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EXHIBIT 2.1
AGREEMENT
and
PLAN OF MERGER
by and among
TUMBLEWEED COMMUNICATIONS CORP.,
MAIZE ACQUISITION SUB, INC.
and
INTERFACE SYSTEMS, INC.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
June 28, 2000, by and among Tumbleweed Communications Corp., a Delaware
corporation ("Parent"), Maize Acquisition Sub, Inc., a Delaware corporation
and a direct wholly-owned subsidiary of Parent ("Sub"), and Interface
Systems, Inc., a Michigan corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent and Sub have approved,
and deem it advisable and in the best interests of their respective stockholders
to consummate, a strategic business combination between the Company and Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, having determined
that such combination is desirable, has approved the transactions contemplated
by this Agreement and the Ancillary Agreements (as defined below);
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WHEREAS, as a condition and inducement to Parent's and Sub's
willingness to enter into this Agreement and incur the obligations set forth
herein, concurrently with the execution and delivery of this Agreement, (i)
Parent and each of the directors, executive officers and other designated
employees of the Company have entered into a Voting Agreement in the form of
Exhibit A hereto (the "Voting Agreements"), pursuant to which, among other
things, such persons agree to vote in favor of approval and adoption of this
Agreement; (ii) the Company and certain key employees of the Company identified
in Schedule B hereto have entered into non-competition agreements (the
"Non-Competition Agreements") in the form of Exhibit B-1 hereto, and employment
agreements (the "Employment Agreements") in the form of Exhibit B-2 hereto, the
effectiveness of which are conditioned upon the consummation of the transactions
contemplated hereby; and (iii) Parent and the Company have entered into an
Option Agreement in the form of Exhibit C hereto (the "Option Agreement"),
pursuant to which, among other things, the Company grants to Parent an option to
purchase newly issued shares of Company Common Stock representing nineteen and
nine-tenths percent (19.9%) of the total outstanding shares of Company Common
Stock (the Voting Agreements, the Non-Competition Agreements, the Employment
Agreements and the Option Agreement are collectively referred to herein as the
"Ancillary Agreements"); and
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger (as defined in Section 1.1 hereof) shall qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder (the
"Code"), and this Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements, and other good and
valuable consideration, set forth herein and in the Ancillary Agreements, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), the Company
and Sub shall consummate a merger (the "Merger") pursuant to which (a) Sub shall
be merged with and into the Company and the separate corporate existence of Sub
shall thereupon cease, (b) the Company shall be the successor or surviving
corporation (the "Surviving Corporation") in the Merger and shall continue to be
governed by the laws of the State of Michigan and (c) the separate corporate
existence of the Company, with all its rights, privileges, immunities, powers
and franchises, shall continue unaffected by the Merger.
Pursuant to the Merger, (a) the Articles of Incorporation set forth
in the Certificate of Merger (as defined in Section 1.2 hereof), shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation, and (b) the By-laws, in
the form of Annex A hereto, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, such
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Articles of Incorporation and such By-laws. The Merger shall have the effects
set forth in the Michigan Business Corporation Act (the "MBCA") and the Delaware
General Corporation Law (the "DGCL").
Section 1.2 Effective Time. Parent, Sub and the Company will cause
(i) a certificate of merger (the "Certificate of Merger") in the form of Exhibit
D-1 hereto, to be filed on the Closing Date (as defined in Section 1.3 hereof)
(or on such other date as Parent and the Company may agree) with the Department
of Consumer and Industry Services, Corporations Bureau, of the State of Michigan
(the "Michigan Department") as provided in the MBCA, and (ii) a certificate of
merger (the "Delaware Certificate of Merger") in the form of Exhibit D-2 hereto,
to be filed on 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
on which the Certificate of Merger and any other documents necessary to effect
the Merger in accordance with the MBCA are duly filed with the Michigan
Department (the "Merger Filing") or such time as is agreed upon by the parties
and specified in the Certificate of Merger, and such time is hereinafter
referred to as the "Effective Time."
Section 1.3 Closing. The closing of the Merger (the "Closing") will
take place at 8:00 a.m., local time, on a date to be specified by the parties,
which shall be no later than the second business day after satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000
Xxxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or such other date or place as
agreed to in writing by the parties hereto.
Section 1.4 Directors and Officers of the Surviving Corporation. The
directors and officers of the Sub at the Effective Time shall, from and after
the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
By-laws.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares.
(a) Each share of common stock, no par value per share
("Company Common Stock"), of the Company issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled pursuant to
Section 2.1(c) hereof) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive .264 (the
"Exchange Ratio") of a fully paid and nonassessable share (the "Merger
Consideration") of common stock, par value $.001 per share, of Parent (the
"Parent Common Stock").
(b) Each share of common stock, par value $.001 per share, of
Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Parent, be converted
into one fully paid and nonassessable share of common stock, no par value per
share, of the Surviving Corporation.
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(c) Any shares of Company Common Stock that are owned by
Parent, Sub or any other wholly owned Subsidiary (as defined in Section 3.1) of
Parent shall be canceled and retired and shall cease to exist and no Parent
Common Stock or other consideration shall be delivered in exchange therefor.
(d) On and after the Effective Time, holders of certificates
(the "Certificates"), which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock, shall cease to have any rights as
shareholders of the Company, except the right to receive, subject to Section 2.5
hereof, the Merger Consideration (and cash in lieu of any fractional share as
contemplated by Section 2.3) for each share of Company Common Stock held by
them.
Section 2.2 Surrender of Certificates. At or promptly after the
Effective Time, Parent shall make available to Equiserve L.P., or a bank
reasonably acceptable to the Company (the "Exchange Agent"), in trust for the
benefit of the holders of shares of Company Common Stock for exchange in
accordance with this Article II, (i) cash in an amount sufficient to pay cash in
lieu of fractional shares pursuant to Section 2.3, and (ii) certificates
representing the aggregate number of shares of Parent Common Stock issuable
pursuant to Section 2.1 hereof. Promptly after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Certificate or Certificates a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
Parent Common Stock and cash in lieu of fractional shares, if applicable. Upon
surrender of a Certificate or Certificates to the Exchange Agent, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration for each
share of Company Common Stock formerly represented by such Certificate or
Certificates, and the Certificate(s) so surrendered shall forthwith be canceled.
Until surrendered as contemplated by this Article II, from and after the
Effective Time each Certificate shall be deemed to represent only the right to
receive the Merger Consideration (and cash in lieu of any fractional share as
contemplated by Section 2.3) for each share of Company Common Stock formerly
represented by such Certificate, and shall not evidence any interest in, or any
right to exercise the rights of a stockholder of, Parent. If a certificate
representing Parent Common Stock is to be issued or a cash payment in lieu of
fractional share interests is to be made to a person other than the one in whose
name the Certificate surrendered in exchange therefor is registered, it shall be
a condition to such issuance or payment that such Certificate be properly
endorsed (or accompanied by an appropriate instrument of transfer) and
accompanied by evidence that any applicable stock transfer taxes have been paid
or provided for.
Section 2.3 No Fractional Shares. (a) No certificates representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests shall not entitle
the owner thereof to vote or to any other rights of a stockholder of Parent. In
lieu of such fractional shares, any
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holder of Company Common Stock who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock ( after aggregating all shares of
Parent Common Stock issuable to such holder) shall, upon surrender of such
holder's Certificate or Certificates, be paid in cash the dollar amount (rounded
to the nearest whole cent), without interest, determined by multiplying such
fraction by the closing price of a share of Parent Common Stock on Nasdaq Stock
Market on the date the Merger became effective.
(b) As promptly as practicable following the Effective Time,
the Exchange Agent shall deliver the Merger Consideration, whether in the form
of Parent Common Stock or cash in lieu of fractional shares, or both to each
holder of a Certificate or Certificates which have been surrendered.
Section 2.4 No Dividends. No dividends or other distributions
declared or made after the Effective Time with respect to shares of Parent
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Common Stock
represented thereby until the holder of such Certificate shall surrender such
Certificate. Dividends or other distributions with a record date after the
Effective Time payable in respect of shares of Parent Common Stock held by the
Exchange Agent shall be held in trust for the benefit of such holders of
unsurrendered Certificates. Following surrender of any previously unsurrendered
Certificate, there shall be paid to the holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and (ii) at the date of
payment of any dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender, the amount of such dividends or other distributions payable with
respect to such whole shares of Parent Common Stock.
Section 2.5 Return to Parent. Any shares of Parent Common Stock made
available to the Exchange Agent and not exchanged for Certificates within six
(6) months after the Effective Time and any dividends and distributions held by
the Exchange Agent for payment or delivery to the holders of unsurrendered
Certificates formerly representing shares of Company Common Stock and unclaimed
at the end of such six (6) month period shall be redelivered or repaid by the
Exchange Agent to Parent, after which time any holder of Certificates who has
not theretofore delivered or surrendered such Certificates to the Exchange
Agent, subject to applicable law, shall look as a general creditor only to
Parent for payment of the Merger Consideration, cash in lieu of fractional share
interests, and any such dividends or distributions with respect to its shares of
Parent Common Stock. Notwithstanding the foregoing, none of Parent, the Exchange
Agent, the Surviving Corporation or any other party shall be liable to any
holder of a Certificate formerly representing shares of Company Common Stock for
any Merger Consideration, cash in lieu of fractional share interests or
dividends or distributions properly delivered to a public official pursuant to
applicable property, escheat or similar laws. If Certificates are not
surrendered prior to two (2) years after the Effective Time, unclaimed Merger
Consideration (or funds with respect to fractional shares) payable with respect
to such shares of Company Common Stock shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
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Section 2.6 Company Option Plans. At the Effective Time, all options
(the "Company Options") then outstanding, whether or not vested and exercisable,
under the Company's 1982 Stock Option Plan, 1992 Stock Option Plan, 1993 Stock
Option Plan for Non-Employee Directors and the Company's Employee Stock Purchase
Plan, in each case as in effect on the date hereof (collectively, the "Company
Option Plans"), shall be assumed by Parent. Each Company Option assumed by
Parent, other than Company Options issued pursuant to the Company's Employee
Stock Purchase Plan, shall be subject to, and exercisable upon, the same terms
and conditions as under the applicable Company Option Plan and the applicable
option agreement issued thereunder, except that (a) each assumed Company Option
shall be exercisable for, and represent the right to acquire, that number of
shares of Parent Common Stock (rounded down to the nearest whole share) equal to
(i) the number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio;
and (b) the option price per share of Parent Common Stock subject to each
assumed Company Option shall be an amount equal to (i) the option price per
share of Company Common Stock subject to such Company Option in effect
immediately prior to the Effective Time divided by (ii) the Exchange Ratio
(rounded up to the nearest whole cent). The Company represents and warrants that
each of the foregoing actions may be taken and effected by the Company without
the consent of any holder of Company Options. Each assumed purchase right under
the Company's Employee Stock Purchase Plan shall continue to have, and be
subject to, the terms and conditions set forth in the Company's Employee Stock
Purchase Plan and the documents governing the assumed purchase right, except
that the purchase price of such shares of Parent Common Stock for each
respective purchase date under each assumed purchase right shall be the lower of
(i) the quotient determined by dividing eighty-five percent (85%) of the fair
market value of Company Common Stock on the offering date of each assumed
offering period by the Exchange Ratio or (ii) eighty-five percent (85%) of the
fair market value of the Parent Common Stock on each purchase date of each
assumed offering period occurring after the Effective Time (with the number of
shares rounded to the nearest whole share and the purchase price rounded to the
nearest whole cent). The assumed purchase rights shall be exercised at such
times following the Effective Time as set forth in the Company's Employee Stock
Purchase Plan and each participant shall, accordingly, be issued shares of
Parent Common Stock at such times pursuant to the Company's Employee Stock
Purchase Plan. The Company's Employee Stock Purchase Plan shall terminate with
the exercise of the last assumed purchase right, and no additional purchase
rights shall be granted under the Company's Employee Stock Purchase Plan
following the Effective Time. Parent agrees that from and after the Effective
Time, employees of the Surviving Corporation may participate in Parent's
employee stock purchase plan, subject to the terms and conditions of such plan.
