EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
SHPS Holdings, Inc.
SONIC ACQUISITION CORP.
and
LANDACORP, INC.
dated
March 1, 2004
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TABLE OF CONTENTS
Index of Defined Terms..................................................................i
ARTICLE I THE MERGER....................................................................1
Section 1.1 The Merger....................................................1
Section 1.2 Effective Time................................................2
Section 1.3 Closing.......................................................2
Section 1.4 Directors and Officers of the Surviving Corporation...........2
Section 1.5 Subsequent Actions............................................2
Section 1.6 Stockholders' Meeting.........................................3
ARTICLE II CONVERSION OF SECURITIES.....................................................3
Section 2.1 Conversion of Capital Stock...................................3
Section 2.2 Paying Agent..................................................4
Section 2.3 Dissenting Shares.............................................5
Section 2.4 Company Option and Equity Plans...............................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................6
Section 3.1 Organization..................................................7
Section 3.2 Subsidiaries and Affiliates...................................7
Section 3.3 Capitalization................................................8
Section 3.4 Authorization; Validity of Agreement; Company Action..........9
Section 3.5 Board Approvals..............................................10
Section 3.6 Required Vote................................................10
Section 3.7 Consents and Approvals; No Violations........................10
Section 3.8 Company SEC Documents and Financial Statements...............11
Section 3.9 Absence of Certain Changes...................................11
Section 3.10 No Undisclosed Liabilities...................................12
Section 3.11 Litigation; Orders...........................................12
Section 3.12 Employee Benefit Plans; ERISA................................12
Section 3.13 Taxes........................................................14
Section 3.14 Contracts....................................................16
Section 3.15 Title to Assets..............................................17
Section 3.16 Intellectual Property........................................18
Section 3.17 Labor Matters................................................19
Section 3.18 Compliance with Laws.........................................21
Section 3.19 Condition of Assets..........................................21
Section 3.20 Customers and Suppliers......................................21
Section 3.21 Environmental Matters........................................22
Section 3.22 Insurance....................................................24
Section 3.23 Certain Business Practices...................................24
Section 3.24 Information in the Proxy Statement...........................25
Section 3.25 Opinion of Financial Advisor.................................25
Section 3.26 Brokers......................................................25
Section 3.27 Notes and Accounts Receivable................................25
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Section 3.28 Affiliate/Potential Competing Interests......................26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER..................26
Section 4.1 Organization.................................................26
Section 4.2 Authorization; Validity of Agreement; Necessary Action.......26
Section 4.3 Consents and Approvals; No Violations........................26
Section 4.4 Information in the Proxy Statement...........................27
Section 4.5 Brokers......................................................27
Section 4.6 Financing....................................................27
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER.......................................27
Section 5.1 Interim Operations of the Company............................27
Section 5.2 No Solicitation..............................................30
ARTICLE VI ADDITIONAL AGREEMENTS.......................................................32
Section 6.1 Notification of Certain Matters..............................32
Section 6.2 Access; Confidentiality......................................32
Section 6.3 Publicity....................................................33
Section 6.4 Insurance and Indemnification................................33
Section 6.5 Third Party Standstill Agreements............................33
Section 6.6 Reasonable Best Efforts......................................34
Section 6.7 State Takeover Laws..........................................34
Section 6.8 Employee Benefits............................................34
ARTICLE VII CONDITIONS.................................................................35
Section 7.1 Conditions to Each Party's Obligations to Effect the Merger..35
Section 7.2 Conditions to the Obligations of the Purchaser and Parent....35
Section 7.3 Conditions to the Obligations of the Company.................36
ARTICLE VIII TERMINATION...............................................................37
Section 8.1 Termination..................................................37
Section 8.2 Notice of Termination; Effect of Termination.................38
ARTICLE IX MISCELLANEOUS...............................................................39
Section 9.1 Amendment and Modification...................................39
Section 9.2 Non-survival of Representations and Warranties...............39
Section 9.3 Expenses.....................................................39
Section 9.4 Notices......................................................39
Section 9.5 Interpretation...............................................40
Section 9.6 Jurisdiction.................................................41
Section 9.7 Service of Process...........................................41
Section 9.8 Specific Performance.........................................41
Section 9.9 Counterparts.................................................41
Section 9.10 Entire Agreement; No Third-Party Beneficiaries...............41
Section 9.11 Severability.................................................42
Section 9.12 Governing Law................................................42
Section 9.13 Assignment...................................................42
Section 9.14 No Waiver....................................................42
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Index of Defined Terms
Defined Term Section No.
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Acquisition Agreement.........................................................5.2(c)
Acquisition Proposal..........................................................5.2(a)
Agreement...................................................................Recitals
Audit........................................................................3.13(h)
CERCLIS...................................................................3.21(a)(v)
Certificates..................................................................2.2(b)
Closing..........................................................................1.6
Closing Date.....................................................................1.6
Code.........................................................................3.12(b)
Company.....................................................................Recitals
Company Board of Directors..................................................Recitals
Company Disclosure Schedule..............................................Article III
Company Employee..............................................................6.8(a)
Company Financial Advisor.......................................................3.25
Company Intellectual Property................................................3.16(d)
Company Material Adverse Change...............................................3.1(a)
Company Material Adverse Effect...............................................3.1(a)
Company SEC Documents............................................................3.8
Company Stockholders Meeting..................................................1.6(i)
Company Subsidiary............................................................3.2(a)
Confidentiality Agreement.....................................................5.2(b)
Contract.........................................................................3.7
D&O Insurance.................................................................6.4(b)
Delaware Courts..................................................................9.6
DGCL........................................................................Recitals
Dissenting Shares.............................................................2.3(a)
Effective Time...................................................................1.5
Encumbrances..................................................................3.2(a)
Environmental Claim......................................................3.21(e)(ii)
Environmental Laws........................................................3.21(e)(i)
ERISA........................................................................3.12(a)
ERISA Affiliate..............................................................3.12(a)
Exchange Act.....................................................................3.7
Financial Statements.............................................................3.8
GAAP.............................................................................3.8
Governmental Entity..............................................................3.7
Hazardous Substances....................................................3.21(e)(iii)
HSR Act..........................................................................3.7
Knowledge.....................................................................3.2(a)
Material Contract............................................................3.14(a)
Merger........................................................................1.4(a)
Index - i
Merger Consideration..........................................................2.1(c)
NPL.......................................................................3.21(a)(v)
Option Plans..................................................................2.4(a)
Options.......................................................................2.4(a)
PCI Plan......................................................................2.4(a)
Parent......................................................................Recitals
Parent Material Adverse Effect.............................................7.2(a)(f)
Parent Plan...................................................................6.8(c)
Paying Agent..................................................................2.2(a)
Person........................................................................3.2(a)
Plans........................................................................3.12(a)
Preferred Stock ..............................................................3.3(a)
Proxy Statement...........................................................1.9(a)(ii)
Purchaser ..................................................................Recitals
Purchaser Common Stock ..........................................................2.1
Registered Company Intellectual Property ....................................3.16(d)
Representatives...............................................................5.2(a)
Required Company Vote............................................................3.6
SEC .............................................................................1.6
Securities Act ...............................................................2.4(c)
Shares .....................................................................Recitals
Subsidiary....................................................................3.2(a)
Superior Proposal ............................................................5.2(b)
Surviving Corporation ........................................................1.4(a)
Tax Authority................................................................3.13(h)
Tax Returns..................................................................3.13(h)
Taxes .......................................................................3.13(h)
Termination Fee ..............................................................8.2(b)
Title IV Plan................................................................3.12(d)
Transactions.....................................................................3.4
Voting Agreement............................................................Recitals
Voting Debt ..................................................................3.3(a)
1994 Plan.....................................................................2.4(a)
1995 Plan.....................................................................2.4(a)
1998 Plan.....................................................................2.4(a)
Index - ii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated March 1, 2004, by and among SHPS Holdings, Inc., a Delaware
corporation ("Parent"), SONIC Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), and Landacorp, Inc., a
Delaware corporation (the "Company").
WHEREAS, the Board of Directors of each of Parent, the
Purchaser and the Company deem this Agreement and the transactions contemplated
hereby, including the Merger (as defined in Section 1.1) taken together
advisable and in the best interests of its respective stockholders;
WHEREAS, the Board of Directors of each of Parent, the
Purchaser and the Company has approved this Agreement and the Merger in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company (the "Company
Board of Directors") has determined that the consideration to be paid for each
of the issued and outstanding shares of common stock par value $0.001 per share,
of the Company (the "Shares") in the Merger is fair to the holders of such
Shares and has resolved to recommend that the holders of such Shares approve and
adopt this Agreement and the Merger, upon the terms and subject to the
conditions set forth herein; and
WHEREAS, simultaneously with the execution and delivery of
this Agreement, and as a condition to Parent's and the Purchaser's willingness
to enter into this Agreement, certain shareholders of the Company are entering
into a Voting Agreement (the "Voting Agreement"), pursuant to which, among other
things, such individuals are agreeing to grant to Parent a proxy to vote their
respective Shares in favor of the Merger, upon the terms and subject to the
conditions set forth therein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger.
(a) Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company and the Purchaser shall consummate
a merger (the "Merger") pursuant to which (i) the Purchaser shall be merged with
and into the Company and the separate corporate existence of the Purchaser shall
thereupon cease, (ii) the Company shall be the successor or surviving
corporation in the Merger and shall continue to be governed by the laws
of the State of Delaware, and (iii) the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The corporation surviving the Merger is
sometimes hereinafter referred to as (the "Surviving Corporation"). The Merger
shall have the effects set forth in the DGCL.
(b) The Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, except as to the name
of the Surviving Corporation, which shall be Landacorp, Inc., until thereafter
amended as provided by law and such Certificate of Incorporation.
(c) The Bylaws of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, except as to the name of the Surviving Corporation, which shall be
Landacorp, Inc., until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
Section 1.2. Effective Time. Parent, the Purchaser and
the Company shall cause an appropriate Certificate of Merger to be executed and
filed as soon as practicable on or after the Closing Date with the Secretary of
State of the State of Delaware as provided in the DGCL. The Merger shall become
effective on the date and time on which the Certificate of Merger has been duly
filed with the Secretary of State of the State of Delaware, or such later time
as agreed upon by the parties, such time hereinafter referred to as (the
"Effective Time").
Section 1.3 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., Eastern time, on a date to be
specified by the parties, such date to be no later than the second business day
after satisfaction or waiver of all of the conditions set forth in Article VII
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) (the
"Closing Date"), at the offices of Xxxxx Xxxxx Xxxx LLC, 000 Xxxx Xxxxxx Xxxxxx,
00xx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, unless another date or place is
agreed to in writing by the parties hereto.
Section 1.4 Directors and Officers of the Surviving
Corporation. The directors of the Purchaser immediately prior to the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation, and the officers of the Purchaser immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation, in each case until their respective successors shall have
been duly elected, designated or qualified, or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
Section 1.5 Subsequent Actions. If at any time after the
Effective Time the Surviving Corporation shall determine, in its sole
discretion, that any actions are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of either of
the Company or the Purchaser acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, then the officers and directors of the Surviving
Corporation shall be authorized take all such actions as may be
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necessary or desirable to vest all right, title or interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement
Section 1.6 Stockholders' Meeting; Proxy Statement. The
Company shall in accordance with applicable law:
(i) duly call, give notice of, convene
and hold a special meeting of its stockholders (the "Company
Stockholders Meeting") as soon as reasonably practicable following the
date of this Agreement for the purpose of considering and taking action
upon this Agreement;
(ii) as promptly as practicable after
the execution of this Agreement (and in any event within 10 business
days after the date hereof), prepare and file with the United States
Securities and Exchange Commission (the "SEC") a preliminary proxy
statement relating to the Merger and this Agreement (but in any event
after providing Parent with a reasonable opportunity to review and
comment thereon prior to filing) and use its reasonable best efforts to
obtain and furnish the information required to be included by the SEC
in the Proxy Statement and, after consultation with Parent, respond
promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy
or information statement (together with any amendments and supplements
thereto, the "Proxy Statement") to be mailed to its stockholders as
promptly as practicable;
(iii) subject to Section 5.2(c), included
in the Proxy Statement the recommendation of the Company Board of
Directors that stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement; and
(iv) use its reasonable best efforts to
solicit from holders of Shares proxies in favor of the Merger and take
all actions reasonably necessary or, in the reasonable opinion of the
Purchaser, advisable to secure the approval of stockholders required by
the DGCL, the Company's Certificate of Incorporation and any other
applicable law to effect the Merger.
