available to any party which has not complied with its obligations
under Section 6.7); or
(d) by either Parent or the Company if, at the Stockholders
Meeting (including any adjournment or postponement thereof), the requisite vote
of the Company stockholders in favor of this Agreement and approval of the
Merger shall not have been obtained (provided, however, that the right to
terminate this Agreement under this Section 8.1(d) shall not be available to the
Company if it has not complied with its obligations under Sections 6.1, 6.2 and
6.6, and no termination shall be effective by the Company if it has not complied
with its obligations under Section 8.3, if applicable, of this Agreement); or
(e) by Parent if (i) the Board of Directors of the Company or
any committee thereof shall have withdrawn or modified its recommendation of
this Agreement or the Merger to the Company's stockholders in a manner adverse
to Parent; (ii) an Alternative Transaction (as defined in Section 8.3(f))
involving the Company shall have taken place or the Board of Directors of the
Company or any committee thereof shall have recommended such an Alternative
Transaction (or a proposal or offer therefor) to the stockholders of the Company
or shall have publicly announced its intention to recommend such an Alternative
Transaction (or a proposal or offer therefor) to the stockholders of the Company
or to engage in an Alternative Transaction or
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shall have failed to recommend against such Takeover Proposal; or (iii) a tender
offer or exchange offer for any of the outstanding shares of the Company Common
Stock shall have been commenced or a registration statement with respect thereto
shall have been filed (other than by Parent or an affiliate thereof) and the
Board of Directors of the Company or any committee thereof shall have (A)
recommended that the stockholders of the Company tender their shares in such
tender or exchange offer or (B) publicly announced its intention to take no
position with respect to such tender or exchange offer; or
(f) by Parent if a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement
shall have occurred which if uncured would cause any condition set forth in
Sections 7.2(a) or 7.2(b) not to be satisfied, and such breach is incapable of
being cured or, if capable of being cured, shall not have been cured within
twenty (20) business days following receipt by the Company of written notice of
such breach from Parent; or
(g) by the Company if a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement shall have occurred which if uncured would cause any conditions set
forth in Section 7.3(a) or 7.3(b) not to be satisfied, and such breach is
incapable of being cured or, if capable of being cured, shall not have been
cured within twenty (20) business days following receipt by Parent of written
notice of such breach from the Company; or
(h) by the Company in accordance with Section 6.1(c); provided
that in order for the termination of this Agreement pursuant to this paragraph
(h) to be deemed effective, and as a condition thereto, the Company shall have
complied with all provisions contained in Section 6.1, including the notice
provisions therein, and with all the applicable requirements of Section 8.3,
including the payment of the Termination Fee.
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Section 8.2. Effect of Termination. In the event of any
termination of this Agreement pursuant to Section 8.1, there shall be no
liability or obligation on the part of Parent, the Company, Sub, or any of their
respective officers, directors, stockholders or affiliates, except as set forth
in Section 8.3. The foregoing limitations shall not apply, and the remedies
provided by Section 8.3 shall not be exclusive, to the extent that such
termination results from the willful breach by a party of any of its material
representations, warranties, covenants or agreements in this Agreement. The
provisions of Section 8.3 of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
Section 8.3. Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' and accounting
fees and expenses, incurred in relation to the printing and filing of the Proxy
Statement (including any related preliminary materials) and the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto and the fee(s) required to be paid by Parent in connection
with the filing(s) required under the HSR Act and applicable foreign laws (if
any) in connection with the transactions contemplated by this Agreement;
provided, further, that the amount of fees and expenses to be paid by the
Company pursuant to the immediately preceding proviso shall not exceed two
hundred thousand dollars ($200,000).
(b) If any Takeover Proposal is made between the date hereof
and the termination of this Agreement, and this Agreement is terminated (i) by
Parent pursuant to Section 8.1(f), or (ii) by Parent or the Company pursuant to
Section 8.1(d) as a result of the failure to receive the requisite vote for
adoption of this Agreement and approval of the Merger by the stockholders of the
Company at the Stockholders Meeting, then if an Alternative Transaction
involving the Company shall take place or the Company shall enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement with respect to an Alternative Transaction (each, an "Acquisition
Agreement") within twelve (12) months of such termination, then the Company
shall pay to Parent a termination fee in the amount of twelve million dollars
($12,000,000) (the "Termination Fee") simultaneously with the earlier to occur
of such Alternative Transaction or execution of such Acquisition Agreement.