The adjustment provided herein with respect to Company Options shall
be and is intended to be effected in a manner which is consistent with Section
424(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
duration, vesting schedule, exercisability and other terms of each Company
Option immediately after the Effective Time shall be the same as the
corresponding terms in effect immediately before the Effective Time, except that
all references to Company in the Company Option Plans (and the
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corresponding references in the option agreement documenting such option) shall
be deemed to be references to Parent. Except as set forth in Section 3.2(d) of
the Disclosure Schedule (as defined in Article III hereof), vesting of Company
Options shall not be accelerated as a result of the Merger. Continuous
employment with the Company or its Subsidiaries shall be credited to the
optionee for purposes of determining the vesting of all assumed Company Options
after the Effective Time. As soon as reasonably practicable, but in no event
later than thirty (30) days after the Effective Time, Parent will issue to each
holder of an assumed Company Option notice of the foregoing assumption by
Parent.
Parent shall file with the SEC, no later than thirty (30) business
days after the Effective Time, a Registration Statement on Form S-8 relating to
the shares of Parent Common Stock issuable with respect to the Company Options
assumed by Parent in accordance with this Section 2.6.
Section 2.7 Company Warrants. At the Effective Time, all warrants to
purchase Company Common Stock (the "Company Warrants") then outstanding, whether
or not exercisable, shall be assumed by Parent. Each Company Warrant assumed by
Parent shall be subject to, and exercisable upon, the same terms and conditions
as under the applicable warrant agreement issued thereunder, except that (a)
each assumed Company Warrant shall be exercisable for, and represent the right
to acquire, that number of shares of Parent Common Stock (rounded down to the
nearest whole share) equal to (i) the number of shares of Company Common Stock
subject to such Company Warrant immediately prior to the Effective Time
multiplied by (ii) the Exchange Ratio; and (b) the exercise price per share of
Parent Common Stock subject to each assumed Company Warrant shall be an amount
equal to (i) the price per share of Company Common Stock subject to such Company
Warrant in effect immediately prior to the Effective Time divided by (ii) the
Exchange Ratio (rounded up to the nearest whole cent). The Company represents
and warrants that each of the foregoing actions may be taken and effected by the
Company without the consent of any holder of Company Warrants.
Section 2.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective Time,
certificates formerly representing shares of Company Common Stock are presented
to the Surviving Corporation, they shall be canceled and exchanged for cash
and/or certificates representing Parent Common Stock pursuant to this Article
II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure schedule prepared and signed
by the Company and delivered to Parent simultaneously with the execution hereof
(the "Disclosure Schedule"), the Company represents and warrants to Parent and
Sub all of the statements contained in this Article III. Each exception set
forth in the Disclosure Schedule and each other response to this Agreement set
forth in the Disclosure Schedule is identified by reference to, or has been
grouped under a heading referring to, a specific individual section of this
Agreement and relates only to such section, except to the extent that one
portion of the Disclosure Schedule specifically refers to another portion
thereof, identifying such other portion by section reference or similar specific
cross reference.
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Section 3.1 Organization. Each of the Company and its Subsidiaries
is a corporation or other entity duly organized, validly existing, duly
qualified or licensed to do business and in good standing under the laws of the
jurisdiction of its incorporation or organization and in each jurisdiction in
which the nature of the business conducted by it makes such qualification or
licensing necessary, and has all requisite corporate or other power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not have a material adverse effect
on the Company and its Subsidiaries. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding such
partnerships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used in
this Agreement, any reference to any event, change or effect having a "material
adverse effect" on or with respect to any entity (or group of entities taken as
a whole) means such event, change or effect, individually or in the aggregate
with such other events, changes, or effects, which is materially adverse to the
financial condition, businesses, results of operations, assets, liabilities,
properties or prospects of such entity (or, if used with respect thereto, of
such group of entities taken as a whole), it being understood that none of the
following shall be deemed by itself or by themselves, either alone or in
combination, to constitute a material adverse effect: (i) a change in the market
price or trading volume of Company Common Stock or Parent Common Stock, as the
case may be, (ii) conditions affecting the economy of the United States of
America as a whole, (iii) conditions affecting generally the industry in which
Parent or the Company, as applicable, operates, or (iv) changes after the date
hereof in laws or regulations applicable to Parent or the Company, as the case
may be. Section 3.1 of the Disclosure Schedule, sets forth a complete list of
the names, jurisdiction of incorporation or other formation and capitalization
of each of the Company's Subsidiaries and the jurisdictions in which the Company
and each of its Subsidiaries are qualified to do business.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
25,000,000 shares of Company Common Stock. As of the date hereof, (i) 4,719,675
shares of Company Common Stock were issued and outstanding, (ii) 1,275,000
shares of Company Common Stock were reserved for issuance upon the exercise of
outstanding Company Options pursuant to the Company Option Plans and (iii) no
shares of Company Common Stock were reserved for issuance upon the exercise of
Company Warrants. All of the issued and
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outstanding shares of Company Common Stock are validly issued, fully paid and
nonassessable, were issued in compliance with applicable law, and are not
subject to any preemptive or similar rights.
(b) Except as set forth in Section 3.2(b) of the Disclosure
Schedule and other than pursuant to the Option Agreement, there are not now, and
at the Effective Time there will not be, any (i) outstanding right,
subscription, warrant, call, option or other agreement or arrangement of any
kind (collectively, "Rights") to purchase or otherwise to receive from the
Company or any of its Subsidiaries any of the outstanding authorized but
unissued or treasury shares of the capital stock or any other security of the
Company or any of its Subsidiaries, (ii) outstanding security of any kind
convertible into or exchangeable for such capital stock or (iii) voting trust or
other agreement or understanding to which the Company or any of its Subsidiaries
is a party or is bound with respect to the voting of the capital stock of the
Company or any of its Subsidiaries, and, in the case of each of clause (i), (ii)
and (iii), there is not now any agreement, contract, commitment or arrangement
to which the Company or any of its Subsidiaries is a party or is bound to issue
or enter into, as applicable, any of the foregoing.
(c) Each outstanding share of capital stock of each Subsidiary
of the Company is duly authorized, validly issued, fully paid and nonassessable
and each such share is owned by the Company, free and clear of any mortgage,
pledge, assessment, security interest, lease, sublease, lien, adverse claim,
levy, charge, option, right of others or restriction (whether on voting, sale,
transfer, disposition or otherwise) or other encumbrance of any kind, whether
imposed by agreement, understanding, law or equity, or any conditional sale
contract, title retention contract or other contract to give or to refrain from
giving any of the foregoing (collectively, "Liens").
(d) Section 3.2(d) of the Disclosure Schedule sets forth a
listing of (i) all outstanding Company Options as of the date hereof, which
schedule shows the portion of each Company Option which is then vested, the
vesting and acceleration provisions thereof, if any, the date upon which each
Company Option expires and whether or not such Company Option is intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code; (ii) all outstanding Company Warrants as of the date hereof, which
schedule shows the portion of each Company Warrant which is exercisable and the
date upon which each Company Warrant expires; and (iii) each outstanding Company
Option and Company Warrant that will accelerate, in whole or in part, pursuant
to its terms as a result of the transactions contemplated hereby, which schedule
summarizes the terms of acceleration pursuant to such Company Option, Company
Warrant or Company Option Plan.
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party and,
subject to obtaining approval and adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock (the "Company Shareholder Approval"), to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Company of this Agreement and the Ancillary Agreements to which the Company is a
party, and the
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consummation by it of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary corporate action on the part
of the Company and, except for obtaining the Company Shareholder Approval, no
other corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby. Each of this Agreement and the Ancillary
Agreements to which it is a party have been duly executed and delivered by the
Company and, assuming each of this Agreement and such Ancillary Agreements
constitutes a valid and binding obligation of the other parties hereto and
thereto, constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(b) The Board of Directors of the Company (the "Company
Board") has duly and validly approved and taken all corporate action required to
be taken by such Company Board for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, and resolved to
recommend that the shareholders of the Company approve and adopt this Agreement.
The Company Shareholder Approval is the only vote of the holders of any class or
series of Company capital stock necessary to approve this Agreement and to
consummate the Merger. The Company has taken all actions necessary with respect
to the entering into of this Agreement and the Ancillary Agreements to which it
is a party, the consummation of the Merger and the other transactions
contemplated by this Agreement and the Ancillary Agreements so as to render
inapplicable to such transactions the restrictions on business combinations
contained in Chapter 7A of the MBCA.
Section 3.4 Consents and Approvals; No Violations. Except as
disclosed in Section 3.4 of the Disclosure Schedule and except for the Company
Shareholder Approval, the Merger Filing, and filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Securities Act and state blue sky laws, neither the execution,
delivery or performance of this Agreement or any Ancillary Agreements by the
Company nor the consummation by the Company of the transactions contemplated
hereby or thereby nor compliance by the Company with any of the provisions
hereof or thereof will (i) conflict with or result in any breach of any
provision of the articles of incorporation or by-laws or similar organizational
documents of the Company or of any of its Subsidiaries, (ii) require any filing
with, or permit, authorization, consent or approval of, any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency (a "Governmental Entity"), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or result in the creation of any lien) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which the Company or any of
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its Subsidiaries is a party or by which any of them or any of their properties
or assets may be bound (a "Company Agreement") or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its Subsidiaries or any of their properties or assets, except in the case of
clauses (ii), (iii) or (iv) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings, or where such
violations, breaches or defaults would not, individually or in the aggregate,
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole, and will not materially impair the ability of the Company to consummate
the transactions contemplated hereby or by the Ancillary Agreements.
Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the Securities and Exchange Commission (the "SEC"), and has
heretofore made available to Parent true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
and its Subsidiaries since June 1, 1995 under the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
have been amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (the "Company Financial
Statements") (a) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act or the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. The
Company SEC Documents include all the documents that the Company was required to
file with the SEC since June 1, 1995. The Company Financial Statements have been
prepared from, and are in accordance with, the books and records of the Company
and its consolidated Subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, 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 or, in the case of the unaudited statements, as permitted by Form 10-Q
of the SEC) and present fairly the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein. The Company has not received notice (written or oral) from and, to its
knowledge, is not under any review by any Governmental Entity in connection with
its revenue recognition policies and procedures. Without limiting the foregoing,
for any period after December 31, 1998, the Company has complied in all material
respects with Statement of Position 97-2 (Software Revenue Recognition), as
amended by Statement of Position 9804.
Section 3.6 Absence of Certain Changes. Except as and to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, since March 31, 2000, the Company and its Subsidiaries have conducted
their respective businesses and operations consistent with past practice only in
the ordinary and usual course. From March 31, 2000 through the date of this
Agreement, there has not occurred (i) any events, changes or effects (including
the incurrence of any liabilities of any nature,
12
whether or not accrued, contingent or otherwise) having or, which would be
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries; (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of the Company or of any of its
Subsidiaries; or (iii) any change by the Company or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP. Except as set forth in Section 3.6 of the Disclosure Schedule, since
March 31, 2000 neither the Company nor any of its Subsidiaries has taken any of
the actions prohibited by Section 5.1 hereof.
Section 3.7 No Undisclosed Liabilities. Except as set forth in
Section 3.7 of the Disclosure Schedule, since March 31, 2000, neither the
Company nor any of its Subsidiaries has incurred any liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise, that (a) have,
or would be reasonably likely to have, a material adverse effect on the Company
and its Subsidiaries or (b) would be required to be reflected or reserved
against on a consolidated balance sheet of the Company and its Subsidiaries
(including the notes thereto) prepared in accordance with GAAP as applied in
preparing the consolidated balance sheet of the Company and its Subsidiaries as
of March 31, 2000. Section 3.7 of the Disclosure Schedule sets forth the amount
of principal and unpaid interest outstanding under each instrument evidencing
indebtedness of the Company and its Subsidiaries which will accelerate or become
due or result in a right of redemption or repurchase on the part of the holder
of such indebtedness (with or without due notice or lapse of time) as a result
of this Agreement, any of the Ancillary Agreements, the Merger or the other
transactions contemplated hereby or thereby.