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 holders of any Shares or the holders of the common stock, par value $0.01
per share, of the Purchaser (the "Purchaser Common Stock"):
(a) Each outstanding share of Purchaser Common
Stock shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.
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(b) All Shares that are owned by the Company as
treasury stock and any Shares owned by Parent, the Purchaser or any other wholly
owned Subsidiary of Parent shall be cancelled and retired, and no consideration
shall be delivered in exchange therefor.
(c) Each outstanding Share (other than Shares to
be cancelled in accordance with Section 2.1(b) and other than Dissenting Shares)
shall be converted into the right to receive $3.09, payable to the holder
thereof in cash, without interest (the "Merger Consideration"). From and after
the Effective Time, all such Shares shall no longer be outstanding and shall
automatically be cancelled and retired, 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 Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without interest
thereon.
Section 2.2 Paying Agent.
(a) Prior to the Effective Time, Parent shall
designate an agent reasonably acceptable to the Company (the "Paying Agent") for
the holders of Shares in connection with the Merger and to receive the funds to
which holders of Shares shall become entitled pursuant to Section 2.1(c). Prior
to the Effective Time, Parent or the Purchaser shall make available to the
Paying Agent the aggregate Merger Consideration. Such funds shall be invested by
the Paying Agent as directed by Parent or the Surviving Corporation, in its sole
discretion, pending payment thereof by the Paying Agent to the holders of the
Shares. Earnings from such investments shall be the sole and exclusive property
of Parent and the Surviving Corporation, and no part of such earnings shall
accrue to the benefit of holders of Shares.
(b) Promptly after the Effective Time, the
Paying Agent shall mail to each holder of record of Shares (the "Certificates"),
whose Shares were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a customary letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent) and (ii) instructions for effecting the surrender of the Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each Share formerly represented
by such Certificate and the Certificate so surrendered shall forthwith be
cancelled. If payment of the Merger Consideration is to be made to a Person
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition precedent of payment that (x) the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer, and (y) the Person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not required to be paid.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed after the Effective Time to represent only the right to receive the
Merger Consideration, without interest thereon.
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(c) At the Effective Time, the stock transfer
books of the Company shall be closed and thereafter there shall be no further
registration of transfers of Shares on the records of the Company. From and
after the Effective Time, the holders of Certificates evidencing ownership of
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares, except as otherwise provided for herein
or by applicable law. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be cancelled and
exchanged as provided in this Article II.
(d) At any time following six months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any funds (including any interest received with
respect thereto) made available to the Paying Agent and not disbursed to holders
of Certificates, and thereafter such holders shall be entitled to look only to
the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Section 2.3 Dissenting Shares.
(a) Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has complied with Section 262 of the DGCL ("Dissenting
Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses his or her right to appraisal. A holder of Dissenting Shares shall be
entitled to receive payment of the appraised value of such Shares held by him or
her in accordance with Section 262 of the DGCL unless, after the Effective Time,
such holder fails to perfect or withdraws or loses his or her right to
appraisal, in which case such Shares shall be converted into and represent only
the right to receive the Merger Consideration, without interest thereon, upon
surrender of the Certificate or Certificates representing such Shares pursuant
to Section 2.2.
(b) The Company shall give Parent (i) prompt
notice of any written demands for appraisal of any Shares, attempted withdrawals
of such demands and any other instruments served pursuant to the DGCL and
received by the Company relating to rights of appraisal and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. Except with the prior written consent of Parent, the Company
shall not make any payment with respect to any demands for appraisal or settle
or offer to settle any such demands for appraisal.
Section 2.4 Company Option and Equity Plans.
(a) At least 20 days prior to the Effective Time, the
Company shall have taken all necessary actions to notify each holder of
unexpired and unexercised options to acquire Shares ("Options") under the
Landacorp, Inc. 1998 Equity Incentive Plan (the "1998 Plan") that
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Options under the Plan will not be assumed and converted by Purchaser, and
therefore all Options under that Plan will become 100% vested on the date of
such notice and will terminate if not exercised at or prior to the Effective
Time. At least 20 days prior to the Effective Time, the Company shall have taken
all necessary actions to notify each holder of unexpired and unexercised Options
under the Capitated Disease Management Services, Inc. Stock Compensation Program
(the "PCI Plan") that Options under the Plan will not be assumed and converted
by Purchaser, and therefore all Options under the PCI Plan will terminate if not
exercised at or prior to the Effective Time. At least 20 days prior to the
Effective Time, the Company shall have notified each holder of Options under the
Lang & Associates, Inc. Incentive Stock Option Plan (the "1984 Plan") and the
1995 Incentive Stock Option Plan (the "1995 Plan") of the effect of the
Transactions on their Options (as described below) and that all such Option
holders may exercise before the Effective Time. Each Option under the 1984 Plan
or the 1995 Plan that are not so exercised will be converted to options to
purchase 0.2472 common shares or units in SHPS Holdings, LLC or SHPS, Inc., a
wholly owned subsidiary of Parent, in the sole discretion of Parent. With
respect to any Option to be so converted, (i) the number of common shares or
units subject to such Option as converted will be determined by multiplying the
number of Shares subject to such Option immediately prior to the Effective Time
by 0.2472, and rounding any fractional share or unit down to the nearest whole
share or unit, and (ii) the per share or unit exercise price of such Option as
converted will be determined by dividing the exercise price per Share specified
in the Option by 0.2472, and rounding the exercise price thus determined up to
the nearest whole cent; provided, however, that in the case of any Option to
which Section 422 of the Code applies, the adjustments provided for in this
Section 2.4(a) shall be effected in a manner consistent with the requirements of
Section 424(a) of the Code. Such new option shall otherwise be subject to the
same terms and conditions as such prior Option. At the Effective Time, (i) all
references in the 1984 Plan and the 1995 Plan and in the applicable stock option
or other award agreements issued thereunder shall be deemed to refer to
Parent,SHPS, Inc., or SHPS Holdings, LLC, as determined by Parent; and (ii)
Parent, SHPS, Inc. or SHPS Holdings, LLC shall assume the 1984 Plan and 1995
Plans and all of the Company's obligations with respect to the Options, subject
to this Section 2.4(a). The 1998 Plan, the PCI Plan, the 1995 Plan, and the 1984
Plan are hereafter collectively referred to as the "Option Plans".
(b) Prior to the Effective Time, the Company shall have
taken all necessary actions so that, not later than immediately before the
Effective Time, the last Offering Period under the Landacorp, Inc. 1999 Employee
Stock Purchase Plan will end pursuant to the procedure for setting a new
Exercise Date in Section 19(c) of that Plan, and the Plan shall have been
terminated and made of no further force or effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in a disclosure schedule delivered to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and the Purchaser as
set forth below. Each exception set forth in the Company Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring
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to, a specific individual section or subsection of this Agreement and relates
only to such section or subsection.
Section 3.1 Organization.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority and all necessary governmental
licenses, authorizations, permits, consents and approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority, or governmental licenses,
authorizations, permits, consents or approvals would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect. As
used in this Agreement, ("Company Material Adverse Change") or ("Company
Material Adverse Effect") means any change, event or effect, as the case may be,
that is materially adverse to (y) the business, operations, properties
(including intangible properties), condition (financial or otherwise), results
of operations, prospects, assets or liabilities of the Company and the Company
Subsidiaries, taken as a whole, or (z) the Company's ability to consummate the
Transactions within the timeframes contemplated by this Agreement; provided,
however, that in no event shall any of the following, either alone or in
combination, be deemed to constitute a Company Material Adverse Effect: (i) any
change, event or effect resulting from or arising out of the Company's
performance of its obligations under this Agreement (excluding any change, event
or effect resulting from or arising out of the announcement or pendency of the
Transactions other than any such change or effect on the Company's relationships
with the customers described in Section 3.1(a) of the Company Disclosure
Schedule), (ii) any change, event or effect resulting from or arising out of the
changes in economic conditions or conditions in the capital markets in the
United States (to the extent that such changes, events or effects do not
disproportionately affect the Company or any Company Subsidiary), and (iii) any
change, event or effect resulting from or arising out of the changes in the
industry in which the Company operates (to the extent that such changes do not
disproportionately affect the Company).
(b) The Company is qualified or licensed to do
business and in good standing in each jurisdiction where such qualification or
licensing is necessary, except where the failure to be so qualified or licensed
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Section 3.1(b) of the
Company Disclosure Schedule identifies each jurisdiction in which the Company is
qualified or licensed to do business.
Section 3.2 Subsidiaries and Affiliates.
(a) Section 3.2(a) of the Company Disclosure
Schedule sets forth the name, jurisdiction of incorporation or organization and
authorized and outstanding capital stock (or other similar equity interests) of
each Company Subsidiary. Other than with respect to the Company Subsidiaries,
the Company does not own, directly or indirectly, any capital stock or other
equity securities of any Person or have any direct or indirect equity or
ownership interest in any business. All of the outstanding capital stock (or
other similar equity interests) of each
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Company Subsidiary is (or are) owned directly or indirectly by the Company free
and clear of all liens, charges, security interests, options, claims, mortgages,
pledges, or other encumbrances and restrictions of any nature whatsoever
("Encumbrances"), and is (or are) validly issued, fully paid and nonassessable.
As used in this Agreement: the term "Company Subsidiary" means each Person which
is a Subsidiary of the Company; the term "Subsidiary" means with respect to any
party, any corporation, partnership, limited liability company or other
organization or entity, whether incorporated or unincorporated, of which (i) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries or (ii) such
party or any other Subsidiary of such party is a general partner (excluding any
such partnership where such party or any Subsidiary of such party does not have
a majority of the voting interest in such partnership); and the term "Person"
means a natural person, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Entity or other entity or organization. The term
"Knowledge" means the actual knowledge, after due inquiry, of all directors of
the Company and any Company Subsidiary and Xxxx Xxxxxx, Xxxx Xxxxxxxx, and
Xxxxxxx Xxxxxx, which individuals constitute all of the executive officers of
the Company and the Company Subsidiaries.
(b) Each Company Subsidiary (i) is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, (ii) has full power and authority
and all necessary governmental licenses, authorizations, permits, consents and
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, and (iii) is duly qualified or licensed to do
business and in good standing in each jurisdiction where such qualification or
license is necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Section 3.2(b)
of the Company Disclosure Schedule identifies each jurisdiction in which each
Company Subsidiary is qualified or licensed to do business. The Company has
heretofore made available or delivered to Parent complete and correct copies of
the Certificate of Incorporation and Bylaws (or similar organizational
documents) of the Company and each Company Subsidiary as presently in effect.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company
consists of (i) 50,000,000 Shares and (ii) 8,000,000 shares of preferred stock,
par value $0.001 per share (the "Preferred Stock"). As of February 27, 2004, (i)
16,175,458 Shares are issued and outstanding, (ii) no shares of Preferred Stock
are issued and outstanding, (iii) no Shares are issued and held in the treasury
of the Company, and (iv) a total of 2,759,759 Shares are reserved for issuance
upon the exercise of outstanding Options. All of the outstanding shares of the
Company's capital stock are, and all Shares which may be issued pursuant to the
exercise of outstanding Options will be (when and if issued in accordance with
the terms of such Options), duly authorized, validly issued, fully paid and
non-assessable. There is no indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any Company
-8-
Subsidiary issued and outstanding. Except as disclosed in this Section 3.3 or as
set forth in Section 3.3(a) of the Company Disclosure Schedule, (i) there are no
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements, understandings or commitments of any kind
relating to the issued or unissued capital stock of, or other equity interests
in, the Company or any Company Subsidiary obligating the Company or any Company
Subsidiary to issue, transfer, register or sell or cause to be issued,
transferred, registered or sold any shares of capital stock or Voting Debt of,
or other equity interest in, the Company or any Company Subsidiary or securities
convertible into or exchangeable for such shares or equity interests or other
securities, or obligating the Company or any Company Subsidiary to grant, extend
or enter into any such option, warrant, call, subscription or other right,
agreement, arrangement, understanding or commitment, and (ii) there are no
outstanding agreements, arrangements, understandings or commitments of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
Shares or the capital stock of the Company or any capital stock or other equity
interests in any Company Subsidiary or any Person or to provide funds to make
any investment (in the form of a loan, capital contribution or otherwise) in any
Company Subsidiary or any Person. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or other similar rights with
respect to the Company or any Company Subsidiary.