(c) If this Agreement is terminated by Parent pursuant to
Section 8.1(e), then the Company shall pay to Parent the Termination Fee no
later than one business day following such termination.
(d) If this Agreement is terminated by the Company pursuant to
Section 8.1(h), then the Company shall pay to Parent the Termination Fee prior
to, and as a condition to, effectiveness of such termination.
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(e) Any Termination Fee payable under this Section 8.3 shall
be paid in immediately available funds.
(f) As used in this Agreement, an "Alternative Transaction"
involving the Company means (i) a transaction or series of transactions pursuant
to which any person or group (as such term is defined under the Exchange Act),
other than Parent or Sub, or any affiliate thereof (a "Third Party"), acquires
(or would acquire upon completion of such transaction or series of transactions)
more than thirty-five percent (35%) of the equity securities or voting power of
the Company or any of its Subsidiaries, pursuant to a tender offer or exchange
offer or otherwise, (ii) a merger, consolidation, share exchange or other
business combination involving the Company or any of its Subsidiaries pursuant
to which any Third Party acquires ownership (or would acquire ownership upon
consummation of such merger, consolidation, share exchange or other business
combination) of more than thirty-five percent (35%) of the outstanding equity
securities or voting power of the Company or any of its Subsidiaries or of the
entity surviving such merger or business combination or resulting from such
consolidation, (iii) any other transaction or series of transactions pursuant to
which any Third Party acquires (or would acquire upon completion of such
transaction or series of transactions) control of assets of the Company or any
of its Subsidiaries (including, for this purpose, outstanding equity securities
of Subsidiaries of such party) having a fair market value equal to more than
thirty-five percent (35%) of the fair market value of all the consolidated
assets of the Company immediately prior to such transaction or series of
transactions, or (iv) any transaction or series of transactions pursuant to
which any Third Party acquires (or would acquire upon completion of such
transaction or series of transactions) control of the Board of Directors of the
Company or by which nominees of any Third Party are (or would be) elected or
appointed to a majority of the seats on the Board of Directors of the Company.
Section 8.4. Amendment. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.5. Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
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ARTICLE IX
MISCELLANEOUS
Section 9.1. Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing and the Effective Time, except for the agreements contained
in Section 6.14 (Indemnification), this Article IX, the Company Affiliate
Letters delivered pursuant to Sections 3.17 and 6.11, the Parent Tax
Certificate, the Company Tax Certificate and any other agreement contemplated by
this Agreement which, by its terms, does not terminate until a later date.
Section 9.2. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Tellabs, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx and
Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Coherent Communications Systems Corporation
00000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxx
Chief Executive Officer
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxx & Bockius LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: N. Xxxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
Section 9.3. Interpretation. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement they
shall be deemed to be followed by the words "without limitation."
Section 9.4. Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 9.5. Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the documents and the instruments referred to herein)
and the Confidentiality Agreement (other than Section 7 thereof) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
Except as provided in Section 6.14 and Section 6.17, this Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 9.6. Governing Law. This Agreement shall be governed
and construed, and any controversy arising out of or otherwise relating to the
Agreement shall be determined, in accordance with the internal laws of the State
of Delaware without regard to conflicts of law rules thereof. Each party hereto
consents and submits to the exclusive jurisdiction of the courts of the State of
Delaware and the courts of the United States located in such state for the
adjudication of any action, suit, proceeding, claim or dispute arising out of or
otherwise relating to this Agreement.
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Section 9.7. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, and any attempted assignment thereof
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
TELLABS, INC.
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive Officer
CARDINAL MERGER CO.
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President
COHERENT COMMUNICATIONS SYSTEMS
CORPORATION
By: /s/ Xxxxxx X. XxXxxxxx
Name: Xxxxxx X. XxXxxxxx
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Title: Chief Executive Officer
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