Section 3.8 Information in Proxy Statement/Prospectus. The Proxy
Statement/Prospectus (as defined in Section 5.8 hereof) (or any amendment
thereof or supplement thereto) will not, at the date mailed to Company
shareholders or at the times of the Special Meeting (as defined in Section
5.7(b) hereof), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by the Company with
respect to statements made therein based on information supplied by Parent or
Sub specifically for inclusion in the Proxy Statement/Prospectus. None of the
information supplied by the Company specifically for inclusion or incorporation
by reference in the Parent Registration Statement (as defined in Section 5.8
hereof) will, at the date it becomes effective and at the time of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus specifically, as to information
supplied by the Company for inclusion therein, will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
13
Section 3.9 Employee Benefit Matters.
(a) All employee benefit plans and other incentive,
compensation or benefit agreements or arrangements covering any current or
former employee or director of, or consultant to, the Company or any Subsidiary
are listed in Section 3.9(a) of the Disclosure Schedule (the "Company Benefit
Plans"). True and complete copies of the Company Benefit Plans, trusts and
reports and summaries required under the Code or the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the favorable determination
letter from the Internal Revenue Service (the "IRS") for each plan intended to
be qualified under Section 401(a) of the Code, have been provided to the
Purchaser. Except as set forth in Section 3.9(a) of the Disclosure Schedule,
each Company Benefit Plan has been administered and maintained in all material
respects in compliance with its terms and with all applicable laws, including,
but not limited to, ERISA and the Code. Each Company Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined by the IRS to be
so qualified and to the knowledge of the Company no event has occurred that
could reasonably be expected to adversely affect the qualified status of such
Company Benefit Plan. Neither the Company nor any of its Subsidiaries has
incurred (and to the knowledge of the Company no transaction has occurred which
could reasonably be expected to give rise to) any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA with respect to any Company
Benefit Plan. To the knowledge of the Company, there are no pending, nor has the
Company or any of its Subsidiaries received notice of any threatened, claims
against or otherwise involving any of the Company Benefit Plans. No Company
Benefit Plan is under audit or investigation by the IRS, the Department of Labor
or the Pension Benefit Guaranty Corporation, and to the knowledge of the
Company, no such audit or investigation is pending or threatened. All material
contributions and other payments required to be made as of the date of this
Agreement to, or pursuant to, the Company Benefit Plans have been made or
accrued for in the Company Financial Statements. Neither the Company nor any
entity under "common control" with the Company within the meaning of Section
4001 of ERISA has at any time contributed to, or been required to contribute to,
any "pension plan" (as defined in Section 3(2) of ERISA) that is subject to
Title IV of ERISA or Section 412 of the Code, including, without limitation, any
"multi-employer plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA),
and neither the Company nor any such entity has at any time incurred or could
reasonably expect to incur any liability under Title IV of ERISA.
(b) The consummation of the Transactions will not (either
alone or upon the occurrence of any additional or subsequent events) (i)
constitute an event under any Company Benefit Plan, employment or severance
agreement, trust, loan or other compensation or benefits agreement or
arrangement that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any current
or former employee, officer, director, agent or consultant of the Company or any
Subsidiary, or (ii) result in the triggering or imposition of any restrictions
or limitations on the right of the Company or the Purchaser to amend or
terminate any Company Benefit Plan and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. No payment or benefit which will or may be made by the
Company, any of its Subsidiaries, the Purchaser or any of their respective
affiliates with respect to any employee, officer or director of the Company or
its Subsidiaries will be characterized as an "excess parachute payment," within
14
the meaning of Section 280G(b)(1) of the Code and no amount of any such payment
or benefit will fail to be deductible by the Company by reason of Section 162(m)
of the Code.
(c) Neither the Company nor any of its Subsidiaries (i)
maintains or contributes to any Company Benefit Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any employee upon or with respect to periods following his
retirement or termination of employment, except as may be required by Section
4980B of the Code; or (ii) has ever represented, promised or contracted (whether
in oral or written form) to any employee (either individually or to employees as
a group) that such employee(s) would be provided with life insurance, medical,
severance or other employee welfare benefits upon their retirement or
termination of employment, except to the extent required by Section 4980B of the
Code. All amounts of deferred compensation benefits under any Company Benefit
Plan have been properly accrued for in the Financial Statements.
(d) With respect to each Company Benefit Plan which is an
"employee welfare benefit plan" within the meaning of Section 3(1) of ERISA, all
material claims incurred (including claims incurred but not reported) by
employees thereunder for which the Company is, or will become, liable are (i)
insured pursuant to a contract of insurance whereby the insurance company bears
any risk of loss with respect to such claims; (ii) covered under a contract with
a health maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims, or (iii) reflected as a liability in Section 3.9(d)
of the Disclosure Schedule.
Section 3.10 Litigation; Compliance with Law.
(a) There is no suit, claim, action, proceeding, arbitration
or investigation pending or, to the knowledge of the Company, threatened against
or affecting, the Company or any of its Subsidiaries which, individually or in
the aggregate, is reasonably likely, individually or in the aggregate, to have a
material adverse effect on the Company and its Subsidiaries, or materially
impair the ability of the Company to consummate the Merger or the other
transactions contemplated hereby or by the Ancillary Agreements. The foregoing
includes, without limitation, actions pending or, to the knowledge of the
Company, threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's or any of its Subsidiaries' employees,
their use in connection with the Company's or any of its Subsidiaries' business
of any information, techniques, patents, patent applications, copyrights, trade
secrets, inventions, technology, know- how, Software (as defined in Section
3.17(j)) or other intellectual property rights allegedly proprietary to any of
their former employers, or their obligations under any agreements with prior
employers.
(b) The Company and its Subsidiaries have complied in a timely
manner and in all material respects, with all laws, statutes, regulations,
rules, ordinances, and judgments, decrees, orders, writs and injunctions, of any
court or Governmental Entity relating to any of the property owned, leased or
used by them, or applicable to their business, including, but not limited to,
(1) the Foreign Corrupt Practices Act of 1977 and any other laws regarding use
of funds for political activity or
15
commercial bribery and (2) laws relating to equal employment opportunity,
discrimination, occupational safety and health, environmental, interstate
commerce and antitrust.
Section 3.11 No Default. The business of the Company and each of its
Subsidiaries has not been and is not being conducted in default or violation of
any term, condition or provision of (i) its respective articles of incorporation
or bylaws or similar organizational documents, (ii) any Company Agreement or
(iii) any federal, state, local or foreign law, statute, regulation, rule,
ordinance, judgment, decree, order, writ, injunction, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to the Company or any of its Subsidiaries or relating to any of the
property owned, leased or used by them, or applicable to their business,
excluding from the foregoing clauses (ii) and (iii), defaults or violations that
would not, individually or in the aggregate, have a material adverse effect on
the Company and its Subsidiaries or materially impair the ability of the Company
to consummate the Merger or the other transactions contemplated hereby or by the
Ancillary Agreements. No investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its Subsidiaries is pending
or, to the knowledge of the Company, threatened, nor has any Governmental Entity
or other entity indicated an intention to conduct the same, other than, in each
case, those the outcome of which, as far as reasonably can be foreseen, in the
future will not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries.
Section 3.12 Taxes.
(a) Except as set forth in Section 3.12 of the Disclosure
Schedule, the Company and each of its Subsidiaries has timely filed (or has had
timely filed on its behalf) with the appropriate Tax Authorities all Tax Returns
required to be filed by the Company and each of its Subsidiaries, and such Tax
Returns are true, correct, and complete in all material respects.
(b) The Company and each of its Subsidiaries has paid, or
where payment is not yet due, has established an adequate accrual in accordance
with GAAP for the payment of, all Taxes for all periods ending through the date
hereof.
(c) There are no liens for Taxes upon any property or assets
of the Company or any of its Subsidiaries, except for liens for Taxes not yet
due and for which adequate reserves have been established in accordance with
GAAP.
(d) No federal, state, local or foreign Audits are presently
pending with regard to any Taxes or Tax Returns of the Company and its
Subsidiaries and to the knowledge of the Company, no such Audit is threatened.
(e) Except as set forth in Section 3.12(e) of the Disclosure
Schedule, the Tax Returns of the Company and each of its Subsidiaries have been
examined by the applicable Tax Authority (or the applicable statutes of
limitation for the assessment of Taxes for such periods have expired),
16
and for any year that a Tax Return was examined, no material adjustments were
asserted as a result of such examination which have not been resolved and fully
paid, and no issue has been raised by any Tax Authority in any Audit of the
Company or any of its Subsidiaries that, if raised with respect to any other
period not so audited, could be expected to result in a proposed deficiency for
any such period not so audited.
(f) There are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.
(g) Neither the Company nor any of its Subsidiaries is a party
to any agreement providing for the allocation, indemnification, or sharing of
Taxes.
(h) Except as set forth in Section 3.12(h) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has been a member
of any "affiliated group" (as defined in section 1504(a) of the Code) and
is not subject to Treas. Reg. 1.1502-6 for any period.
(i) Neither the Company nor any of its Subsidiaries is or has
been a U.S. real property holding company (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.
(j) "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 assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax, or
penalties applicable thereto, imposed by any Tax Authority. "Tax Authority"
means the IRS 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, and information returns and any amendments thereto.
Section 3.13 Contracts. Each Company Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries, and there are no defaults
thereunder, except those defaults that would not have a material adverse effect
on the Company and its Subsidiaries. Section 3.13 of the Disclosure Schedule
sets forth a true and complete list of (i) all Company Agreements entered into
by the Company or any of its Subsidiaries and included as exhibits to the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1999 that have been altered, amended or otherwise modified in any manner, and
(ii) all non-competition agreements imposing restrictions on the ability of the
Company or any of its Subsidiaries to conduct business in any jurisdiction or
territory.
17
Section 3.14 Assets; Real Property. The Company and its Subsidiaries
have all assets, properties, rights and contracts necessary to permit the
Company and its Subsidiaries to conduct their business as it is currently being
conducted, except where the failure to have such assets, properties, rights and
contracts would not have a material adverse effect on the Company and its
Subsidiaries. The Company SEC Documents accurately identify all material real
property or material interests in material real property owned by the Company
and its Subsidiaries (the "Real Property"). The Company or its Subsidiaries has
good and marketable title to the real property owned by them, free and clear of
all liens, charges, security interests, options, claims, mortgages, pledges,
easements, rights-of-way or other encumbrances and restrictions of any nature
whatsoever, except as described in Section 3.14 of the Disclosure Schedule and
those that do not adversely affect the value of such real property.
Section 3.15 Environmental Matters. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement, (a) the Company
and its Subsidiaries are in compliance in all material respects with federal,
state, local and foreign laws and regulations relating to pollution, protection
or preservation of human health or the environment, including, without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of toxic or hazardous substances, materials or wastes,
petroleum and petroleum products, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon, or lead or lead-based paints or materials
("Materials of Environmental Concern"), or otherwise relating to the generation,
storage, containment (whether above ground or underground), disposal, transport
or handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon (collectively,
"Environmental Laws"), and including, but not limited to, compliance with any
permits or other governmental authorizations or the terms and conditions
thereof; (b) neither the Company nor any of its Subsidiaries has received any
communication or notice, whether from a governmental authority or otherwise,
alleging any violation of or noncompliance with any Environmental Laws by any of
the Company or its Subsidiaries or for which the any of them is responsible, and
there is no pending or threatened claim, action, investigation or notice by any
person or entity alleging potential liability for investigatory, cleanup or
governmental response costs, or natural resources or property damages, or
personal injuries, attorney's fees or penalties relating to (i) the presence, or
release into the environment, of any Materials of Environmental Concern at any
location owned or operated by the Company or its Subsidiaries, now or in the
past, or (ii) any violation, or alleged violation, of any Environmental Law
(collectively, "Environmental Claims"), except where such Environmental Claims
would not have a material adverse effect or otherwise require disclosure in the
Company SEC Documents; and (c) there are no past or present facts or
circumstances that could form the basis of any Environmental Claim against the
Company or its Subsidiaries or against any person or entity whose liability for
any Environmental Claim the Company or its Subsidiaries have retained or assumed
either contractually or by operation of law, except where such Environmental
Claim, if made, would not have a material adverse effect or otherwise require
disclosure in the Company SEC Documents. All permits and other governmental
authorizations currently held or required to be held by the Company and its
Subsidiaries pursuant to any Environmental Laws are identified in Section 3.15
of the Disclosure Schedule. The Company has provided to Parent all assessments,
reports, data, results of investigations or audits, and other information that
is in the possession of or reasonably available to the Company
18
regarding environmental matters pertaining to the environmental condition of the
business of the Company and its Subsidiaries, or the compliance (or
noncompliance) by the Company or its Subsidiaries with any Environmental Laws.