(b) Section 3.3(b) of the Company Disclosure
Schedule sets forth, with respect to each Option outstanding as of January 31,
2004, the number of Shares issuable therefor, the Option Plan under which each
Option was granted, the extent to which each Option is vested and/or currently
exercisable, and the purchase price payable therefor upon the exercise of each
such Option. Since January 31, 2004, the Company has not granted or issued any
Options. To the Knowledge of the Company, all of the Options have been granted
to employees or directors of the Company in the ordinary course of business
consistent with past practice. Except as set forth on Section 3.3(b) of the
Company Disclosure Schedule, to the Knowledge of the Company, all options
granted under the Option Plans have been granted pursuant to option award
agreements in substantially the forms attached as an exhibit to Section 3.3(b)
of the Company Disclosure Schedule.
(c) There are no voting trusts or other
agreements or understandings to which the Company or any Company Subsidiary is a
party with respect to the voting of the capital stock of the Company or any of
the Company Subsidiaries.
Section 3.4 Authorization; Validity of Agreement;
Company Action. The Company has the requisite corporate power and authority to
execute and deliver this Agreement, and has the requisite corporate power and
authority to perform the transactions provided for or contemplated by this
Agreement, including, but not limited to, the Merger (collectively, the
"Transactions"). The execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the Transactions, have been duly and
validly authorized by the Company Board of Directors, and no other corporate
proceeding on the part of the Company is necessary to authorize the execution
and delivery by the Company of this Agreement and the consummation by it of the
Transactions other than, with respect to the Merger, the approval of the Merger
and adoption of this Agreement by the Company's stockholders. This Agreement has
been duly and validly executed and delivered by the Company and, assuming due
and valid
-9-
authorization, execution and delivery hereof by Parent and the Purchaser, is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms subject to laws of general application relating to
bankruptcy, insolvency and relief of debtors and the rules of law governing
specific performance, injunctive relief or other equitable remedies.
Section 3.5. Board Approvals. The Company Board of
Directors at a meeting duly called and held, has (i) determined that each of
this Agreement and the Merger are advisable and fair to and in the best
interests of the stockholders of the Company, (ii) duly and validly approved,
adopted and declared advisable this Agreement and the Transactions and taken all
other corporate action required to be taken by the Company Board of Directors to
authorize the consummation of the Transactions, and (iii) resolved to recommend
that the stockholders of the Company approve and adopt this Agreement and the
Merger, and none of the aforesaid actions by the Company Board of Directors has
been amended, rescinded or modified. The action taken by the Company Board of
Directors constitutes approval of the Transactions (including each of this
Agreement, the Merger and the Voting Agreement) by the Company Board of
Directors under Section 203 of the DGCL, and no other state takeover statute or
similar statute or regulation in any jurisdiction in which the Company or any
Company Subsidiary does business is applicable to the Transactions (including
each of this Agreement, the Merger and the Voting Agreement).
Section 3.6 Required Vote. The affirmative vote of the
holders of a majority of the outstanding Shares is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve the
Merger and adopt this Agreement (the "Required Company Vote"). Neither the
Company nor the Transactions are or will be subject to the provisions of Section
2115 of the California General Corporate Law.
Section 3.7 Consents and Approvals; No Violations. None
of the execution, delivery or performance of this Agreement by the Company, the
consummation by the Company of the Transactions or compliance by the Company
with any of the provisions of this Agreement will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation, the Bylaws or
similar organizational documents of the Company or any Company Subsidiary, (ii)
require any filing by the Company with, or any permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or other regulatory authority or agency, foreign or
domestic (a "Governmental Entity") (except for (A) compliance with any
applicable requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), Securities Act or state blue sky laws, (B) any filings as may
be required under the DGCL in connection with the Merger, (C) any compliance
(including any filings or notifications or the expiration of applicable waiting
periods) as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and (D) the filing with the SEC and the
NASDAQ Stock Market of a Proxy Statement, (iii) except as set forth in Section
3.7 of the Company Disclosure Schedule, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, or result in the creation of any Encumbrance on the assets and properties
of the Company or any Company Subsidiary under, any of the terms, conditions or
provisions of any note, bond, mortgage, lien, indenture, lease, license,
contract, agreement, arrangement or understanding or other instrument or
obligation
-10-
(each, a "Contract") to which the Company or any Company Subsidiary is a party
or by which any of them or any of their respective properties or assets may be
bound, or (iv) violate, in any material respect, any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any Company
Subsidiary or any of their respective properties or assets, except in the case
of clauses (ii) and (iii) where (x) any failure to obtain such permits,
authorizations, consents or approvals, (y) any failure to make such filings or
notifications, or (z) any such violations, breaches, defaults or Encumbrances
would not, individually or in the aggregate, reasonably be expected to (I) have
a Company Material Adverse Effect, or (II) materially delay the consummation of
the Transactions.
Section 3.8 Company SEC Documents and Financial
Statements. Since December 31, 2000, the Company has timely filed with the SEC
all forms, reports, schedules, statements, exhibits, and other documents
required by it to be filed under the Exchange Act or the Securities Act
(collectively, the "Company SEC Documents"). As of its filing date or, if
amended, as of the date of the last such amendment, each Company SEC Document
complied as to form with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder. As of its filing date or, if amended, as of the date of the
last such amendment, each Company SEC Document filed pursuant to the Exchange
Act did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Each Company
SEC Document that is a registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act, as of the date such
registration statement or amendment became effective, did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. None
of the Company Subsidiaries is required to file any forms, reports or other
documents with the SEC. All of the audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company included in
the Company SEC Documents (collectively, the "Financial Statements") (i) have
been prepared from, are in accordance with and fairly reflect the books and
records of the Company and its consolidated Subsidiaries in all material
respects, (ii) comply in all material respects with the applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, (iii) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto and
except, in the case of the unaudited interim statements, as may be permitted
under Form 10-Q of the Exchange Act) and (iv) fairly present in all material
respects the consolidated financial position and the consolidated results of
operations and changes in stockholder's equity and cash flows (subject, in the
case of unaudited interim financial statements, to normal and recurring year-end
adjustments) of the Company and its consolidated Subsidiaries as of the times
and for the periods referred to therein.
Section 3.9 Absence of Certain Changes. Except as
specifically contemplated by this Agreement, since September 30, 2003, (a) each
of the Company and each Company Subsidiary has conducted its respective business
only in the ordinary course of business consistent with past practice, (b)
neither the Company nor any Company Subsidiary has suffered any Company Material
Adverse Effect, and (c) neither the Company nor any Company
-11-
Subsidiary has taken any action that, if taken after the date of this Agreement,
would constitute a breach of any of the covenants set forth in Section 5.1.
Section 3.10 No Undisclosed Liabilities. Except for (a)
those liabilities fully reflected or reserved against in the consolidated
financial statements of the Company included in its Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2003, (b) liabilities and
obligations (i) incurred in the ordinary course of business consistent with past
practice since September 30, 2003 or (ii) as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, and
(c) except as set forth in Section 3.10 of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary has incurred any liabilities or
obligations of any nature, whether or not accrued, contingent, absolute or
otherwise. As of January 31, 2004, the Company had outstanding indebtedness,
comprising all liabilities of the Company and the Company Subsidiaries on a
consolidated basis, whether primary or secondary or absolute or contingent
(including indebtedness for borrowed money; indebtedness evidenced by notes,
bonds, debentures or similar instruments; capital lease obligations; and
indebtedness secured by liens on any assets of the Company or any Company
Subsidiary), of $750,000.
Section 3.11 Litigation; Orders. Except as set forth in
Section 3.11 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding, (including, without limitation, arbitration proceeding or
alternative dispute resolution proceeding) pending or, to the Knowledge of the
Company, threatened against or naming as a party thereto the Company or any
Company Subsidiary that would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. To the Knowledge of the
Company, there is no investigation of any nature pending or threatened against
the Company that would, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect. No judgement, decree, injunction,
rule or order of any Governmental Entity is outstanding against the Company or
any Company Subsidiary or any of their respective properties or assets that
would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
Section 3.12 Employee Benefit Plans; ERISA.
(a) Section 3.12(a) of the Company Disclosure
Schedule contains a true and complete list of each deferred compensation and
each incentive compensation, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(l) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA); each employment, termination or
severance agreement; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by the Company or by any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that together
with the Company would be deemed a "single employer" within the meaning of
section 4001(b) of ERISA, or to which the Company or an ERISA Affiliate is
party, whether written or oral, for the benefit of any employee or former
employee of the Company or any Company Subsidiary (the "Plans").
-12-
(b) With respect to each Plan, the Company has
heretofore made available or delivered to Parent true and complete copies of the
Plan and any amendments thereto (or if the Plan is not a written Plan, a
description thereof), any related trust or other funding vehicle, any reports or
summaries required under ERISA or the Code with respect to the three most recent
years, the last three actuarial or allocation reports for any plans that are
pension plans under Section 3(2) of ERISA, and the most recent determination
letter received from the Internal Revenue Service with respect to each Plan
intended to qualify under section 401 of the Internal Revenue Code of 1986, as
amended (the "Code").
(c) None of the Plans is, and neither the
Company nor any Company Subsidiary or ERISA Affiliate has maintained or
contributed to a plan during the last completed six fiscal years that is,
subject to Title IV or section 302 of ERISA or Section 412 of the Code.
(d) No Plan maintained during the last six
completed fiscal years is "multiemployer pension plan" within the meaning of
section 3(37) of ERISA.
(e) Except as set forth in Section 3.12(e) of
the Company Disclosure Schedule, each Plan has been operated and administered in
all material respects in accordance with its terms and applicable law, including
but not limited to ERISA and the Code.
(f) Each Plan intended to be qualified under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either applied for prior to the expiration of the
requisite period under applicable Treasury Regulations or IRS pronouncements, or
obtained a favorable determination, notification, advisory and/or opinion
letter, as applicable, as to its qualified status from the IRS or still has a
remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination.
(g) No Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of the Company or any Subsidiary for periods
extending beyond their retirement or other termination of service, other than
(i) coverage mandated by applicable law, or (ii) death benefits under any
"pension plan". (h) Except as disclosed in Section 3.12(h) of the Company
Disclosure Schedule, no amounts payable (individually or collectively and
whether in cash, capital stock of the Company or other property) under any of
the Plans or any other contract, agreement or arrangement with respect to which
the Company or any Company Subsidiary may have any liability could fail to be
deductible for federal income tax purposes by virtue of section 162(m) or
section 280G of the Code or, to the Knowledge of the Company, section 162(a) of
the Code.
(h) Except as disclosed in Section 3.12(h) of
the Company Disclosure Schedule, no amounts payable (individually or
collectively and whether in cash, capital stock of the Company or other
property) under any of the Plans or any other contract, agreement or arrangement
with respect to which the Company or any Company Subsidiary may have any
liability could fail to be deductible for federal income tax purposes by virtue
of section 162(m) or section 280G of the Code or, to the Knowledge of the
Company, section 162(a) of the Code.
(i) Except as specifically described in Section
3.12(i) of the Company Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or officer of the
Company or any ERISA Affiliate to severance pay, unemployment compensation or
any other payment, except as expressly provided in this Agreement, or (ii)
-13-
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(j) There are no pending, or, to the Knowledge
of the Company, threatened or anticipated claims by or on behalf of any Plan, by
any employee or beneficiary covered under any such Plan, or otherwise involving
any such Plan (other than routine claims for benefits).
(k) None of the Company, any Company Subsidiary,
any ERISA Affiliate, any of the Plans, any trust created thereunder, nor to the
Company's Knowledge, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company, any Company Subsidiary or any ERISA Affiliate could be subject to
any material liability for either a civil penalty assessed pursuant to section
409 or 502(1) of ERISA or a tax imposed pursuant to section 4975, 4976 or 4980B
of the Code.
(l) Neither the Company nor any ERISA Affiliate
is a party to any agreement or understanding, whether written or unwritten, with
the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the
Department of Labor or the Centers for Medicare & Medicaid Services. Except as
set forth in Section 3.12(l) of the Company Disclosure Schedule, no
representations or communications, oral or written, with respect to the
participation, eligibility for benefits, vesting, benefit accrual or coverage
under any Plan have been made to employees, directors or agents (or any of their
representatives or beneficiaries) of the Company or any Company Subsidiary which
are not in accordance with the terms and conditions of the Plans in all material
respects.