Section 3.16 Product Liability. Except as described in Section 3.16
of the Disclosure Schedule, there are not presently pending or, to the knowledge
of the Company, threatened any civil, criminal or administrative actions, suits,
demands, claims, hearings, notices of violation, investigations, proceedings or
demand letters relating to any alleged hazard or alleged defect in design,
manufacture, materials or workmanship, including any failure to warn or alleged
breach of express or implied warranty or representation, relating to any product
manufactured, distributed or sold by or on behalf of the Company and its
Subsidiaries, which if adversely determined, would reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries. Neither the
Company nor any of its Subsidiaries has extended to its customers any written
non-uniform product warranties, indemnifications or guarantees.
Section 3.17 Intellectual Property.
(a) The Company or its Subsidiaries own or have a valid right
to use all trademarks, service marks, trade names, Internet domain names,
designs, slogans, and general intangibles of like nature, together with all
goodwill related to the foregoing (collectively, "Trademarks"); patents;
copyrights (including any registrations, renewals and applications for any of
the foregoing); Software; technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models, and
methodologies (collectively, "Trade Secrets," and together with the foregoing,
the "Intellectual Property") used in or necessary for the conduct of the Company
and each Subsidiaries' business as currently conducted or contemplated to be
conducted.
(b) Section 3.17(b)(1) of the Disclosure Schedule sets forth,
for the Intellectual Property owned by the Company or its Subsidiaries, a
complete and accurate list of all U.S. and foreign (1) patents and patent
applications; (2) Trademark registrations (including Internet domain
registrations) and applications and material unregistered Trademarks; (3)
copyright registrations and applications, and material unregistered copyrights,
including those in Software, indicating for each, the applicable jurisdiction,
registration number (or application number), and date issued (or date filed).
Section 3.17(b)(2) sets forth a complete and accurate list of all license
agreements granting any right to use or practice any rights under any
Intellectual Property that call for the payment or receipt of more than $25,000,
whether the Company or any of its Subsidiaries is the licensee or licensor
thereunder, and any written settlements relating to any Intellectual Property to
which the Company or any of its Subsidiaries is a party or otherwise bound
(collectively, the "License Agreements"), indicating for each the title, the
parties, the date executed and the Intellectual Property covered thereby.
(c) The Intellectual Property owned by the Company or any of
its Subsidiaries is free and clear of all Liens, and the Company or a Subsidiary
of the Company, as noted in Section 3.17(c) of the Disclosure Schedule is listed
in the records of the appropriate United States, state or foreign agency as the
sole owner of record for each application and registration listed in Section
3.17(c) of the Disclosure Schedule.
19
(d) Except as set forth in Section 3.17(d) of the Disclosure
Schedule, the Intellectual Property owned by the Company or any Subsidiary and,
to the best of the Company's knowledge, any Intellectual Property used by the
Company, is valid and subsisting, in full force and effect, and has not been
canceled, expired, or abandoned. There is no pending or, to the knowledge of the
Company, threatened opposition, interference or cancellation proceeding before
any court or registration authority in any jurisdiction against the
registrations listed in Section 3.17(d) of the Disclosure Schedule, or, to the
best of the Company's knowledge, against any Intellectual Property licensed to
the Company or its Subsidiaries.
(e) The conduct of the Company's and its Subsidiaries'
business as currently conducted or planned to be conducted does not infringe
upon any Intellectual Property rights owned or controlled by any third party
(either directly or indirectly such as through contributory infringement or
inducement to infringe). Except as set forth in Section 3.17(e) of the
Disclosure Schedule, there are no claims or suits pending or, to the knowledge
of the Company, threatened, and neither the Company nor any of its Subsidiaries
has received any notice of a third party claim or suit (1) alleging that its
activities or the conduct of its businesses infringes upon, violates, or
constitutes the unauthorized use of the Intellectual Property rights of any
third party or (2) challenging the ownership, use, validity or enforceability of
any Intellectual Property.
(f) Except as set forth in Section 3.17(f) of the Disclosure
Schedule, there are no settlements, forebearances to xxx, consents, judgments,
or orders or similar obligations which (1) restrict the Company's or its
Subsidiaries' rights to use any Intellectual Property, (2) restrict the
Company's or its Subsidiaries' business in order to accommodate a third party's
Intellectual Property or (3) permit third parties to use any Intellectual
Property owned or controlled by the Company or any of its Subsidiaries. The
Company or its Subsidiaries has not licensed or sublicensed its rights in any
material Intellectual Property other than pursuant to the License Agreements,
and no royalties, honoraria or other fees are payable by the Company or its
Subsidiaries for the use of or right to use any Intellectual Property, except
pursuant to the License Agreements. The License Agreements are valid and binding
obligations of all parties thereto, enforceable in accordance with their terms,
and there exists no event or condition which will result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default by the Company or, to the knowledge of the Company, any other party
under any such License Agreement.
(g) The Company and each of its Subsidiaries take reasonable
measures to protect the confidentiality of Trade Secrets, including, except as
set forth in Section 3.17(g) of the Disclosure Schedule, requiring its employees
and independent contractors having access thereto to execute written
non-disclosure agreements. Except as set forth in Section 3.17(g) of the
Disclosure Schedule, to the knowledge of the Company, no Trade Secret has been
disclosed or authorized to be disclosed to any third party other than pursuant
to a non-disclosure agreement that adequately protects the Company and the
applicable Subsidiary's proprietary
20
interests in and to such Trade Secrets. Neither the Company nor, to the
knowledge of the Company, any other party to any non-disclosure agreement
relating to the Company's Trade Secrets is in breach or default thereof.
(h) To the knowledge of the Company, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned by the Company or any of its Subsidiaries and, except as set forth in
Section 3.17(h) of the Disclosure Schedule, no such claims have been brought
against any third party by the Company or any of its Subsidiaries.
(i) Except as set forth in Section 3.17(i) of the Disclosure
Schedule, the consummation of the transactions contemplated hereby will not
result in the loss or impairment of the Company or any of its Subsidiaries'
right to own or use any of the Intellectual Property, nor will require the
consent of any governmental authority or third party in respect of any such
Intellectual Property.
(j) Section 3.17(j) of the Disclosure Schedule lists all
Software (other than off-the-shelf software applications programs having an
acquisition price of less than $25,000) which are owned, licensed, leased, or
otherwise used by the Company or any of its Subsidiaries, and identifies which
of such Software is owned, licensed, leased, or otherwise used, as the case may
be. Section 3.17(j) of the Disclosure Schedule lists all Software sold,
licensed, leased or otherwise distributed by the Company or any of its
Subsidiaries to any third party, and identifies which Software is sold,
licensed, leased, or otherwise distributed as the case may be. With respect to
the Software set forth in Section 3.17(j) of the Disclosure Schedule which the
Company or any of its Subsidiaries purports to own, such Software was either
developed (1) by employees of the Company or any of its Subsidiaries within the
scope of their employment; or (2) by independent contractors who have assigned
their rights to the Company or any of its Subsidiaries pursuant to written
agreements. For purposes of this Section 3.17, "Software" means any and all (v)
computer programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (w) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (x) descriptions, flow- charts and other work
product used to design, plan, organize and develop any of the foregoing, (y) the
technology supporting any Internet site(s) operated by or on behalf of the
Company or any of its Subsidiaries, and (z) all documentation, including user
manuals and training materials, relating to any of the foregoing.
(k) Any Software that the Company or any of its Subsidiaries
licenses and maintains pursuant to contracts with third parties ("Licensed
Software") in order to enable such Software to process accurately (including
calculating, comparing and sequencing) in all material respects date data from,
into and between the twentieth and twenty-first centuries, including leap year
calculations ("Millennial Date Data"). All such Licensed Software processes
Millennial Date Data without material errors or omissions and without materially
affecting functionality when used in accordance with the product documentation
provided by the Company therefor and provided that all other software and all
hardware and firmware used in combination with such Licensed Software properly
exchanges date data with it. To the knowledge of the Company, neither the
Company nor any of its
21
Subsidiaries has made any representation or warranty to any third party that
imposes any liability (whether or not accrued, contingent or otherwise) on the
Company or any of its Subsidiaries greater than the preceding representation.
(l) Except as set forth in Section 3.17(l) of the Disclosure
Schedule, the Company and its Subsidiaries have obtained written representations
or assurances from each third party that (A) provides or will provide Millennial
Date Data to the Company or its Subsidiaries, (B) processes or will process
Millennial Date Data for the Company or its Subsidiaries or (C) otherwise
provides or will provide any material product or service to the Company or its
Subsidiaries that is dependent upon any Software, microcode, chip or hardware
system or component, including any electronic or electronically controlled
system or component (a "System") that processes any Millennial Date Data,
stating that all of such Systems that are used for, or on behalf of, the Company
or its Subsidiaries will process Millennial Date Data without materially
affecting the supply of such product or service to the Company or its
Subsidiaries after December 31, 1999.
Section 3.18 Proprietary Rights and Confidentiality Agreements.
Except as set forth in Section 3.18 of the Disclosure Schedule, each current and
former employee and officer of the Company and its Subsidiaries has executed a
Proprietary Rights and Confidentiality Agreement or similar such agreement, in
substantially the form previously provided to Parent. The Company is not aware
that any of the current or former employees of the Company or any of its
Subsidiaries is in violation thereof.
Section 3.19 Insurance. The Company and each of its Subsidiaries has
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Company and its Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. The Company has not been notified of any threatened
termination of, or material premium increase with respect to, any of such
policies.
Section 3.20 Suppliers and Customers. Since March 31, 2000, no
material licensor, vendor, supplier, licensee or customer of the Company or any
of its Subsidiaries has canceled or otherwise modified its relationship with the
Company or its Subsidiaries and, to the Company's knowledge, (a) no such person
has any intention to do so, and (b) the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
Section 3.21 Labor Matters.
(a) Except as set forth in Section 3.21(a) of the Disclosure
Schedule, (i) the Company and its 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; (ii) neither
the Company nor any of its Subsidiaries has received written
22
notice of any charge or complaint against the Company or any of its Subsidiaries
pending before the Equal Employment Opportunity Commission, the National Labor
Relations Board, or any other government agency or court or other tribunal
regarding an unlawful employment practice; (iii) neither the Company nor any of
its Subsidiaries is a party to any collective bargaining agreement and there is
no labor strike, slowdown or stoppage actually pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries; (iv) neither the Company nor any of its Subsidiaries has received
notice that any representation petition respecting the employees of the Company
or any of its Subsidiaries has been filed with the National Labor Relations
Board, and, to the knowledge of the Company, there has been no labor union prior
to the date hereof organizing any employees of the Company or any of its
Subsidiaries into one or more collective bargaining units; (v) there are no
complaints, lawsuits, arbitrations or other proceedings pending, or to the
knowledge of the Company, threatened by or on behalf of any present or former
employee of the Company or any of its Subsidiaries alleging breach of any
express or implied contract of employment; (vi) to the knowledge of the Company,
no federal, state, or local agency responsible for the enforcement of labor or
employment laws intends to conduct an investigation with respect to or relating
to the Company or any of its Subsidiaries and no such investigation is in
progress; (vii) there are no personnel arrangements, understandings, policies,
rules or procedures (whether written or oral) applicable to employees of the
Company or any of its Subsidiaries other than those set forth in Section 3.21(a)
of the Disclosure Schedule, true, correct and complete copies of which have
heretofore been delivered to Parent; and (viii) there are no employment
contracts, severance agreements, confidentiality agreements (other than standard
employee non-disclosure agreements as contemplated by Section 3.21(vii)) or any
other agreements (whether written or oral) with any employees of the Company or
any Subsidiary thereto.
(b) The Company and its Subsidiaries are and have been in
substantial compliance with all notice and other requirements under the Worker
Adjustment and Retaining Notification Act ("WARN") or similar state statute.
Except as set forth in Section 3.21(b) of the Disclosure Schedule, none of the
employees of the Company or any of its Subsidiaries have suffered an "employment
loss" (as defined in WARN) during the ninety (90)-day period prior to the
execution of this Agreement.