(m) No "leased employee," as that term is
defined in section 414(n) of the Code, performs services for the Company or any
ERISA Affiliate. The Company and each Company Subsidiary have at all times been
in material compliance with applicable law regarding the classification of
employees and independent contractors.
Section 3.13 Taxes.
(a) The Company and all Company Subsidiaries (i)
have duly filed (or there have been filed on their behalf) with the appropriate
Tax Authorities all material income and other material Tax Returns required to
be filed by them, and all such Tax Returns are true, correct and complete in all
material respects, and (ii) have duly and timely paid in full (or there has been
paid on their behalf), or (in the case of any Taxes that are being contested in
good faith by appropriate proceedings) have established reserves (in accordance
with GAAP) as reflected on the Financial Statements, all income and other
material Taxes that are due and payable and for which they are liable.
(b) There are no liens for Taxes upon any
property or assets of the Company or any Company Subsidiary, except for liens
for Taxes not yet due or for Taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established on
the Financial Statements in accordance with GAAP.
-14-
(c) No material federal, state, local or foreign
Audits are pending with regard to any income or other material Taxes or any
income or other material Tax Returns of the Company or any Company Subsidiary
and to the best Knowledge of the Company and the Company Subsidiaries no such
Audit is threatened.
(d) The federal income Tax Returns of the
Company and the Company Subsidiaries (i) have been examined by the applicable
Tax Authorities for all periods through and including the taxable year ended
December 31, 2000, or (ii) the applicable statutes of limitation for the
assessment of Taxes for such periods have expired and, as of the date hereof no
material adjustments have been asserted as a result of such examinations which
have not been (x) resolved and fully paid, or (y) reserved on the Financial
Statements in accordance with GAAP. None of the Company or any Company
Subsidiary has granted any request, agreement, consent or waiver to extend the
statutory period of limitations applicable to the assessment of any Tax with
respect to any Tax Return of the Company or any Company Subsidiary.
(e) Neither the Company nor any Company
Subsidiary is a party to any written or oral contract, agreement or arrangement
providing for the allocation, indemnification, or sharing of Taxes.
(f) Neither the Company nor any Company
Subsidiary (x) has been a member of any "affiliated group" (as defined in
section 1504(a) of the Code) other than the affiliated group of which Company is
the "parent;" (y) is subject to Treasury Regulation section 1.1502-6 (or any
similar provision under foreign, state, or local law) for any period other than
in connection with the affiliated group of which the Company is the "parent;" or
(z) has any liability for Taxes of any Person (other than the Company and the
Company Subsidiaries) under Treasury Regulation section 1.1502-6 or any similar
provision of state, local or foreign law, as a transferee or successor, by
contract, operation of law or otherwise.
(g) The Company is not and has not been a
"United States real property holding corporation" (as defined in section
897(c)(2) of the Code) during the applicable period specified in section
897(c)(1)(A)(ii) of the Code, and the Shares are "regularly traded on an
established securities market" for purposes of section 1445(b)(6) of the Code
and Treasury Regulation section 1.1445-2(c)(2).
(h) As used in this Agreement, "Audit" means any
audit, assessment, or other examination relating to Taxes by any Tax Authority
or any judicial or administrative proceedings relating to Taxes. "Tax" or
"Taxes" means all federal, state, local, and foreign taxes, and other duties or
assessments of a similar nature (whether imposed directly or through withholding
and including all estimated payments of such taxes, duties or assessments),
including any interest, additions to tax, or penalties applicable thereto,
imposed by any Tax Authority. "Tax Authority" means the Internal Revenue Service
and any other domestic or foreign governmental authority responsible for the
administration of any Taxes. "Tax Returns" mean all federal, state, local, and
foreign tax returns, declarations, statements, reports, schedules, forms,
documents and information returns (and any amendments thereto) that are filed or
required to be filed with any Tax Authority.
-15-
Section 3.14 Contracts.
(a) Section 3.14(a) of the Company Disclosure
Schedule sets forth a list of the following (collectively, the "Material
Contracts"):
(i) A description of each lease of real
or personal property (other than any lease of personal property (A) requiring
future payments of less than $50,000, or (B) which is terminable by either the
Company or any Company Subsidiary without breach or penalty on less than 61 days
prior written notice) to which the Company or any Company Subsidiary is a party,
either as lessee or lessor, including a description of the parties to each such
lease, the property to which each such lease relates, and the rental term and
monthly (or other) rents payable under each such lease;
(ii) All management agreements,
employment agreements, consulting agreements, and independent contractor
agreements to which the Company or any Company Subsidiary is a party (other than
any agreement which (A) provides for future payments of less than $50,000, or
(B) which is terminable by the Company or any Company Subsidiary without breach
or penalty on less than 61 days prior written notice);
(iii) All guaranties, mortgages, deeds of
trusts, indentures and loan agreements, to which the Company or any Company
Subsidiary is a party in excess of $50,000;
(iv) All Contracts with third party
payors and all other Contracts relating to the Company's or any Company
Subsidiary's service to customers; provided, however, there shall be excluded
from the Company Disclosure Schedule any Contract involving payments of less
than $50,000 per annum;
(v) All Contracts (other than those
described in or excepted from clauses (i), (ii), (iii) or (iv)) to which the
Company or any Company Subsidiary is a party, or to which the Company or any
Company Subsidiary or any of its or their respective assets or properties are
subject (other than any Contract or group of related Contracts which requires
aggregate payments by the Company or any Company Subsidiary of less than $50,000
in amount per annum); and
(vi) All Contracts with stockholders
(other than employees who own fewer than 25,000 Shares), directors or officers
of the Company or any Company Subsidiary, Contracts containing covenants by the
Company or any Company Subsidiary not to compete in any lines of business or
commerce, and Contracts for the acquisition, sale or lease of material
properties or assets of the Company or any Company Subsidiary (by merger,
purchase or sales of assets or stock or otherwise) and all investment joint
venture, operating or partnership agreements of the Company or any Company
Subsidiary. True and complete copies of all Material Contracts have been
provided or made available to the Parent and the Purchaser.
(b) Each Material Contract to which the Company
or any Company Subsidiary is a party or by which any of them or any of their
respective properties or assets may
-16-
be bound is valid, binding and enforceable and is in full force and effect,
except where any failure to be valid, binding and enforceable and in full force
and effect would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect, and, except as set forth in Section
3.14(b) of the Company Disclosure Schedule, there are no defaults or breaches
thereunder and no event has occurred which, with the passage of time or the
giving of notice or both, would reasonably be expected to result in such a
default or breach, except for those breaches and defaults that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(c) Except as would not reasonably be expected
to have a Company Material Adverse Effect, neither the Company nor any Company
Subsidiary has received any written notice of the intention of any party to
terminate any Material Contract whether as a termination for convenience or for
default of the Company or any Company Subsidiary thereunder.
(d) Except as set forth in Section 3.14(d) of
the Company Disclosure Schedule, no customer or vendor Contract which would have
constituted a Material Contract if in effect as of the date hereof has expired
or been terminated since December 31, 2002. Neither the Company nor any Company
Subsidiary has been notified in writing that in the event of a sale or change of
ownership of the Company or any Company Subsidiary, any of the Material
Contracts could reasonably be expected to be terminated or modified in a manner
which could reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in Section 3.14(d) of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary is a party to any covenant or
agreement which prohibits, limits, restricts or otherwise adversely affects the
right of any such entities to provide the services, and at the prices, they
currently provide or engage in any other business as a consequence of the
Merger.
Section 3.15 Title to Assets. Each of the Company and
the Company Subsidiaries has good and valid title to, or valid leasehold
interests in, all its properties and assets, free and clear of all Encumbrances,
except for Encumbrances that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Each of the
Company and the Company Subsidiaries enjoys peaceful and undisturbed possession
under all real property leases to which it is a party, except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
-17-
Section 3.16 Intellectual Property.
(a) Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect:
(i) the Company and each Company
Subsidiary own or have the right to use all Company Intellectual
Property used by the Company or any Company Subsidiary, or used by any
other Person (in a manner consistent with the Contracts with such
Person, but excluding the use by any such Person (outside the Company's
Knowledge or control) of Company Intellectual Property in connection
with other Intellectual Property, hardware or processes), except as set
forth in Section 3.16(a)(i) of the Company Disclosure Schedule;
(ii) the conduct of the Company's and
each Company Subsidiary's business and the use of the Company
Intellectual Property by the Company or any Company Subsidiary or by
any other Person (in a manner consistent with the Contracts with such
Person, but excluding the use by any such Person (outside the Company's
Knowledge or control) of Company Intellectual Property in connection
with other Intellectual Property, hardware or processes) in connection
therewith, does not infringe, misappropriate, or otherwise violate any
Intellectual Property of any third party, and neither the Company nor
any Company Subsidiary has received written notice alleging any
infringement, misappropriation, or other violation by the Company or
any Company Subsidiary (or any Person which uses Company Intellectual
Property under valid Contracts) of any Intellectual Property of any
third party, except as set forth in Section 3.16(a)(ii) of the Company
Disclosure Schedule;
(iii) (w) the Company Intellectual
Property that is Registered Company Intellectual Property owned by the
Company or any Company Subsidiary is to the Knowledge of the Company
valid, subsisting, and in full force and effect, (including any
applications for Registered Company Intellectual Property), (x) the
Company or Company Subsidiaries has properly registered the Registered
Company Intellectual Property listed in Section 3.16(a)(iii)(x) of the
Company Disclosure Schedule, (y) registrations and applications for
Company Intellectual Property owned by the Company or any Company
Subsidiary, are subsisting, current, in full force and effect, have not
been cancelled, expired, or abandoned; and (z) there are no pending or,
to the Knowledge of the Company, threatened challenges to the validity
of any Company Intellectual Property owned by the Company or any
Company Subsidiary and to the Knowledge of the Company, there is no
pending or threatened challenges to the validity of any Company
Intellectual Property; and
(iv) the Company and each Company
Subsidiary has taken reasonable steps to preserve the confidentiality
of its trade secrets and other confidential, proprietary information
that it (1) is required to maintain as confidential, or (2) reasonably
would be expected to maintain as confidential.
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(b) Neither the Company nor any Company
Subsidiary has received notice or has Knowledge that any third party is
infringing upon, misappropriating, or otherwise violating any Company
Intellectual Property owned by the Company or any Company Subsidiary.
(c) The consummation of the Transactions will
not alter or impair the Company's or any Company Subsidiary's rights to own or
use any Company Intellectual Property.
(d) Definitions: As used in this Section 3.16:
(i) "Company Intellectual Property"
means Intellectual Property used to conduct the business of the Company or any
Company Subsidiary as presently conducted.
(ii) "Intellectual Property" means (1)
all copyrights, including, without limitation, moral rights and rights of
attribution and integrity, copyrights in the content contained on any Internet
site, and registrations and applications for any of the foregoing; (2) all
patents, including without limitation any continuations, divisionals,
continuations-in-part, renewals, reissues and applications for any of the
foregoing; (3) all rights of publicity and privacy, including but not limited to
the use of the names, likenesses, voices, signatures, biographical information,
persona and other recognizable aspects of real persons; (4) all computer
programs (whether in source code or object code form), databases, compilations
of data, all documentation related to any of the foregoing and the copyrights in
all the foregoing; (5) all trademarks, service marks, trade names, domain names,
designs, logos, emblems, signs or insignia, slogans, other similar designations
of source or origin and general intangibles of like nature, together with the
registrations and applications relating to any of the foregoing; and (6) all
trade secrets (as defined under applicable law) including, without limitation,
trade secrets of the following nature: financing and marketing information,
customer information, technology, know-how, inventions, proprietary processes,
formulae, algorithms, models and methodologies.
(iii) "Registered Company Intellectual
Property" means Intellectual Property that has been registered, filed, certified
or otherwise perfected or recorded with or by any state, governmental or other
public or quasi-public legal authority, including, without limitation, patents,
trademarks, and copyrightable works.
Section 3.17 Labor Matters.
(a) The Company and each Company Subsidiary are
neither party to, nor bound by, any labor or collective bargaining agreement or
any other agreement with a labor union and there are no labor or collective
bargaining agreements that pertain to any of the employees of the Company or any
Company Subsidiary, nor are any such employees represented by any labor
organization with respect to such employment. The Company and each Company
Subsidiary has good labor relations and there are no controversies, grievances,
or arbitrations pending, or to the Knowledge of the Company, threatened between
the Company or any Company Subsidiary, on the one hand, and any of their
respective employees, on the other hand,
-19-
which could, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. No labor organization or group of employees of
the Company or any Company Subsidiary has made a pending demand for recognition
or certification, and there are no representation or certification proceedings
or petitions seeking a representation proceeding presently pending or, to the
Knowledge of the Company, threatened in writing to be brought or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. The Company does not know of any labor union organizing activities
with respect to any employees of the Company or any Company Subsidiary into one
or more collective bargaining units.