(c) Neither the Company nor any of its Subsidiaries is bound
by any contract, arrangement, understanding, policy, rule or procedure (whether
written or oral) that restricts its ability to terminate the employment of any
of its employees at any time without payment or other liability.
Section 3.22 Accounts Receivable; Inventory. Subject to any reserves
set forth in the balance sheet of the Company included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, as filed
with the SEC prior to the date of this Agreement (the "Company Balance Sheet"),
the accounts receivable shown in the Company Balance Sheet arose in the ordinary
course of business; were not, as of the date of the Company Balance Sheet,
subject to any material discount, contingency, claim of offset or recoupment or
counterclaim; and represented, as of the date of the Company Balance Sheet, bona
fide claims against debtors for sales, leases, licenses and other charges. All
accounts
23
receivable of the Company and its Subsidiaries arising after the date of the
Company Balance Sheet through the date of this Agreement arose in the ordinary
course of business and, as of the date of this Agreement, are not subject to any
material discount, contingency, claim of offset or recoupment or counterclaim,
except for normal reserves consistent with past practice. The amount carried for
doubtful accounts and allowances disclosed in the Company Balance Sheet is
believed by the Company as of the date of this Agreement to be sufficient to
provide for any losses which may be sustained or realization of the accounts
receivable shown in the Company Balance Sheet. As of the date of the Company
Balance Sheet, the inventories shown on the Company Balance Sheet consisted in
all material respects of items of a quantity and quality usable or saleable in
the ordinary course of business. All of such inventories were acquired in the
ordinary course of business and, as of the date of this Agreement, have been
replenished in all material respects in the ordinary course of business
consistent with past practices. All such inventories are valued on the Company
Balance Sheet in accordance with GAAP applied on a basis consistent with the
Company's past practices, and provision has been made or reserves have been
established on the Company Balance Sheet, in each case in an amount believed by
the Company as of the date of this Agreement to be adequate, for all
slow-moving, obsolete or unusable inventories.
Section 3.23 Transactions with Affiliates. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this Agreement
or as disclosed in Section 3.23 of the Disclosure Schedule, since March 31,
2000, there have been no transactions, agreements, arrangements or
understandings between the Company and its affiliates that would be required to
be disclosed under Item 404 of Regulation S-K under the Securities Act.
Section 3.24 Opinion of Financial Advisor. The Company has received
the written opinion of Newbury, Piret & Company, Inc., dated the date hereof, to
the effect that, as of such date, the consideration to be received by the
shareholders of the Company in the Merger is fair to such shareholders from a
financial point of view, a signed copy of which opinion has been delivered to
Parent.
Section 3.25 Brokers or Finders. The Company represents, as to
itself, its Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person, other than Newbury, Piret &
Company, Inc., is or will be entitled to any brokers' or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, and the Company agrees to indemnify and hold
Parent and Sub harmless from and against any and all claims, liabilities or
obligations with respect to any other commissions or similar fees in connection
with any of the transactions contemplated by this Agreement which are asserted
by any person on the basis of any act or statement alleged to have been made by
or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Newbury,
Piret & Company, Inc., pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereby. The aggregate payments
payable to Newbury, Piret & Company, Inc. as a result of the consummation of the
Merger, the purchase of any Securities, the issuance of any securities, and
otherwise in connection with the transactions contemplated hereby and by the
Ancillary Agreements, is $930,000.
24
Section 3.26 Tax Matters. None of the Company, any of its
Subsidiaries or, to the knowledge of the Company, any of their respective
directors, officers or shareholders, has taken any action which would prevent
the Merger from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
Section 3.27 State Takeover Statutes. To the knowledge of the
Company, no state takeover statute (other than Chapter 7A of the MBCA, which is
inapplicable) is applicable to the Merger or the transactions contemplated by
this Agreement and the Ancillary Agreements.
Section 3.28 Full Disclosure. The Company has not failed to disclose
to Parent any facts material to the Company's business, results of operations,
assets, liabilities, financial condition or prospects. No representation or
warranty by the Company in this Agreement and no statement by the Company
contained in any document (including the Company Financial Statements), schedule
or certificate furnished or to be furnished by the Company to Parent pursuant to
the terms hereof, the Option Agreement or in connection with the transactions
contemplated hereby or thereby, contains as of the date hereof or will contain
as of the Effective Time, any untrue statements of a material fact or omit or
will omit to state any material fact necessary, in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries. Parent and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, in the aggregate, have a material adverse effect on
Parent and its Subsidiaries.
Section 4.2 Capitalization.
(a) The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $.001 per share (the "Parent Preferred Stock"). As of March 31,
2000, (i) 25,789,588 shares of Parent Common Stock were issued and outstanding,
(ii) no shares of Parent Preferred Stock were
25
issued and outstanding, and (iii) 4,652,405 shares of Parent Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
shares of Parent Common Stock pursuant to employee stock option plans of Parent.
All of the issued and outstanding shares of Parent Common Stock are validly
issued, fully paid and nonassessable and are not subject to any preemptive or
similar rights.
(b) Except as disclosed in this Section 4.2, as of the date of
this Agreement, there is no outstanding (i) Right to purchase or otherwise to
receive from Parent or any of its Subsidiaries any of the outstanding authorized
but unissued or treasury shares of the capital stock of Parent or any of its
Subsidiaries, (ii) security of any kind convertible into or exchangeable for
such capital stock and (iii) voting trust or other agreement or understanding to
which Parent or any of its Subsidiaries is a party or is bound with respect to
the voting of the capital stock of Parent or any of its Subsidiaries.
Section 4.3 Authorization; Validity of Agreement; Necessary
Action.
(a) Each of Parent and Sub has full corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the
Ancillary Agreements to which each of Parent and Sub, respectively, is a party
and the consummation by Parent and Sub of the Merger and of the other
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Sub,
respectively, and no other corporate actions on the part of Parent and Sub are
necessary to authorize the execution and delivery of this Agreement or such
Ancillary Agreements and the consummation by each of them of the transactions
contemplated hereby and thereby. Each of this Agreement and the Ancillary
Agreements to which each of Parent and Sub, respectively, is a party has been
duly executed and delivered by Parent or Sub, as the case may be, assuming each
of this Agreement and such Ancillary Agreements constitutes a valid and binding
obligation of the other parties hereto and thereto, constitutes a valid and
binding obligation of Parent or Sub, as the case may be, enforceable against
Parent or Sub, as the case may be, in accordance with their respective terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(b) The Boards of Directors of Parent and Sub each have duly
and validly approved and taken all corporate action required to be taken by such
Board of Directors for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements to which Parent or Sub, as the case may
be, is a party.
26
Section 4.4 Consents and Approvals; No Violations. Except for the
Merger Filing and filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Exchange Act,
the Securities Act and state blue sky laws, neither the execution, delivery or
performance of this Agreement or any Ancillary Agreements by Parent and Sub nor
the consummation by Parent and Sub of the transactions contemplated hereby or
thereby nor compliance by Parent and Sub with any of the provisions hereof or
thereof will (i) conflict with or result in any breach of any provision of the
respective certificates of incorporation or by-laws of Parent or Sub, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) 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, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, lease, contract, agreement
or other instrument or obligation to which Parent or any of its Subsidiaries is
a party or by which any of them or any of their properties or assets may be
bound or (iv) 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 clauses (ii), (iii) and (iv) where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings, or where such violations, breaches or defaults would not,
individually or in the aggregate, have a material adverse effect on Parent and
will not materially impair the ability of Parent or Sub to consummate the
transactions contemplated hereby or by the Ancillary Agreements.
Section 4.5 Information in Proxy Statement/Prospectus. The
Registration Statement (or any amendment thereof or supplement thereto) will
not, at the date it becomes effective and at the times of the Special Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or Sub with respect
to statements made therein based on information supplied by the Company for
inclusion in the Registration Statement. None of the information supplied by
Parent or Sub for inclusion or incorporation by reference in the Proxy
Statement/Prospectus, at the date mailed to shareholders and at the time of the
Special Meeting, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement, as to information supplied by
Parent or Sub, will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
Section 4.6 SEC Reports and Financial Statements. Parent has filed
with the SEC, and has heretofore made available to the Company true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since August 5, 1999 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the "Parent SEC Documents"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Parent SEC Documents, including, without limitation, any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a
27
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act or the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The Parent SEC
Documents include all the documents that Parent was required to file with the
SEC since August 5, 1999. Each of the consolidated financial statements included
in the Parent SEC Documents have been prepared from, and are in accordance with,
the books and records of Parent and its consolidated Subsidiaries, comply in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and present fairly
the consolidated financial position and the consolidated results of operations
and cash flows of Certificate of Incorporation and its consolidated Subsidiaries
as at the dates thereof or for the periods presented therein. Parent has not
received notice (written or oral) from and, to its knowledge, is not under any
review by any Governmental Entity in connection with its revenue recognition
policies and procedures. Without limiting the foregoing, for any period after
December 31, 1998, Parent has complied in all material respects with Statement
of Position 97-2 (Software Revenue Recognition), as amended by Statement of
Position 9804.
Section 4.7 Absence of Certain Changes. Except as and to the extent
disclosed in the Parent SEC Documents filed prior to the date of this Agreement,
since March 31, 2000, Parent and its Subsidiaries have conducted their
respective businesses and operations in all material respects consistent with
past practice only in the ordinary and usual course. From March 31, 2000 through
the date of this Agreement, there has not occurred (i) any events, changes or
effects (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) having or, which would be reasonably
likely to have, individually or in the aggregate, a material adverse effect on
Parent and its Subsidiaries; (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of Parent or of any of its Subsidiaries other
than regular quarterly cash dividends or dividends paid by wholly owned
Subsidiaries; or (iii) any change by Parent or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP. Since March 31, 2000 neither Parent nor any of its Subsidiaries has
taken any of the actions prohibited by Section 5.2 hereof.
Section 4.8 Litigation; Compliance with Law.
(a) Except for the suits disclosed in the Parent SEC Documents
filed prior to the date of this Agreement, there is no suit, claim, action,
proceeding, arbitration or investigation pending or, to the knowledge of Parent,
threatened against or affecting, Parent or any of its Subsidiaries which,
individually or in the aggregate, is reasonably likely, individually or in the
aggregate, to have a material adverse effect on Parent and its Subsidiaries, or
materially impair the ability of Parent to consummate the Merger or the other
transactions contemplated hereby or by the Ancillary
28
Agreements. The foregoing includes, without limitation, actions pending or, to
the knowledge of Parent, threatened (or any basis therefor known to Parent)
involving the prior employment of any of Parent's or any of its Subsidiaries'
employees, their use in connection with Parent's or any of its Subsidiaries'
business of any information, techniques, patents, patent applications,
copyrights, trade secrets, inventions, technology, know-how, software or other
intellectual property rights allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
(b) Parent and its Subsidiaries have complied in a timely
manner and in all material respects, with all laws, statutes, regulations,
rules, ordinances, and judgments, decrees, orders, writs and injunctions, of any
court or Governmental Entity relating to any of the property owned, leased or
used by them, or applicable to their business, including, but not limited to,
(1) the Foreign Corrupt Practices Act of 1977 and any other laws regarding use
of funds for political activity or commercial bribery and (2) laws relating to
equal employment opportunity, discrimination, occupational safety and health,
environmental, interstate commerce and antitrust.
Section 4.9 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or person, other than Xxxx Xxxxxxxx, Inc., is or
will be entitled to any brokers' or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, and Parent agrees to indemnify and hold the Company harmless from and
against any and all claims, liabilities or obligations with respect to any other
fees, commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by or on behalf of such party.