(b) The Company and all Company Subsidiaries are
in compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, health and safety, and wages and
hours, including, without limitation, the Immigration Reform and Control Act,
the Worker Adjustment and Retraining Notification Act, all laws respecting
employment discrimination, disability rights or benefits, equal opportunity,
plant closure issues, affirmative action, workers' compensation, employee
benefits, severance payments, labor relations, employee leave issues, wage and
hour standards, occupational safety and health requirements, unemployment
insurance and related matters, and the collection and payment of withholding or
social security taxes and any similar tax, and neither Company nor any Company
Subsidiary are engaged in any unfair labor practice except for any noncompliance
or practices that would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary are delinquent in payments to any employees of the Company or
any Company Subsidiary for any services or amounts required to be reimbursed or
otherwise paid to such employees.
(c) Neither the Company, nor any Company
Subsidiary, nor any of their respective employees, agents or representatives has
committed a material unfair labor practice as defined in the National Labor
Relations Act and there is no material unfair labor practice complaint or other
allegation of labor law violation against the Company or any Company Subsidiary
pending before the National Labor Relations Board or any other Governmental
Entity.
(d) Since September 30, 2003, there has been no
and there is no actual labor dispute, strike, lockout slowdown or work stoppage
or, to the Knowledge of the Company, threatened against or affecting the Company
or any Company Subsidiary.
(e) Except for such matters as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, neither Company nor any Company Subsidiary has received
notice of any actual or threatened investigation, charge or complaint against
Company or any Company Subsidiary with respect to employees pending before the
Equal Employment Opportunity Commission or any other Governmental Entity
regarding an unlawful employment practice.
(f) To the Knowledge of the Company no employee
of the Company or any Company Subsidiary is in any respect in violation of any
term of any employment contract, non-disclosure agreement, noncompetition
agreement, or any restrictive covenant to a
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former employer relating to the right of any such employee to be employed by the
Company or any Company Subsidiary because of the nature of the business
conducted or presently proposed to be conducted by the Company or any Company
Subsidiary or to the use of trade secrets or proprietary information of others
except where such violation would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section 3.18 Compliance with Laws.
(a) Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (i)
the Company and the Company Subsidiaries have complied in a timely manner with
all laws, rules and regulations, ordinances, judgments, decrees, orders, writs
and injunctions of all Governmental Entities which apply to the business,
properties or assets of the Company or the Company Subsidiaries, (ii) no notice,
charge, claim, action or assertion has been received by the Company or any
Company Subsidiary or has been filed, commenced or, to the Knowledge of the
Company, threatened in writing against the Company or any Company Subsidiary
alleging any violation of any of the foregoing, (iii) all licenses, permits and
approvals required under such laws, rules and regulations are in full force and
effect and (iv) there is no action, proceeding or investigation pending or, to
the Knowledge of the Company, threatened in writing regarding the suspension,
revocation or cancellation of any such licenses, permits and approvals.
(b) The Company and the Company Subsidiaries are
and have been in compliance with all applicable provisions of the Health
Insurance Portability and Accountability Act of 1996, as amended, including but
not limited to the electronic health care transactions and code sets standards
published by the Secretary of the Department of Health and Human Services and
the standards for privacy of electronically transmitted individually
identifiable health information as published by such Secretary, except where any
such noncompliance, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
(c) The Company and the Company Subsidiaries are
and have been in compliance with all applicable laws, rules and regulations of
all Governmental Entities with respect to the marketing of products and services
via electronic or telephonic media or the internet except where such violation
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
Section 3.19 Condition of Assets. All of the property,
plant and equipment of the Company and each Company Subsidiary has in all
material respects been maintained in reasonable operating condition and repair,
ordinary wear and tear excepted, and is in all material respects sufficient to
permit the Company and each Company Subsidiary to conduct their operations in
the ordinary course of business in a manner consistent with their past
practices.
Section 3.20 Customers and Suppliers. Except as set forth
in Section 3.20 of the Company Disclosure Schedule, since December 31, 2002,
there has been no termination, cancellation or material curtailment of the
business relationship of the Company or any Company Subsidiary with any material
customer or supplier or group of affiliated customers or
-21-
suppliers nor has any material customer, supplier or group of affiliated
customers or suppliers indicated in writing an intent to so terminate, cancel or
materially curtail its business relationship with the Company or any Company
Subsidiary except where any such termination, cancellation or curtailment would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section 3.21 Environmental Matters.
(a) Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect:
(i) the Company and each Company
Subsidiary has been and is in compliance with all applicable
Environmental Laws, including, but not limited to, possessing all
permits, authorizations, licenses, exemptions and other governmental
authorizations required for its operations under applicable
Environmental Laws;
(ii) there is no pending or, to the
Knowledge of the Company, threatened claim, lawsuit, or administrative
proceeding against the Company or any Company Subsidiary, under or
pursuant to any Environmental Law;
(iii) with respect to the real property
that is currently owned, leased or operated by the Company or any
Company Subsidiary, there have been no spills, discharges or releases
(as such term is defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42, U.S.C. 9601, et seq.) of Hazardous
Substances or any other contaminant or pollutant on or underneath any
of such real property by the Company or any Company Subsidiary, or to
the Knowledge of the Company (except that the term "Knowledge" as used
in this Section 3.21(a)(iii) shall not require due inquiry), by any
other Person;
(iv) with respect to real property that
was formerly owned, leased or operated by the Company or any Company
Subsidiary or any of their predecessors in interest, there were no
spills, discharges or releases (as such term is defined by the
Comprehensive Environmental Response, Compensation and Liability Act,
42, U.S.C. 9601, et seq.) of Hazardous Substances or any other
contaminant or pollutant on or underneath any of such real property by
the Company or any Company Subsidiary, or to the Knowledge of the
Company (except that the term "Knowledge" as used in this Section
3.21(a)(iv) shall not require due inquiry), by any other Person during
or prior to the Company's or any Company Subsidiary's ownership or
operation of such real property; and
(v) neither the Company nor any Company
Subsidiary has disposed or arranged for the disposal of Hazardous
Substances (or any waste or substance containing Hazardous Substances)
at any location that is: (x) listed on the Federal National Priorities
List ("NPL") or identified on the Comprehensive Environmental Response,
Compensation, and
-22-
Liability Information System ("CERCLIS"), each established pursuant to
the Comprehensive Environmental Response, Compensation and Liability
Act, 42, U.S.C. 9601, et seq.; (y) listed on any state or foreign list
of hazardous waste sites that is analogous to the NPL or CERCLIS; or
(z) has been subject to environmental investigation or remediation.
(b) Neither the Company nor any Company
Subsidiary has received written notice from any Person, including, but not
limited to, any Governmental Entity, alleging that the Company or any Company
Subsidiary has been or is in violation or potentially in violation of any
applicable Environmental Law or otherwise may be liable under any applicable
Environmental Law. Neither the Company nor any Company Subsidiary has received
any request for information from any Person, including but not limited to any
Governmental Entity, related to liability under or compliance with any
applicable Environmental Law.
(c) There is no Environmental Claim pending or,
to the Knowledge of the Company, threatened against the Company or any Company
Subsidiary or, to the Knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any Company Subsidiary has
retained or assumed either contractually or by operation of law and there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Hazardous Substance that is reasonably likely to
form the basis of any Environmental Claim against the Company or any Company
Subsidiary or, to the Knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any Company Subsidiary has
retained or assumed whether contractually or by operation of law.
(d) Neither the Company nor any Company
Subsidiary has entered into any written agreement or incurred any legal or
monetary obligation that may require them to pay to, reimburse, guarantee,
pledge, defend, indemnify or hold harmless any Person from or against any
liabilities or costs arising out of or related to the generation, manufacture,
use, transportation or disposal of Hazardous Substances, or otherwise arising in
connection with or under Environmental Laws, other than in each case exceptions
which would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
(e) The following terms shall have the following
meanings for the purposes of this Agreement:
(i) "Environmental Laws" shall mean all
foreign, Federal, state and local laws, regulations, rules and
ordinances relating to pollution or protection of the environment or
worker health and safety, including, without limitation, laws relating
to releases or threatened releases of Hazardous Substances into the
indoor or outdoor environment (including, without limitation, ambient
air, surface water, groundwater, land, surface and subsurface strata)
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, release, transport or handling of Hazardous
Substances; all laws and regulations with regard to record keeping,
notification, disclosure and reporting requirements respecting
Hazardous Substances; all laws relating to endangered or threatened
species of fish, wildlife and plants and the management or use of
natural resources; and common law to the extent it relates to or
applies to exposure to or impact of Hazardous Substances on persons or
property.
-23-
(ii) "Environmental Claim" shall mean
any claim, action, cause of action, investigation or notice by any
person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from (a) the presence, or release into the environment, of an
Hazardous Substance at any location, whether or not owned or operated
by the Company or any Company Subsidiary or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental
Law.
(iii) "Hazardous Substances" shall mean
(a) any petrochemical or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, urea formaldehyde
foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "restricted hazardous materials," "extremely
hazardous substances," "toxic substances," "contaminants" or
"pollutants" or words of similar meaning and regulatory effect; or (c)
any other chemical, material or substance, exposure to which is
prohibited, limited, or regulated by any applicable Environmental Law.
Section 3.22 Insurance. The Company and the Company
Subsidiaries have the policies of insurance set forth in Section 3.22 of the
Company Disclosure Schedule. All such policies are in full force and effect, all
premiums due thereon have been paid by the Company or the Company Subsidiaries,
and the Company and the Company Subsidiaries are otherwise in compliance in all
material respects with the terms and provisions of such policies. Furthermore,
(a) neither the Company nor any Company Subsidiary has received any written
notice of cancellation or non-renewal of any such policy or arrangement nor has
the termination of any such policies or arrangements been threatened in writing,
(b) there is no claim pending under any of such policies or arrangements as to
which coverage has been questioned, denied or disputed, in writing, by the
underwriters of such policies or arrangements, (c) neither the Company nor any
Company Subsidiary has received any written notice from any of its insurance
carriers that any insurance premiums will be increased in the future or that any
insurance coverage presently provided for will not be available to the Company
or any Company Subsidiary in the future on substantially the same terms as now
in effect and (d) none of such policies or arrangements provides for any
retrospective premium adjustment, experienced-based liability or loss sharing
arrangement affecting the Company or any Company Subsidiary, except where the
existence of any of the foregoing would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section 3.23 Certain Business Practices. Neither the
Company nor any Company Subsidiary, and no director or executive officer, and,
to the Knowledge of the Company, no agent or employee of the Company or any
Company Subsidiary, has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of
-24-
the Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any other
unlawful payment.
Section 3.24 Information in the Proxy Statement. The
Proxy Statement will not, at the time that the Proxy Statement or any amendment
or supplement thereto is first mailed to the stockholders of the Company, at the
time of the meeting of the stockholders of the Company to be held in connection
with the Merger and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to
statements made in the Proxy Statement, if any, based on information furnished
in writing by Parent or the Purchaser for inclusion therein. The Proxy Statement
will comply in all material respects with the provisions of applicable federal
securities laws.
Section 3.25 Opinion of Financial Advisor. The Company
has received the written opinion of Xxxxxxxxx Associates LLC (the "Company
Financial Advisor"), dated February 29, 2004, to the effect that, as of such
date, the consideration to be received in the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a copy of such opinion has been delivered to Parent and the Purchaser.
The Company has been authorized by the Company Financial Advisor to permit the
inclusion of such opinion in its entirety and a discussion of the Company
Financial Advisor's analysis in preparing such opinion in the Proxy Statement.
Section 3.26 Brokers. No broker, investment banker,
financial advisor or other person, other than the Company Financial Advisor, 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 based upon arrangements made by or on behalf of
Company or the Purchaser. True and correct copies of all agreements between the
Company and the Company Financial Advisor, including, without limitation, any
fee arrangements, are included in Section 3.26 of the Company Disclosure
Schedule.
Section 3.27 Notes and Accounts Receivable. All notes
and accounts receivable of the Company and any Company Subsidiary shown on the
Financial Statements or thereafter acquired by the Company or any Company
Subsidiary have been collected or are current and are collectible in the
ordinary course (in the case of any such note, in accordance with its terms, and
in the case of any such account, within 90 days after billing) at the aggregate
recorded amounts thereof on the Company's and each Company Subsidiary's books,
less the allowance for uncollectible accounts provided in the Financial
Statements as such allowances may have been adjusted on the Company's and each
Company Subsidiary's books in the ordinary course of business to date, which
adjustments of allowances, if any, are disclosed in Section 3.27 of the Company
Disclosure Schedule. No note or account receivable of the Company or any Company
Subsidiary is subject to an asserted counterclaim or set-off which if successful
could, individually or in the aggregate, be reasonably expected to have a
Company Material Adverse Effect.
-25-
Section 3.28 Affiliate/Potential Competing Interests.
Except as disclosed in Section 3.28 of the Company Disclosure Schedule, no
officer, director, or principal stockholder of the Company or any of the Company
Subsidiaries or any individual in such officer's or director's or principal
stockholder's immediate family is a party to any agreement, contract, commitment
or transaction with the Company or any of the Company Subsidiaries or has any
interest in any real or personal property used by the Company or any of the
Company Subsidiaries, other than benefits provided to or arrangements with
employees that are available to similarly situated employees of the Company or
any Company Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company
as follows:
Section 4.1 Organization. Each of Parent and the
Purchaser is a corporation duly organized and validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation and
has all requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as is now being conducted, except where the failure to be so organized and
existing or to have such power, authority, and governmental approvals would not,
individually or in the aggregate, impair in any material respect the ability of
each of Parent and the Purchaser, as the case maybe, to perform its obligations
under this Agreement, or prevent or materially delay the consummation of any of
the Transactions.
Section 4.2 Authorization; Validity of Agreement;
Necessary Action. Each of Parent and the Purchaser has full corporate power and
authority to execute and deliver this Agreement and to consummate the
Transactions. The execution, delivery and performance by Parent and the
Purchaser of this Agreement and the consummation of the Transactions have been
duly authorized by the boards of directors of each of Parent and the Purchaser,
and by Parent as the sole stockholder of the Purchaser, and no other corporate
authority or approval on the part of Parent or the Purchaser is necessary to
authorize the execution and delivery by Parent and the Purchaser of this
Agreement and the consummation of the Transactions. This Agreement has been duly
and validly executed and delivered by Parent and the Purchaser and, assuming due
and valid authorization, execution and delivery hereof by the Company, is the
valid and binding obligation of each of Parent and the Purchaser enforceable
against each of them in accordance with its terms.
Section 4.3 Consents and Approvals; No Violations. None
of the execution, delivery or performance of this Agreement by Parent or the
Purchaser, the consummation by Parent or the Purchaser of the Transactions, or
compliance by Parent or the Purchaser with any of the provisions hereof will (a)
conflict with or result in any breach of any provision of the organizational
documents of Parent or the Certificate of Incorporation or Bylaws of the
Purchaser, (b) violate, conflict with or result in a breach of any provisions
under any of the terms, conditions or provisions of any material Contract to
which Parent is a party, (c) require any material filing by Parent or the
Purchaser with, or permit, authorization, consent or approval
-26-
of, any Governmental Entity (except for (i) compliance with any applicable
requirements of the Exchange Act and Securities Act, (ii) any filing pursuant to
the DGCL, (iii) the filing with the SEC and the NASDAQ Stock Market of (A) the
Proxy Statement, (B) such reports under Section 13(a) of the Exchange Act as may
be required in connection with this Agreement and the Transactions, (iv) such
filings and approvals as may be required by any applicable state securities,
blue sky or takeover laws, or (v) such compliance (including filings or
notifications or the expiration of waiting periods) as may be required under the
HSR Act), or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent, any of its Subsidiaries, or any of their
properties or assets, except in the case of clause (b) or (c) such violations,
breaches or defaults which would not, individually or in the aggregate, impair
in any material respect the ability of each of Parent and the Purchaser to
perform its obligations under this Agreement, as the case may be, or prevent or
materially delay the consummation of any the Transactions.
Section 4.4 Information in the Proxy Statement. None of
the information supplied by Parent or the Purchaser in writing expressly for
inclusion in the Proxy Statement will, at the time the Proxy Statement or any
amendment or supplement thereto is first mailed to stockholders of the Company,
at the time of the meeting of stockholders Company to be held in connection with
the Merger, and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading.
Section 4.5 Brokers. No broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or the
Purchaser.
Section 4.6 Financing. Parent has or has access to
financial resources sufficient to consummate the Transactions and make the
payments described in Article II.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Interim Operations of the Company. The
Company covenants and agrees that, except as (i) expressly contemplated by this
Agreement, or (ii) consented to in writing by Parent or Purchaser, after the
date hereof, and prior to the earlier of (x) the Effective Time, and (y) the
termination of this Agreement in accordance with Article VIII:
(a) the business of the Company and the Company
Subsidiaries shall be conducted only in the ordinary course of business
consistent with past practice, and each of the Company and the Company
Subsidiaries shall use its commercially reasonable efforts to preserve its
present business organization intact, to keep available the services of its
respective current officers, employees and consultants, and to maintain existing
relations with customers,
-27-
suppliers, employees, contractors, distributors and others having material
business dealings with it;
(b) neither the Company nor any Company
Subsidiary shall, (i) directly or indirectly, except with respect to the
Company, for the issuance of Shares upon the exercise of the Options outstanding
on the date hereof pursuant to the terms of such Options, issue, sell, transfer,
dispose of, encumber or pledge any shares of capital stock of the Company or any
capital stock or other equity interests of any Company Subsidiary, securities
convertible into or exchangeable for, or options, warrants or rights of any kind
to acquire any shares of such capital stock or other equity interests or any
other ownership interest; (ii) amend or otherwise change its Certificate of
Incorporation or Bylaws or similar organizational documents; (iii) split,
combine, reclassify, subdivide or redeem, or purchase or otherwise acquire
(other than pursuant to the Company's exercise of its rights to repurchase
shares from directors, employees and consultants under agreements disclosed in
Section 5.1 of the Company Disclosure Schedule), directly or indirectly, any of
its capital stock or other equity interests; or (iv) declare, set aside or pay
any dividend or other distribution payable in cash, stock or property with
respect to its capital stock;
(c) neither the Company nor any Company
Subsidiary will (i) incur or assume indebtedness (other than trade payables
incurred in the ordinary course of business consistent with past practices and
intercompany indebtedness) or issue any debt securities; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; (iii) make
any loans, advances (other than immaterial advances for Company business
expenses relating to Company purposes consistent with past practices and Company
policy) or capital contributions to, or investments in, any other Person; (iv)
acquire (by merger, consolidation, acquisition of stock or assets or otherwise)
any corporation, partnership or other business organization or division thereof
or any equity interest therein; (v) transfer, lease, license, sell, mortgage,
pledge, dispose of, or encumber any of its assets or properties, other than in
the ordinary course of business consistent with past practice;
(d) neither the Company nor any Company
Subsidiary shall (i) change the compensation or benefits payable or to become
payable to any of its officers, directors, employees, agents or consultants;
(ii) enter into or amend any employment, severance, consulting, termination or
other agreement or employee benefit plan; or (iii) make any loans to any of its
officers, directors, employees, agents, consultants or affiliates or change its
existing borrowing or lending arrangements for or on behalf of any of such
persons pursuant to an employee benefit plan or otherwise;
(e) neither the Company nor any Company
Subsidiary shall (i) pay or arrange for payment of any pension, retirement
allowance or other employee benefit pursuant to any existing plan, agreement or
arrangement to any officer, director, employee or affiliate or pay or make any
arrangement for payment to any officers, directors, employees or affiliates of
the Company of any amount relating to unused vacation days, except payments and
accruals made in the ordinary course of business consistent with past practice;
(ii) except as may be required pursuant to the terms of a Plan as in effect as
of the date of this Agreement, adopt or pay, grant,
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issue, accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any director, officer or employee, whether past or present, or (iii)
amend in any material respect any such existing plan, agreement or arrangement
except as may be required by applicable law;
(f) neither the Company nor any Company
Subsidiary will, (i) modify, amend or terminate any material Contract to which
the Company or any Company Subsidiary is a party or by which any of them or any
of their respective properties or assets may be bound; (ii) waive, release or
assign any rights or claims under any of such Contracts; or (iii) enter into any
material Contract;
(g) neither the Company nor any Company
Subsidiary will (i) change any of the accounting methods used by it except for
such changes required by GAAP or (ii) make any Tax election or change any Tax
election already made, adopt any Tax accounting method, change any Tax
accounting method, enter into any closing agreement or settle any claim or
assessment relating to Taxes or consent to any claim or assessment relating to
Taxes or any waiver of the statute of limitations for any such claim or
assessment;
(h) neither the Company nor any Company
Subsidiary will pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, in the
ordinary course of business consistent with past practice, or of claims,
liabilities or obligations reflected or reserved against in the Financial
Statements of the Company for the period ended September 30, 2003 or incurred
since September 30, 2003 in the ordinary course of business consistent with past
practice;
(i) neither the Company nor any Company
Subsidiary will (i) settle or commence any action, suit, claim, litigation or
other proceeding involving an amount in excess of $25,000 or, in the aggregate,
an amount in excess of $50,000 or (ii) enter into any consent decree, injunction
or other similar restraint or form of equitable relief in settlement of any
action, suit, claim, litigation or other proceeding;
(j) neither the Company nor any Company
Subsidiary will adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any Company Subsidiary (other than with respect to Company,
the Merger);
(k) neither the Company nor any Company
Subsidiary will take any action that would reasonably be expected to result in
any of the conditions to the Merger set forth in Article VII not being satisfied
or that could delay the consummation of, or materially impair the ability of the
Company to consummate, the Transactions in accordance with the terms hereof;
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(1) except for the amounts due the Company
Financial Advisor under the engagement letter disclosed in the Company
Disclosure Schedule and for the reasonable fees and expenses of Wilson, Sonsini,
Xxxxxxxx & Xxxxxx, neither the Company nor any Company Subsidiary shall make any
capital expenditure(s) other than as and in the amounts reflected in the budget
for the fiscal year 2004, set forth in Section 5.1(1) of the Company Disclosure
Schedule; and
(m) neither the Company nor any Company
Subsidiary will enter into any agreement, contract, commitment or arrangement to
do any of the foregoing, or authorize, recommend, propose or announce an
intention to do any of the foregoing.
Section 5.2 No Solicitation.
(a) The Company agrees that it shall immediately
cease and cause to be terminated all existing discussions, negotiations and
communications with any Persons with respect to (i) any tender or exchange offer
involving the Company, (ii) any proposal for a merger, consolidation or other
business combination involving the Company, (iii) any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial portion
of the business or assets of, the Company, (iv) any proposal or offer with
respect to any recapitalization or restructuring with respect to the Company or
(v) any proposal or offer with respect to any other transaction similar to any
of the foregoing with respect to the Company other than the Transactions
contemplated by this Agreement (each an "Acquisition Proposal"). Except as
provided in Section 5.2(b), the Company shall not and shall not authorize or
permit its officers, directors, employees, investment bankers, attorneys,
accountants or other agents (collectively, "Representatives") to directly or
indirectly (i) initiate, solicit or encourage, or take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to any Acquisition Proposal, (ii) enter into any agreement with respect
to any Acquisition Proposal, or (iii) in the event of an unsolicited Acquisition
Proposal for the Company, engage in negotiations or discussions with, or provide
any information or data to, any Person (other than Parent or any of its
affiliates or representatives) relating to any Acquisition Proposal. The Company
shall promptly notify Parent if any proposals are received by, any information
is requested from, or any negotiations or discussions are sought to be initiated
or continued with the Company or its Representatives, in each case, in
connection with an Acquisition Proposal or the possibility or consideration of
making an Acquisition Proposal, which notice shall identify the name of the
Person making such proposal or request or seeking such negotiations or
discussions, the material terms and conditions of any offer or proposal and any
subsequent changes to such terms and conditions. Any violation of this Section
5.2 by any of the Company's Representatives, whether or not such Representative
is so authorized and whether or not such Representative is purporting to act on
behalf of the Company or otherwise, shall be deemed to be a material breach of
this Agreement by the Company.