Section 4.10 Tax Matters. None of Parent, any of its Subsidiaries
or, to the knowledge of Parent, any of their respective directors, officers or
shareholders, has taken any action which would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
Section 4.11 Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, except (i) as expressly provided in this Agreement or (ii) with
the prior written consent of Parent, after the date hereof and prior to the
Effective Time:
(a) the business of the Company and its Subsidiaries will be
conducted in the ordinary and customary course consistent with past practice and
each of the Company and its Subsidiaries shall use its best efforts to preserve
its business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
29
(b) the Company will not, directly or indirectly, split,
combine or reclassify the outstanding Company Common Stock, or any outstanding
capital stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall (i)
amend its certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock; (iii)
issue, sell, transfer, pledge, dispose of or encumber any additional shares of,
or securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class of the Company or its Subsidiaries, other than issuances pursuant to the
exercise of Company Options outstanding on the date hereof, in accordance with
their present terms; (iv) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any material assets other than in the ordinary and usual
course of business and consistent with past practice; or (v) redeem, purchase or
otherwise acquire directly or indirectly any of its capital stock;
(d) neither the Company nor any of its Subsidiaries shall (i)
grant any increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any of its officers, directors, employees,
agents or consultants (other than increases for non-executive level employees in
the ordinary course of business consistent with past practice); (ii) adopt or
enter into any new plan, policy, agreement or arrangement that would constitute
a Company Benefit Plan, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing Company Benefit Plan; (iii) enter into any, or amend any existing,
employment or severance agreement with or, except in accordance with the
existing written policies of the Company previously delivered to Parent, grant
any severance or termination pay to any officer, director or employee of the
Company or any of its Subsidiaries; or (iv) make any loans to any of its
officers, directors, employees, agents or consultants or make any changes in its
existing borrowing or lending arrangements for or on behalf of any of such
persons, whether contingent on the Merger or otherwise;
(e) neither the Company nor any of its Subsidiaries shall
modify, amend or terminate any of the Company Agreements or waive, release or
assign any material rights or claims, except in the ordinary course of business
and consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to Parent, except in
the ordinary course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall
license or otherwise transfer, dispose of, permit to lapse or otherwise fail to
preserve any of the Company's or any of its Subsidiaries' Intellectual Property
Rights, or dispose of or disclose to any person any trade secret, formula,
process or know-how not theretofore a matter of public knowledge, except in the
ordinary course of business and consistent with past practice;
30
(h) neither the Company nor any of its Subsidiaries shall
cancel any debts or waive, release or relinquish any contract rights or other
rights of substantial value, except settlements of accounts receivable in the
ordinary course of business and consistent with past practice;
(i) neither the Company nor any of its Subsidiaries shall: (i)
incur or assume any long-term debt except for amounts set forth in the Company's
budget previously delivered to Parent and, except in the ordinary course of
business consistent with past practice, incur or assume any short-term
indebtedness in amounts not consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary course of business and consistent with past practice; (iii) make
any loans, advances or capital contributions to, or investments in, any other
person (other than to wholly owned Subsidiaries of the Company or customary
advances to employees for travel and business expenses in the ordinary course of
business and consistent with past practice); or (iv) enter into any material
commitment or transaction (including, but not limited to, any borrowing, capital
expenditure or purchase, sale or lease of assets) other than capital
expenditures pursuant to the Company's capital expenditures budget previously
delivered to Parent and other capital expenditures that do not exceed $25,000 in
the aggregate since March 31, 2000;
(j) neither the Company nor any of its Subsidiaries shall (i)
change any of the accounting principles used by it unless required by GAAP; or
(ii) take or allow to be taken any action which would jeopardize qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code;
(k) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations (i) in
the ordinary course of business and consistent with past practice, or claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries, (ii) incurred in the ordinary course of business
and consistent with past practice or (iii) which are legally required to be
paid, discharged or satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (iii) are legally required to be paid and
are also not otherwise payable in accordance with clauses (i) or (ii) above, the
Company will notify Parent in writing if such claims, liabilities or obligations
exceed, individually or in the aggregate, $25,000 in value, reasonably in
advance of their payment);
(l) neither the Company nor any of its Subsidiaries will adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries or any agreement relating to an Alternative Transaction (as
defined in Section 5.6(a) hereof);
31
(m) neither the Company nor any of its Subsidiaries will take,
or agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any respect at, or as of
any time prior to, the Effective Time;
(n) neither the Company nor any of its Subsidiaries will
voluntarily make or agree to make any changes in Tax accounting methods, waive
or consent to the extension of any statute of limitations with respect to Taxes,
or consent to any assessment of Taxes, or settle any judicial or administrative
proceeding affecting Taxes; and
(o) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing.
Section 5.2 Interim Operations of Parent. Parent covenants and
agrees that, except (i) as expressly provided in this Agreement, or (ii) with
the prior written consent of the Company, after the date hereof and prior to the
Effective Time:
(a) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock;
(b) Parent shall not: (i) amend its certificate of
incorporation or by-laws; or (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property with respect to its
capital stock other than regular quarterly cash dividends consistent with past
practice;
(c) neither Parent nor any of its Subsidiaries shall (i)
change any of the accounting principles used by it unless required by GAAP; or
(ii) take or allow to be taken any action which would jeopardize qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code;
(d) neither Parent nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of Parent and Sub contained herein inaccurate in any respect at, or as
of any time prior to, the Effective Time; and
(e) neither Parent nor any of its Subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.3 Access to Information. The Company shall (and shall
cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of Parent,
access, during normal business hours, during the period prior to the Effective
Time, to all of its and its Subsidiaries' properties, books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to Parent (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws
and (b) all other information concerning its business, properties and personnel
as Parent may reasonably
32
request. Unless otherwise required by law, until the Effective Time, Parent will
hold, and cause its officers, employees, accountants, counsel, financing sources
and other representatives to hold, any such information which is nonpublic in
confidence in accordance with the provisions of the Mutual Confidentiality
Agreement between the Company and Parent, dated as of June 14, 2000 (the
"Confidentiality Agreement").
Section 5.4 Consents and Approvals. Each of the Company, Parent and
Sub will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby (which actions shall include, without
limitation, furnishing all information in connection with approvals of or
filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby. Each of the Company, Parent and Sub will, and will cause its respective
Subsidiaries to, take all reasonable actions necessary to obtain any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or made by
Parent, Sub, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement or
the Ancillary Agreements (collectively, the "Requisite Regulatory Approvals").
Section 5.5 Employment Agreements. Prior to the Closing, the Company
shall, upon Parent's request, extend offers of employment, to be effective as of
the Effective Time and to be subject to consummation of the Merger, to certain
key employees of the Company identified by Parent, in each case on terms to be
proposed by Parent, subject to execution of Parent's standard form of offer
letter, in the form of Exhibits B-1 and B-2 hereto, the effectiveness of which
offer letters shall be conditioned upon the consummation of the transactions
consummated hereby.
Section 5.6 No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any of its officers, directors
or employees or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its Subsidiaries to, directly
or indirectly through another person, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action designed
to facilitate, any inquiries or the making of any proposal the consummation of
which would constitute an Alternative Transaction or (ii) participate in any
discussions or negotiations regarding any Alternative Transaction; provided,
however, that if, at any time prior to the adoption of this Agreement by the
holders of the Company Common Stock, the Company Board determines in good faith,
after receipt of advice from outside counsel, that such action is required for
the Company Board to comply with its fiduciary obligations to the Company's
shareholders under applicable law, the Company may, in response to any such
proposal that was not solicited by it or which did not otherwise result from a
breach of this Section 5.6(a), and subject to compliance with Section 5.6(c)
hereof, (A) furnish information with respect to the Company and its Subsidiaries
to any person
33
pursuant to a customary confidentiality agreement containing terms as to
confidentiality no less restrictive than the Confidentiality Agreement and (B)
participate in negotiations regarding such proposal. For purposes of this
Agreement "Alternative Transaction" means any of (i) a transaction or series of
transactions pursuant to which any person (or group of persons) other than the
Company and its Subsidiaries and other than Parent and its Subsidiaries (a
"Third Party") acquires or would acquire, directly or indirectly, beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of more than twenty
percent (20%) of the outstanding shares of the Company, whether from the Company
or pursuant to a tender offer or exchange offer or otherwise, (ii) any
acquisition or proposed acquisition of the Company or any of its significant
Subsidiaries by a merger or other business combination whether or not the
Company or any of its significant Subsidiaries is the entity surviving any such
merger or business combination) or (iii) any other transaction pursuant to which
any Third Party acquires or would acquire, directly or indirectly, control of
assets (including for this purpose the outstanding equity securities of
Subsidiaries of the Company and any entity surviving any merger or combination
including any of them) of the Company or any of its Subsidiaries for
consideration equal to twenty percent (20%) or more of the fair market value of
all of the outstanding shares of the Company Common Stock on the date prior to
the date hereof.
(b) Neither the Company Board nor any committee thereof shall
(i) except as expressly permitted by this Section 5.6, withdraw, qualify or
modify, or propose publicly to withdraw, qualify or modify, in a manner adverse
to Parent, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Alternative Transaction, or (iii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, a "Acquisition
Agreement") related to any Alternative Transaction. Notwithstanding the
foregoing, in the event that prior to the adoption of this Agreement by the
holders of the Company Common Stock the Company Board determines in good faith,
after it has received a Superior Proposal (as defined below) and after receipt
of advice from outside counsel, that such action is required for the Company
Board to comply with its fiduciary obligations to the Company's shareholders
under applicable law, the Company Board may (subject to this and the following
sentences) inform the Company shareholders that it no longer believes that the
Merger or this Agreement is advisable and no longer recommends approval of the
Merger or this Agreement (a "Subsequent Determination"), but only at a time that
is after the fifth business day following Parent's receipt of written notice
advising Parent that the Company Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal,
identifying the person making such Superior Proposal and stating that it intends
to make a Subsequent Determination. After providing such notice, the Company
shall provide a reasonable opportunity to Parent to make such adjustments in the
terms and conditions of this Agreement as would enable the Company to proceed
with its original recommendation to shareholders without making a Subsequent
Determination; provided, however, that any such adjustments shall be at the
discretion of the parties at such time. For purposes of this Agreement, a
"Superior Proposal" means any proposal (on its most recently amended or modified
terms, if amended or modified) made by a Third Party to enter into an
Alternative Transaction on terms which the Company Board determines in its good
faith judgment (after receiving
34
the advice of a financial advisor of nationally recognized reputation) to be
more favorable to the Company's shareholders than the Merger taking into account
all relevant factors (including whether, in the good faith judgment of the
Company Board, after obtaining advice from a financial advisor of nationally
recognized reputation, the Third Party is reasonably able to finance the
transaction, and any proposed changes to this Agreement that may have been
proposed by Parent in response to such Alternative Transaction). Notwithstanding
any other provision of this Agreement, the Company shall submit this Agreement
to its shareholders whether or not the Company Board makes a Subsequent
Determination.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.6, the Company shall promptly advise
Parent orally and in writing of any request for information or of any proposal
in connection with an Alternative Transaction, the material terms and conditions
of such request or proposal and the identity of the person making such request
or proposal. The Company will keep Parent reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
proposal on a current basis.
(d) Nothing contained in this Section 5.6 shall prohibit the
Company from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act
or (ii) from making any disclosure to its shareholders if, in the good faith
judgment of the Company Board, after receipt of advice from outside counsel,
failure so to disclose would violate its fiduciary duties to the Company's
shareholders under applicable law.
Section 5.7 Shareholders' Meeting. (a) In order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting"), as soon as practicable
after the Registration Statement is declared effective, for the purpose of
considering and voting upon this Agreement. The Company shall include in the
Proxy Statement/Prospectus the unanimous recommendation of the Company Board
that shareholders of the Company vote in favor of the adoption of this
Agreement. Nothing contained in the preceding sentence shall prohibit the
Company from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act or (ii)
from making any disclosure to its shareholders if, in the good faith judgment of
the Company Board, after receipt of advice from outside counsel, failure so to
disclose would violate its fiduciary duties to the Company's shareholders under
applicable law.
(b) The Company shall use all commercially reasonable efforts
to hold the Special Meeting as soon as reasonably practicable after the date
hereof.
Section 5.8 Proxy Statement/Prospectus; Registration Statement.