(b) Notwithstanding the foregoing, the Company
may furnish information concerning its business, properties or assets to any
Person pursuant to a confidentiality agreement with terms no less favorable in
the aggregate to the Company than those contained in the Confidentiality
Agreement, dated April 29, 2003, entered into between SHPS, Inc. and the Company
(together, the "Confidentiality Agreement") and may negotiate and participate in
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discussions and negotiations with such Person in response to a bona fide written
Acquisition Proposal first made after the date of this Agreement which the
Company's Board of Directors concludes in good faith constitutes or is
reasonably likely to result in a Superior Proposal, if and only to the extent
that the Company's Board of Directors reasonably determines in good faith (after
consultation with outside legal counsel) that failure to do so would cause it to
violate its fiduciary duties under applicable law. For purposes of this
Agreement, "Superior Proposal" means a bona fide written Acquisition Proposal
which the Company's Board of Directors concludes in good faith, after
consultation with the Company Financial Advisor or other recognized investment
banking firm and legal advisors, taking into account all legal, financial,
regulatory and other aspects of the proposal and Person making the proposal
(including, but not limited to, any break-up fees, expense reimbursement
provisions and conditions to consummation) (i) is more favorable to the
stockholders of the Company from a financial point of view, than the
Transactions, and (ii) is fully financed (if consisting of cash), reasonably
likely to receive all required governmental approvals on a timely basis and
otherwise reasonably capable of being completed on the terms proposed. The
Company shall promptly, and in any event within one business day following
receipt of a Superior Proposal and prior to providing any such party with any
material non-public information, notify Parent of the receipt of the same, which
notice shall include the name of the Person making such Superior Proposal, the
material terms and conditions of such Superior Proposal and any subsequent
changes to such terms and conditions. The Company shall promptly provide to
Parent any material non-public information regarding the Company provided to any
other party which was not previously provided to Parent, such additional
information to be provided no later than the date of provision of such
information to such other party.
(c) Except as set forth herein, neither the
Company Board of Directors nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the
Transactions, to Parent or to the Purchaser, the approval or recommendation by
the Company Board of Directors of this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, the Company Board of Directors may (subject to
the terms of this and the following sentence) withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal (an
"Acquisition Agreement"), in each case at any time after the fifth business day
following the Company's delivery to Parent of written notice advising Parent
that the Company Board of Directors has received a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal; provided, however, that the Company shall
not enter into an Acquisition Agreement unless the Company complies with Section
5.2(d). Any such withdrawal, modification or change of the recommendation of the
Company Board of Directors, the approval or recommendation or proposed approval
or recommendation of any Superior Proposal or the entry by the Company into any
Acquisition Agreement shall not change the approval of the Company Board of
Directors for purposes of causing any state takeover statute or other state law
to be applicable to the Transactions (including each of the Merger and the
Voting Agreement).
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(d) The Company may terminate this Agreement and
enter into an Acquisition Agreement, provided that, prior to any such
termination, (i) the Company has provided Parent written notice that it intends
to terminate this Agreement pursuant to this Section 5.2(d), identifying the
Superior Proposal and delivering a copy of the Acquisition Agreement for such
Superior Proposal in the form to be entered into, (ii) within a period of five
full business days following the delivery of the notice referred to in clause
(i) above, Parent does not propose adjustments in the terms and conditions of
this Agreement (and the Company shall have caused its financial and legal
advisors to negotiate with Parent in good faith such proposed adjustments in the
terms and conditions of this Agreement) which the Company Board of Directors
determines in its good faith judgment (after receiving the advice of its
financial advisor) to be as favorable to the Company's stockholders as such
Superior Proposal, and (iii) at least five full business days after the Company
has provided the notice referred to in clause (i) above, the Company delivers to
Parent (A) a written notice of termination of this Agreement pursuant to this
Section 5.2(d) and (B) a wire transfer of immediately available funds in the
amount of the Termination Fee.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Notification of Certain Matters. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (a) the occurrence or non-occurrence of any event whose occurrence
or non-occurrence, as the case may be, could reasonably be expected to cause any
condition set forth in Article VII to not be satisfied at any time from the date
hereof to the Effective Time and (b) any material failure of the Company, the
Purchaser or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 6.1
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice or the representations or warranties of the parties
or the conditions to the obligations of the parties hereto.
Section 6.2 Access; Confidentiality. From the date
hereof until the Effective Time, upon reasonable notice and subject to the terms
of the Confidentiality Agreement, the Company shall (and shall cause each of the
Company Subsidiaries to) afford to the officers, employees, accountants,
counsel, financing sources and other representatives of Parent and the
Purchaser, reasonable access, during normal business hours to all of its
officers, employees, agents, properties, books, Agreements and records and,
during such period, the Company shall (and shall cause each of the Company
Subsidiaries to) furnish promptly to Parent and the Purchaser (a) a copy of each
report, schedule, registration statement and other document filed by it pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent or the Purchaser may
reasonably request. Parent and the Purchaser will hold any information obtained
pursuant to this Section 6.2 in accordance with the terms of the Confidentiality
Agreement. No investigation pursuant to this Section 6.2 shall affect any
representation or warranty made by the parties hereunder.
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Section 6.3 Publicity. Each of Parent and the Company
shall consult with the other regarding their initial press releases with respect
to the execution of this Agreement. Thereafter, so long as this Agreement is in
effect, neither the Company nor Parent, nor any of their respective affiliates,
shall issue any press release or other announcement with respect to the
Transactions or this Agreement without the prior consent of the other party
(such consent not to be unreasonably withheld), except as such press release or
other announcement may be required by law or the rules of a national securities
exchange or trading market, in which case the party required to make the release
or announcement shall use its best efforts to provide the other party with a
reasonable opportunity to review and comment on such release or announcement in
advance of its issuance and except any press release or other announcement
regarding an Acquisition Proposal or a Superior Proposal, as to which prior
consultation shall not be required.
Section 6.4 Insurance and Indemnification.
(a) All rights to indemnification existing in
favor of any director or officer of the Company or any Company Subsidiary as
provided in their respective Certificates or Articles of Incorporation or Bylaws
or in an agreement between any such director or officer and the Company or any
Company Subsidiary, which agreement is disclosed on Section 6.4(a) of the
Company Disclosure Schedule, shall survive the Merger and shall continue in full
force and effect for a period of six (6) years from the Effective Time; provided
that in the event any claim or claims are asserted or made within such six (6)
year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
(b) Parent and the Surviving Corporation shall
use their respective reasonable best efforts to maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
not less than six (6) years after the Effective Time; provided, however, that
Parent may substitute therefor policies of substantially equivalent coverage and
amounts containing terms no less favorable to such former directors or officers;
provided, further, that if the existing D&O Insurance expires or is terminated
or cancelled during such period, then Parent or the Surviving Corporation shall
use their respective reasonable best efforts to obtain substantially similar D&O
Insurance; provided further, however, that in no event shall Parent or Purchaser
be required to pay aggregate premiums for insurance under this Section 6.4(b) in
excess of 200% of the current annual premiums paid by the Company for such
insurance (which premiums the Company represents and warrants to be
approximately $180,000 in the aggregate); provided further, however, that prior
to the Effective Time, the Company, with the consent of Parent (which consent
shall not be unreasonably withheld), may purchase insurance for such six (6)
year period on a prepaid non-cancelable basis, so long as the premium for such
three-year period is not in excess of 200% of the per annum premium that the
Company currently pays for its existing policy of directors' and officers'
liability insurance, in which case, Parent shall have no obligations to maintain
such insurance.
Section 6.5 Third Party Standstill Agreements. During
the period from the date of this Agreement through the Effective Time, the
Company shall enforce and shall not terminate, amend, modify or waive any
standstill provision of any confidentiality or standstill agreement between the
Company and other parties entered into prior to the date hereof.
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Section 6.6 Reasonable Best Efforts. Upon the terms and
subject to the conditions of this Agreement, Parent, the Purchaser and the
Company agree to use their respective reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws to consummate and make effective the
Transactions as promptly as practicable including, but not limited to, using
their respective reasonable best effort to obtain any requisite approvals,
consents, orders, exemptions or waivers by any third Person or Governmental
Entity in connection with the Transactions and to fulfill the conditions to the
Merger.
Section 6.7 State Takeover Laws. If any state takeover
statute becomes or is deemed to become applicable to the Company or the
Transactions, then the Company Board of Directors shall take all actions
necessary to render such statutes inapplicable to the foregoing.
Section 6.8 Employee Benefits.
(a) For purposes of all employee benefit plans,
programs and agreements maintained by or contributed to by Parent and its
Subsidiaries (including, after Closing, the Surviving Corporation), Parent
shall, or shall cause its Subsidiaries to, cause each such plan, program or
arrangement to treat the service with the Company or its Subsidiaries
immediately prior to the Closing of any Company Employee (to the same extent
such service is recognized under analogous plans, programs or arrangements of
the Company or its affiliates prior to the closing) as service rendered to
Parent or its Subsidiaries, as the case maybe, for all purposes; provided,
however, that (i) such crediting of service shall not operate to duplicate any
benefit or the funding of such benefit under any plan, or (ii) require the
crediting of past service for benefit accrual purposes under any defined benefit
pension plan. Parent will cause any and all pre-existing condition limitations,
eligibility waiting periods under any group health plans of Parent in which such
Company Employee and their eligible dependents will participate to be waived.
For purposes of this Agreement, a "Parent Plan" shall mean such employee benefit
plan, as defined in Section 3(3) of ERISA, or a nonqualified employee benefit or
deferred compensation plan, stock option, bonus or incentive plan or other
employee benefit or fringe benefit program, that may be in effect generally for
employees of Company and the Company Subsidiaries from time to time.
(b) Neither this Section 6.8 nor any other
provision of this Agreement shall (i) limit the ability or right of the Company
and its Subsidiaries to terminate the employment of any of their respective
employees on or after the Closing Date (subject to any rights of any such
employees pursuant to any contract, agreement, arrangement, policy, plan or
commitment) or (ii) limit the ability or right of Parent, the Company or any of
their Subsidiaries on or after the Closing Date to modify, amend or terminate
any Plan or any other employee benefit plan, program or agreement they may
maintain or establish or to establish any such plan, program or agreement.
(c) The Company shall not, during the period
prior to the Effective Time, make any written or other communication to its
employees relating to employee,
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compensation or benefits without the prior approval of Parent, which approval
shall not be unreasonably withheld.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations to
Effect the Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of each of
the following conditions, any and all of which may be waived in whole or in part
by Parent, the Purchaser and the Company, as the case may be, to the extent
permitted by applicable law:
(a) The Merger and this Agreement shall have
been approved and adopted by the requisite vote of the holders of the Shares, to
the extent required pursuant to the requirements of the Certificate of
Incorporation, the Bylaws of the Company, and the DGCL;
(b) No statute, rule, regulation, order or
injunction shall have been enacted, promulgated, or issued by any Governmental
Entity which restrains, enjoins, or otherwise prohibits the consummation of the
Merger, and no Governmental Entity shall have instituted any proceeding which
continues to be pending seeking such law or order; and
(c) All required consents, approvals, waivers
and authorizations of, or declarations or filings with, and all expirations of
waiting periods (including under the HSR Act) required from, any Governmental
Entity which are necessary for the consummation of the Merger, shall have been
filed, have occurred or been obtained and all of the foregoing shall be in full
force and effect.
Section 7.2 Conditions to the Obligations of the Purchaser and
Parent. The respective obligations of the Purchaser and Parent to effect the
Merger shall be subject to the satisfaction on or prior to the Closing Date of
each of the following additional conditions, any or all of which may be waived
in whole or part by the Parent and the Purchaser to the extent permitted by
applicable law:
(a) The representations or warranties of the
Company contained in this Agreement shall be true and correct (without giving
effect to any qualifications as to "materiality" or Company Material Adverse
Effect or Company Material Adverse Change set forth therein), in each case, when
made and on and as of the Closing Date as though made on and as of the Closing
Date (except that any representations or warranties that speak as of a specified
date need only be true and correct as of such specified date) except where the
failure of such representations and warranties to be so true and correct
(without giving any effect to any qualification as to "materiality" or Company
Material Adverse Effect or Company Material Adverse Change set forth therein)
would not be reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
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(b) The Company shall have performed or complied
in all material respects with all agreements, covenants and conditions contained
herein required to be performed or complied with by it prior to or at the time
of the Closing.
(c) Intentionally deleted.
(d) Since the date of this Agreement, there
shall have occurred no event, condition or circumstance which has had, or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(e) The Company shall have obtained all
consents, approvals, waivers and authorizations of any Person required in
connection with or as a result of the Merger, which, if not obtained, would
reasonably be likely to have a Company Material Adverse Effect. The Company
shall further have obtained the required consents, approvals or waivers
described in Section 7.2(e) of the Company Disclosure Schedule.
(f) There shall not be any action taken, or in
effect any applicable law or order of, any Governmental Entity, which imposes
any condition or restriction on the Surviving Corporation or its Subsidiaries or
Parent and its Subsidiaries that would reasonably be expected to have a Parent
Material Adverse Effect after giving effect to the Merger. As used in the
Agreement, ("Parent Material Adverse Effect") means any change, event or effect,
as the case may be, that is materially adverse to the business, operations,
properties (including intangible properties), condition (financial or
otherwise), results of operations, prospects, assets or liabilities of Parent
and its Subsidiaries, taken as a whole.
(g) The number of Dissenting Shares shall
constitute no greater than 10% of the total number of Shares outstanding
immediately prior to the Effective Time.
(h) The Company shall have delivered to Parent a
certificate, dated the Closing Date, signed by the President of the Company (but
without personal liability thereto), certifying as to the fulfillment of the
conditions specified in Sections 7.2(a) through 7.2(d) and Section 7.2(g).
Section 7.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Transactions are subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions, any or all of which may be waived in whole or in part by the Company
to the extent permitted by applicable law:
(a) The representations and warranties of the
Purchaser and Parent contained herein or otherwise required to be made after the
date hereof in a writing expressly referred to
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herein by or on behalf of the Purchaser Group pursuant to this Agreement, to the
extent qualified by "materiality" or Parent Material Adverse Effect, shall have
been true and, to the extent not qualified by "materiality" or Parent Material
Adverse Effect, shall have been true in all material respects, in each case,
when made and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a specified
date, which need be true, or true in all material respects, as the case may be,
only as of the specified date).
(b) Parent and Purchaser shall have performed or
complied in all material respects with all agreements and conditions contained
herein required to be performed or complied with by it prior to or at the time
of the Closing and shall have caused Purchaser to perform or comply in all
material respects with all agreements and conditions contained herein required
to be performed or complied with by Purchaser prior to or at the time of the
Closing.
(c) Parent shall have delivered to the Company a
certificate, dated the Closing Date, signed by the President of Parent (but
without personal liability thereto), certifying as to the fulfillment of the
conditions specified in Sections 7.3(a) and 7.3(b).
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be
terminated and the Transactions may be abandoned at anytime before the Effective
Time, whether before or after stockholder approval thereof:
(a) By mutual written consent of Parent and the
Company;
(b) By either Parent or the Company (i) if,
prior to the Effective Time, a court of competent jurisdiction or other
Governmental Entity shall have issued an order, decree or ruling or taken any
other action, in each case permanently restraining, enjoining or otherwise
prohibiting any of the Transactions (including each of the Merger and the Voting
Agreement), or (ii) if the Merger has not been consummated by August 31, 2004;
provided, however, that the right to terminate this Agreement pursuant to clause
(ii) of 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 be consummated by August 31, 2004;
(c) By Parent, at any time prior to the
Effective Time, if (i) the Company Board of Directors or any committee thereof
shall have withdrawn, modified, or changed its recommendation in respect of this
Agreement, or the Merger in a manner adverse to the Transactions, to Parent or
to the Purchaser, (ii) the Company Board of Directors or any committee thereof
shall have recommended or approved, or taken a neutral position with respect to,
any Acquisition Proposal, (iii) the Company Board of Directors or any committee
thereof shall have resolved to do any of the foregoing, (iv) the Company Board
of Directors or any committee thereof shall have failed to affirm its
recommendation in respect of the Transactions within five days of a request to
do so by Parent, (v) the Company shall have violated or breached
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any of its obligations under Section 5.2, (vi) the Company shall have breached
any representation or warranty contained in this Agreement which (A) would give
rise to the failure of a condition set forth in Section 7.2(a) and (B) cannot be
or has not been cured, in all material respects, within 10 days after the giving
of written notice to the Company, (vii) the Company shall have breached any
covenant or other agreement contained in this Agreement which (A) would give
rise to the failure of a condition set forth in Section 7.2(b) and (B) cannot be
or has not been cured, in all material respects, within 10 days after the giving
of written notice to the Company, or (viii) the Company Required Vote is not
obtained at the Company Stockholders Meeting and at or prior to the Company
Stockholders Meeting any party to the Voting Agreement (other than Purchaser and
Parent) shall have breached or failed to perform any of its covenants or
agreements under such agreement or breached any of its representations and
warranties in such agreement;
(d) By the Company, at any time prior to the
Effective Time, (i) pursuant to and in compliance with Section 5.2(d), or (ii)
if Parent or the Purchaser shall have breached in any material respect any of
the representations, warranties, covenants or agreements contained in this
Agreement and such breach cannot be or has not been cured, in all material
respects, within 10 days after the giving of written notice to Parent; or
(e) By Parent or the Company, if the Required
Company Vote shall not have been obtained upon a vote taken thereon at the
Company Stockholders Meeting and, in either case, at or prior to the Company
Stockholders Meeting, no party to the Voting Agreement (other than Purchaser and
Parent) shall have breached or failed to perform any of its covenants or
agreements under such agreement or breached any of its representations and
warranties in such agreement.
Section 8.2 Notice of Termination; Effect of
Termination.
(a) In the event of the termination of this
Agreement as provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void (except for Sections 9.3, 9.4, 9.5, 9.6, 9.7, 9.8 and 9.12 which shall
survive such termination) and there shall be no liability on the part of Parent,
the Purchaser or the Company, except (i) as set forth in Sections 6.2 and 8.2,
and (ii) nothing herein shall relieve any party from liability for any breach of
this Agreement.
(b) If (i) Parent shall have terminated this
Agreement pursuant to Section 8.1(c)(other than under Section 8.1(c)(vi)), (ii)
Parent shall have terminated this Agreement pursuant to Section 8.1(c)(vi)
because of a willful breach of the representations and warranties of the Company
contained in this Agreement, or (iii) the Company shall have terminated this
Agreement pursuant to Section 8.1(d)(i), then the Company shall pay to Parent a
termination fee of $2,000,000 (the "Termination Fee"). The Company shall pay the
Termination Fee (1) concurrently with such termination in the case of a
termination pursuant to Section 8.1(d)(i) and (2) within two business days after
such termination in the case of a termination pursuant to Section 8.1(c).
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(c) If (i) either Parent or the Company shall
have terminated this Agreement pursuant to Section 8.1(b)(ii) or Section 8.1(e),
and (ii) following the date hereof and prior to such termination there shall
have been an Acquisition Proposal publicly announced or otherwise communicated
to the senior management or Board of Directors of the Company, then the Company
shall pay to Parent 60% of the Termination Fee concurrently with such
termination; and if (iii) within one year following the date of termination of
this Agreement, the Company enters into a definitive agreement or letter of
intent relating to any Acquisition Proposal, then the Company shall pay to
Parent the remaining 40% of the Termination Fee concurrently with the execution
of such definitive agreement or letter of intent.
(d) If Parent shall have terminated this
Agreement pursuant to Section 8.2(c)(vi) and Parent is not otherwise entitled to
the Termination Fee or any portion thereof as provided above, then the Company
shall pay Parent the amount of Parent and Purchaser's documented expenses
(including, without limitation, attorneys and accountants fees) incurred in
connection with this Agreement or the proposed Transactions, which expenses
shall not exceed $700,000 in the aggregate, within two (2) business days
following Parent's delivery of documentation of such expenses.
(e) The Termination Fee (or any part thereof)
and any expenses payable under Section 8.2(d) shall be paid by wire transfer of
immediately available funds to such account as Parent may designate in writing
to the Company.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to
applicable law and as otherwise provided herein, this Agreement may be amended,
modified and supplemented in any and all respects, whether before or after any
vote of the stockholders of the Company contemplated hereby, by written
agreement of the parties hereto, by action taken by their respective Boards of
Directors, but, after the approval of this Agreement by the stockholders, no
amendment shall be made which by law requires further approval by such
stockholders without obtaining 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 9.2 Non-survival of Representations and
Warranties. None of the representations and warranties in this Agreement or in
any schedule, instrument or other document delivered pursuant to this Agreement
shall survive the Effective Time.
Section 9.3 Expenses. All fees, costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such fees, costs and expenses.
Section 9.4 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally, telecopied (which is confirmed) or sent by a nationally
recognized overnight courier service, such as United Parcel Service
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(providing proof of delivery), 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 the Purchaser, to:
SHPS Holdings, Inc.
ATTN: Chief Financial Officer
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxxx Xxxx LLC
ATTN: Xxxxx X. Xxxxxxx, Xx.
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
and
(b) if to the Company, to:
Landacorp, Inc.
0000 Xxxxxxx Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
Section 9.5 Interpretation. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include", "includes"
or "including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term "affiliates"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act. The words
describing the singular number shall include the plural and vice versa. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted
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jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement. Headings of the Articles and Sections of this Agreement, the
Table of Contents and the Index of Defined Terms are for the convenience of the
parties only and shall be given no substantive or interpretive effect
whatsoever.
Section 9.6 Jurisdiction. Each of Parent, the Purchaser
and the Company hereby expressly and irrevocably submits to the exclusive
personal jurisdiction of the United States District Court for the District of
Delaware and to the jurisdiction of any other competent court of the State of
Delaware (collectively, the "Delaware Courts"), preserving, however, all rights
of removal to such federal court under 28 U.S.C. Section 1441, in connection
with all disputes arising out of or in connection with this Agreement or the
transactions contemplated hereby and agrees not to commence any litigation
relating thereto except in such courts. Each such party hereby waives the right
to any other jurisdiction or venue for any litigation arising out of or in
connection with this Agreement or the transactions contemplated hereby to which
any of them may be entitled by reason of its present or future domicile.
Notwithstanding the foregoing, each such party agrees that each of the other
parties shall have the right to bring any action or proceeding for enforcement
of a judgment entered by the Delaware Courts in any other court or jurisdiction.
Section 9.7 Service of Process. Each of Parent, the
Purchaser and the Company irrevocably consents to the service of process outside
the territorial jurisdiction of the courts referred to in Section 9.6 hereof in
any such action or proceeding by mailing copies thereof by registered United
States mail, postage prepaid, return receipt requested, to its address as
specified in or pursuant to Section 9.4 hereof. However, the foregoing shall not
limit the right of a party to effect service of process on the other party by
any other legally available method.
Section 9.8 Specific Performance. Each of Parent, the
Purchaser and the Company acknowledges and agrees that in the event of any
breach of this Agreement, each non-breaching party would be irreparably and
immediately harmed and would not be made whole by monetary damages. It is
accordingly agreed that the parties hereto (a) will waive, in any action for
specific performance, the defense of adequacy of a remedy at law and (b) shall
be entitled, in addition to any other remedy to which they may be entitled at
law or in equity, to compel specific performance of this Agreement.
Section 9.9 Counterparts. This Agreement maybe executed
manually or by facsimile by the parties hereto, in any number of counterparts,
each of which shall be considered one and the same agreement and shall become
effective when a counterpart hereof shall have been signed by each of the
parties and delivered to the other parties.
Section 9.10 Entire Agreement; No Third-Party
Beneficiaries. This Agreement, the Confidentiality Agreement and the Voting
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof (provided that the provisions
of this Agreement shall supersede any conflicting provisions of the
Confidentiality Agreement). Except as provided
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in Section 6.4, nothing in this Agreement, express or implied, is intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
Section 9.11 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of being enforced
by rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Transactions is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the Transactions are fulfilled to the extent possible.
Section 9.12 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law thereof.
Section 9.13 Assignment. This Agreement shall not be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties, except that the
Purchaser may assign any or all of its rights, interests and obligations
hereunder to Parent, one or more direct or indirect wholly owned Subsidiaries of
Parent, or a combination thereof. Subject to the foregoing, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
permitted assigns.
Section 9.14 No Waiver. No waiver by any party to this
Agreement at any time of a breach by any other party of any provision of this
Agreement to be performed by such other party shall be deemed a waiver of any
similar or dissimilar provisions of this Agreement at the same or any prior or
subsequent time.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
SHPS HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Corporate VP and CFO
SONIC ACQUISITION CORP.
By /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Corporate VP and CFO
LANDACORP, INC.
By /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President and CEO
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