(a) Parent and the Company shall use commercially reasonable
efforts to prepare and file with the SEC, as promptly as practicable after the
execution of this Agreement, a proxy statement relating to the Special Meeting
to be held in connection with the
35
Transactions (together with any amendments thereof or supplements thereto, the
"Proxy Statement/Prospectus"). Parent shall use commercially reasonable efforts
to prepare and file with the SEC, as promptly as practicable after the execution
of this Agreement, a registration statement on Form S-4 (together with all
amendments thereto, the "Parent Registration Statement"), in which the Proxy
Statement/Prospectus shall be included as a prospectus, in connection with the
registration under the Securities Act of the shares of Parent Common Stock and
warrants to purchase shares of Parent Common Stock to be issued pursuant to the
Merger. Each of Parent and the Company (i) shall cause the Proxy
Statement/Prospectus and the Parent Registration Statement to comply as to form
in all material respects with the applicable provision of the Securities Act,
the Exchange Act and the rules and regulations thereunder, (ii) shall use all
reasonable efforts to have or cause the Parent Registration Statement to become
effective as promptly as practicable, and (iii) shall take any and all action
required under any applicable Federal or state securities laws in connection
with the issuance of shares of Parent Common Stock pursuant to the Merger.
Parent and the Company shall furnish to the other all information concerning
Parent and the Company as the other may reasonably request in connection with
the preparation of the documents referred to herein. As promptly as practicable
after the Parent Registration Statement shall have become effective, the Company
shall deliver the Proxy Statement/Prospectus to its shareholders.
(b) The information supplied by each of Parent and the Company
for inclusion in the Parent Registration Statement and the Proxy
Statement/Prospectus shall not (i) at the time the Parent Registration Statement
is declared effective, (ii) at the time the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to the shareholders of
the Company, (iii) at the time of the Special Meeting, or (iv) 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 therein not misleading. If, at any time prior to the Effective Time,
any event or circumstance relating to the Company, any Subsidiary of the
Company, Parent, any Subsidiary of Parent, or their respective officers or
directors, should arise or be discovered by such party which should be set forth
in an amendment or a supplement to the Parent Registration Statement or the
Proxy Statement/Prospectus, such party shall promptly inform the other thereof
and take appropriate action in respect thereof. Parent may suspend the
effectiveness or distribution of the Proxy Statement/Prospectus, as reasonably
deemed appropriate, pending resolution of such event or circumstance.
Section 5.9 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable, whether under applicable
laws and regulations or otherwise, or to remove any injunctions or other
impediments or delays, legal or otherwise, to consummate and make effective the
Merger and the other transactions contemplated by this Agreement and the
Ancillary Agreements. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement or
the Ancillary Agreements, the proper officers and directors of the Company and
Parent shall use all reasonable efforts to take, or cause to be taken, all such
necessary actions.
36
Section 5.10 Publicity. So long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement, the Ancillary Agreements, or the other
transactions contemplated hereby or thereby without the prior consultation of
the other party, except as may be required by law or by any listing agreement
with a national securities exchange. Without limiting the foregoing, so long as
this Agreement is in effect, the Company shall not issue or cause the
publication of any press release or other announcement without the prior consent
of Parent, which consent shall not be unreasonably withheld.
Section 5.11 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time and (ii) any material failure of the Company 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 or under any Ancillary Agreement;
provided, however, that the delivery of any notice pursuant to this Section 5.11
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.12 Directors' and Officers' Insurance and Indemnification.
Parent agrees that at all times after the Effective Time, it shall indemnify, or
shall cause the Company (or the Surviving Corporation if after the Effective
Time) and its Subsidiaries to indemnify, each person who is now, or has been at
any time prior to the date hereof, a director or officer of the Company or of
any of the Company's Subsidiaries, successors and assigns (individually an
"Indemnified Party" and collectively the "Indemnified Parties"), to the same
extent and in the same manner as is now provided in the respective certificates
of incorporation or by-laws of the Company and such Subsidiaries or otherwise in
effect on the date hereof, with respect to any claim, liability, loss, damage,
cost or expense (whenever asserted or claimed) ("Indemnified Liability") based
in whole or in part on, or arising in whole or in part out of, any matter
existing or occurring at or prior to the Effective Time. Parent shall, and shall
cause the Company (or the Surviving Corporation if after the Effective Time) to,
maintain in effect for not less than six (6) years after the Effective Time the
current policies of directors' and officers' liability insurance maintained by
the Company and its Subsidiaries on the date hereof (provided that Parent may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies as insured) with respect to matters existing or
occurring at or prior to the Effective Time; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
shall exceed one hundred fifty percent (150%) of the per annum rate of premium
currently paid by the Company and its Subsidiaries for such insurance on the
date of this Agreement, which amount is set forth in Section 5.14 of the
Disclosure Schedule, then Parent shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, and the Company (or the Surviving
Corporation if after the Effective Time) shall, provide the maximum
37
coverage that shall then be available at an annual premium equal to one hundred
fifty (150%) of such rate. Without limiting the foregoing, in the event any
Indemnified Party becomes involved in any capacity in any action, proceeding or
investigation based in whole or in part on, or arising in whole or in part out
of, any matter, including the transactions contemplated hereby, existing or
occurring at or prior to the Effective Time, then to the extent permitted by law
Parent shall, or shall cause the Company (or the Surviving Corporation if after
the Effective Time) to, periodically advance to such Indemnified Party its legal
and other expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the provision by such Indemnified
Party of an undertaking to reimburse the amounts so advanced in the event of a
final determination by a court of competent jurisdiction that such Indemnified
Party is not entitled thereto. Promptly after receipt by an Indemnified Party of
notice of the assertion (an "Assertion") of any claim or the commencement of any
action against him in respect to which indemnity or reimbursement may be sought
against Parent, the Company, the Surviving Corporation or a Subsidiary of the
Company or the Surviving Corporation ("Indemnitors") hereunder, such Indemnified
Party shall notify any Indemnitor in writing of the Assertion, but the failure
to so notify any Indemnitor shall not relieve any Indemnitor of any liability it
may have to such Indemnified Party hereunder except where such failure shall
have materially prejudiced Indemnitor in defending against such Assertion.
Indemnitors shall be entitled to participate in and, to the extent Indemnitors
elect by written notice to such Indemnified Party within thirty (30) days after
receipt by any Indemnitor of notice of such Assertion, to assume, the defense of
such Assertion, at their own expense, with counsel chosen by Indemnitors and
reasonably satisfactory to such Indemnified Party. Notwithstanding that
Indemnitors shall have elected by such written notice to assume the defense of
any Assertion, such Indemnified Party shall have the right to participate in the
investigation and defense thereof, with separate counsel chosen by such
Indemnified Party, but, until there is a conflict between the positions of the
Indemnified Party and the Indemnitors, the fees and expenses of such counsel
shall be paid by such Indemnified Party. No Indemnified Party shall settle any
Assertion without the prior written consent of Parent, nor shall Parent settle
any Assertion without either (i) the written consent of all Indemnified Parties
against whom such Assertion was made, or (ii) obtaining a general release from
the party making the Assertion for all Indemnified Parties as a condition of
such settlement. The provisions of this Section 5.12 are intended for the
benefit of, and shall be enforceable by, the respective Indemnified Parties.
Section 5.13 Affiliate Agreements. The Company has previously
delivered to Parent a list setting forth the names of all persons who are
expected to be, at the time of the Special Meeting, in the Company's reasonable
judgment, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall furnish such information and documents as
Parent may reasonably request for the purpose of reviewing such list. The
Company shall use its reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished pursuant to this Section 5.13
to execute a written agreement as soon as practicable after the date hereof, but
in no event later than the day preceding the filing of the Registration
Statement, in substantially the form of Exhibit E hereto.
38
Section 5.14 Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (i) with respect to the timing of the Special Meeting,
(ii) in determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, and (iii) in seeking any such actions,
consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith and timely seeking to obtain any
such actions, consents approvals or waivers. Subject to the terms and conditions
of this Agreement, Parent and the Company will each use its reasonable best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after the Registration Statement is
filed, and Parent and the Company shall, subject to applicable law, confer on a
regular and frequent basis with one or more representatives of one another to
report operational matters of significance to the Merger and the general status
of ongoing operations insofar as relevant to the Merger, provided that the
parties will not confer on any matter to the extent inconsistent with law.
Section 5.15 Letters of Accountants.
(a) Parent shall use all reasonable efforts to cause to be
delivered to the Company a comfort letter of KPMG LLP, Parent's independent
auditors, dated within two (2) business days before the date on which the
Registration Statement shall become effective and addressed to the Company, in
form and substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to the Effective Time.
(b) The Company shall use all reasonable best efforts to cause
to be delivered to Parent a comfort letter of Xxxxxx Xxxxxxxx LLP, the Company's
independent auditors, dated within two (2) business days before the date on
which the Registration Statement shall become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
which letter shall be brought down to the Effective Time.
Section 5.16 Consents of Accountants. Parent and the Company will
each use reasonable best efforts to cause to be delivered to each other consents
from their respective independent auditors, dated the date on which the
Registration Statement shall become effective, in form reasonably satisfactory
to the recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form S-4 under the Securities Act.
39
Section 5.17 Subsequent Financial Statements. The Company shall
consult with Parent prior to making publicly available its financial results for
any period after the date of this Agreement and prior to filing any Company SEC
Documents after the date of this Agreement, it being understood that Parent
shall have no liability by reason of such consultation.
Section 5.18 Nasdaq Qualification. Parent shall use all reasonable
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be qualified for inclusion in the Nasdaq Stock Market, subject to official
notice of issuance, as of or prior to the Effective Time.
Section 5.19 Employee Plans and Arrangements. As soon as practicable
after the execution of this Agreement, the Company and Parent shall confer and
work together in good faith to agree upon mutually acceptable employee benefit
and compensation arrangements (and amend or terminate Company employee plans
immediately prior to the Effective Time, if appropriate). Parent shall use
commercially reasonable efforts to ensure that continuous employment with the
Company or its Subsidiaries shall be credited to Company employees who become
Parent employees or become Continuing Employees for all purposes of eligibility
and vesting of benefits but not for purposes of accrual of benefits. Parent
shall take commercially reasonable steps to (a) cause to be waived all
limitations as to preexisting condition limitations, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the employees of the Company and its Subsidiaries under any welfare benefit
plans that such employees are eligible to participate in after the Effective
Time, other than limitations, exclusions or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of the
Effective Time under any welfare benefit plan maintained for such employees
immediately prior to the Effective Time and (b) provide each employee of the
Company and its Subsidiaries with credit for any co-payments and deductibles
paid during the plan year commencing immediately prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time for such plan year. For purposes of this Section 5.19,
"Continuing Employee" means any employee of the Company who continues as an
employee of the Surviving Corporation or Parent after the Effective Time.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Obligations of Each Party. The
obligations of the Company, on the one hand, and Parent and Sub, on the other
hand, to consummate the Merger are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of the
following conditions:
(a) the Company shall have received the Company
Shareholder Approval;
(b) no court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any statute, rule
or regulation, restraining or prohibiting (collectively, "Restraints") the
consummation of the Merger or the effective operation of the business of the
Company and its respective Subsidiaries after the Effective Time;
40
(c) all Requisite Regulatory Approvals shall have been
obtained but excluding any Requisite Regulatory Approval the failure to obtain
which would not have a material adverse effect on Parent, Sub, the Company or,
after the Effective Time, the Surviving Corporation;
(d) the shares of Parent Common Stock to be issued in the
Merger shall have been qualified for inclusion in Nasdaq Stock Market; and
(e) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending effectiveness of the
Registration Statement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the SEC.
Section 6.2 Conditions to the Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) the representations and warranties of the Company shall
have been true and accurate both when made and (except for those representations
and warranties that address matters only as of a particular date which need only
be true and accurate as of such date) as of the Effective Time as if made at and
as of such time, except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries taken as a whole; provided, that the
representations and warranties set forth in Sections 3.2 and 3.3 shall be true
and correct in all respects;
(b) the Company shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior
to the Effective Time;
(c) the Company shall have obtained, and there shall be in
full force and effect, the consents described in Section 6.2 of the Disclosure
Schedule;
(d) each of the Ancillary Agreements shall be valid, in
full force and effect and complied with in all material respects;
(e) since the date of this Agreement, there shall not have
occurred any event, change or effect having, or which could be reasonably likely
to have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries;
(f) Parent shall have received an opinion of Xxxxxx Xxxxxxx
PLLC, substantially in the form attached as Exhibit F-1 hereto and otherwise
reasonably satisfactory in form and substance to Parent, addressed to Parent and
dated the Closing Date;
41
(g) The Company shall have furnished Parent with a certificate
dated the Closing Date signed on behalf of it by the Chairman of the Board of
Directors of the Company or the President and Chief Financial Officer of the
Company to the effect that the conditions set forth in Sections 6.2(a) through
(e) have been satisfied;
(h) The Company shall deliver to Parent a certification, in
form and substance reasonably satisfactory to Parent, that neither the Company
nor any of its Subsidiaries is or has been a U.S. real property holding company
(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
(i) Each employee of the Company shall have executed and
delivered a Proprietary Rights and Confidentiality Agreement to Parent and
confirmation of "at will" employment, in each case in form and substance
acceptable to Parent.
Section 6.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction (or waiver by the Company) of the following further conditions:
(a) the representations and warranties of Parent and Sub shall
have been true and accurate both when made and (except for those representations
and warranties that address matters only as of a particular date which need only
be true and accurate as of such date) as of the Effective Time as if made at and
as of such time, except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on Parent and its Subsidiaries taken as a whole; provided, that the
representations and warranties set forth in Sections 4.2 and 4.3 shall be true
and correct in all respects;
(b) Each of Parent and Sub shall have performed in all
material respects all of the respective obligations hereunder required to be
performed by Parent or Sub, as the case may be, at or prior to the Effective
Time;
(c) Since the date of this Agreement, there shall not have
occurred any event, change or effect having, or which could be reasonably likely
to have, individually or in the aggregate, a material adverse effect on Parent
and its Subsidiaries, taken as a whole;
(d) The Company shall have received an opinion of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, substantially in the form attached as Exhibit
F-2 hereto and otherwise reasonably satisfactory in form and substance to the
Company, addressed to the Company and dated the Closing Date;
(e) Parent shall have furnished the Company with a certificate
dated the Closing Date signed on behalf of it by the President of Parent to the
effect that the conditions set forth in Sections 6.3(a) through (c) have been
satisfied.
42
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Effective Time, and (except in the case of 7.1(e)) whether before or after
the Company Shareholder Approval:
(a) by mutual written consent of the Company and Parent, if
the Board of Directors of each so determines by a vote of a majority of its
entire Board;
(b) by either the Company Board or the Parent Board:
(i) if the Merger shall not have
been consummated by December 15, 2000 unless the Company Board or Parent
Board, as the case may be, has expressly restricted in writing its right
to terminate this Agreement pursuant to this Section 7.1(b)(i); provided,
however, that the right to terminate this Agreement pursuant to this
Section 7.1(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the failure
of the Merger to be consummated by such time;
(ii) if the Company Shareholder
Approval shall not have been obtained at the Special Meeting duly convened
therefor or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of
the effects set forth in Section 6.1(c) shall be in effect and shall have
become final and nonappealable, or if any Governmental Entity that must
grant a Requisite Regulatory Approval has denied approval of the Merger
and such denial has become final and nonappealable; provided, however,
that the party seeking to terminate this Agreement pursuant to this
Section 7.1(b)(iii) shall have used commercially reasonable efforts to
prevent the entry of and to remove such Restraint or to obtain such
Requisite Regulatory Approval, as the case may be;
(c) by the Company Board (provided that the Company is not
then in material breach of any representation, warranty, covenant or other
agreement contained herein), if Parent shall have materially breached or failed
to perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.3(a) or (b), and (B)
is incapable of being cured by Parent or is not cured within thirty (30) days of
written notice thereof;
(d) by the Parent Board (provided that Parent is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), if the Company shall have materially breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set forth
in Section 6.2(a) or (b), and (B) is incapable of being cured by the Company or
is not cured within thirty (30) days of written notice thereof; and
43
(e) by the Parent Board, at any time prior to the Special
Meeting, if the Company Board shall have (A) failed to include in the Proxy
Statement/Prospectus to the shareholders of the Company its recommendation
without modification or qualification that such shareholders approve this
Agreement and the transaction contemplated hereby, (B) failed to reaffirm such
recommendation upon Parent's request, (C) subsequently withdrawn such
recommendation or (D) modified or qualified such recommendation in a manner
adverse to the interests of Parent.
Section 7.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided
in Section 7.1 hereof, and subject to the provisions of Section 8.1 hereof, this
Agreement shall forthwith become void and there shall be no liability on the
part of any of the parties, except (i) as set forth in this Section 7.2, Section
8.1 and in the last sentence of Section 5.3, and (ii) nothing herein shall
relieve any party from liability for any breach hereof.
(b) The Company shall pay to Parent a fee of $2.5 million,
plus an amount equal to all of the costs and expenses incurred by Parent in
connection with this Agreement, the Ancillary Agreements and the consummation of
the transactions contemplated hereby and thereby, upon the earliest to occur of
the following events:
(i) the termination of this Agreement by Parent
pursuant to Section 7.1(e);
(ii) the termination of this Agreement by the Company
or Parent pursuant to Section 7.1(b)(ii); or
(iii) the termination of this Agreement by Parent
pursuant to Section 7.1(d).
(c) The fee, costs and expenses payable pursuant to Section
7.2(b) hereof shall be paid (1) within one (1) business day after the first to
occur of any of the events referred to in Section 7.2(b)(i) or 7.2(b)(iii) and
(2) in the case of Section 7.2(b)(ii) hereof, upon the earlier to occur of (A)
the date of the announcement of an Alternative Transaction or (B) 360 calendar
days. Parent will provide to the Company reasonable documentation in respect of
the costs and expenses payable pursuant to Section 7.2(b) hereof.
(d) Notwithstanding anything to the contrary in this Section
7.2, in the event of termination of this Agreement pursuant to Section
7.2(b)(ii), if an Alternative Transaction has not been entered into or announced
prior to 360 calendar days from the date of such termination, the fee payable
pursuant to Section 7.2(b) shall be reduced from $2.5 million to $1 million.
44
(e) Notwithstanding anything to the contrary in this Section
7.2, the payments provided for in this Section 7.2 shall not be deemed to be
Parent's or Sub's exclusive remedy, and Parent and Sub shall have the right to
pursue any remedies available to them at law or in equity.
Section 7.3 Amendment. Subject to compliance with applicable law,
this Agreement may be amended by the parties at any time before or after the
Company Shareholder Approval; provided, however, that after any such approval,
there may not be, without further approval of such shareholders of the Company,
any amendment of this Agreement that changes the amount or the form of the
consideration to be delivered to the holders of Company Common Stock hereunder,
or which by law otherwise expressly requires the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto and duly approved by the
parties' respective Boards of Directors or a duly designated committee thereof.
Section 7.4 Extension; Waiver. At any time prior to the Effective
Time, a party may, subject to the provision of Section 7.3 (and for this purpose
treating any waiver referred to below as an amendment), (a) extend the time for
the performance of any of the obligations or other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties of the other
parties contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. Any extension or waiver
given in compliance with this Section 7.4 or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as otherwise contemplated
by this Agreement, including Section 7.2 hereof, whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement,
the Ancillary Agreements, the consummation of the transactions contemplated
hereby and thereby, and the issuance of any securities, including all legal,
accounting and financial advisory fees and expenses ("Third Party Expenses"),
shall be paid by the party incurring such expenses, except that (i) those costs
and expenses incurred in connection with filing, printing and mailing the
Registration Statement and the Proxy Statement/Prospectus (including filing fees
related thereto) shall be shared equally by Parent and the Company and (ii) the
Company shall cause its Third Party Expenses to be invoiced at or before the
Closing and not to exceed, in the aggregate, $1,200,000.
Section 8.2 Nonsurvival 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.
45
Section 8.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, faxed
(which is confirmed) or sent by an overnight courier service, such as FedEx, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to:
Tumbleweed Communications Corp.
000 Xxxxxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx - Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
and
(b) if to the Company, to:
Interface Systems, Inc.
0000 Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Nero
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxxx X. Xxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Section 8.4 Interpretation. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or
Section of this Agreement, as the case may be, 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."
The phrase "made available" in this Agreement shall mean that the information
referred to has been made available if requested by the party to whom such
information is to be made available. The phrases "the date of this Agreement",
"the date hereof," and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to June , 2000. As used in this Agreement,
the term "affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the
Exchange Act. The headings and table of contents contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation hereof.
46
Section 8.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 8.6 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement, the Ancillary Agreements and the Confidentiality
Agreement (including the documents and the instruments referred to herein and
therein): (a) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 5.12 hereof, are
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
Section 8.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.8 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 8.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
TUMBLEWEED COMMUNICATIONS CORP.
By:
-----------------------------------------
Name:
Title:
MAIZE ACQUISITION SUB, INC.
By:
-----------------------------------------
Name:
Title:
INTERFACE SYSTEMS, INC.
By:
-----------------------------------------
Name:
Title:
47
TABLE OF CONTENTS
ARTICLE I
MERGER.................................................................2
Section 1.1 The Merger................................................2
Section 1.2 Effective Time............................................3
Section 1.3 Closing...................................................3
Section 1.4 Directors and Officers of the Surviving Corporation.......3
ARTICLE II
CONVERSION OF SHARES...................................................3
Section 2.1 Conversion of Shares......................................3
Section 2.2 Surrender of Certificates.................................5
Section 2.3 No Fractional Shares......................................5
Section 2.4 No Dividends..............................................6
Section 2.5 Return to Parent..........................................6
Section 2.6 Company Option Plans......................................7
Section 2.7 Company Warrants..........................................8
Section 2.8 Stock Transfer Books......................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY..............................9
Section 3.1 Organization..............................................9
Section 3.2 Capitalization...........................................10
Section 3.3 Corporate Authorization; Validity of Agreement;
Company Action...........................................12
Section 3.4 SEC Reports and Financial Statements.....................14
Section 3.5 Absence of Certain Changes...............................14
Section 3.6 No Undisclosed Liabilities...............................15
Section 3.7 Information in Proxy Statement/Prospectus................15
Section 3.8 Employee Benefit Matters.................................16
Section 3.9 Litigation; Compliance with Law..........................18
Section 3.10 No Default...............................................19
Section 3.11 Taxes....................................................19
Section 3.12 Contracts................................................21
Section 3.13 Assets; Real Property....................................21
48
Section 3.14 Environmental Matters....................................21
Section 3.15 Product Liability........................................22
Section 3.16 Intellectual Property....................................23
Section 3.17 Proprietary Rights and Confidentiality Agreements........27
Section 3.18 Insurance................................................27
Section 3.19 Suppliers and Customers..................................27
Section 3.20 Labor Matters............................................27
Section 3.21 Accounts Receivable; Inventory...........................29
Section 3.22 Transactions with Affiliates.............................29
Section 3.23 Opinion of Financial Advisor.............................29
Section 3.24 Brokers or Finders.......................................30
Section 3.25 Tax Matters..............................................30
Section 3.26 State Takeover Statutes..................................30
Section 3.27 Full Disclosure..........................................30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB......................31
Section 4.1 Organization.............................................31
Section 4.2 Capitalization...........................................31
Section 4.3 Authorization; Validity of Agreement; Necessary Action...32
Section 4.4 Consents and Approvals; No Violations....................33
Section 4.5 Information in Proxy Statement/Prospectus................33
Section 4.6 SEC Reports and Financial Statements.....................34
Section 4.7 Absence of Certain Changes...............................35
Section 4.8 Litigation; Compliance with Law..........................35
Section 4.9 Brokers or Finders.......................................36
Section 4.10 Tax Matters..............................................36
Section 4.11 Operations of Sub........................................36
ARTICLE V
COVENANTS.............................................................36
Section 5.1 Interim Operations of the Company........................36
Section 5.2 Interim Operations of Parent.............................39
Section 5.3 Access to Information....................................40
Section 5.4 Consents and Approvals...................................41
Section 5.5 Employment Agreements....................................41
Section 5.6 No Solicitation by the Company...........................41
Section 5.7 Shareholders' Meeting....................................44
Section 5.8 Proxy Statement/Prospectus; Registration Statement.......44
Section 5.9 Additional Agreements....................................45
Section 5.10 Publicity................................................46
Section 5.11 Notification of Certain Matters..........................46
Section 5.12 Directors' and Officers' Insurance and Indemnification...46
Section 5.13 Affiliate Agreements.....................................48
Section 5.14 Cooperation..............................................48
Section 5.15 Letters of Accountants...................................49
Section 5.16 Consents of Accountants..................................49
Section 5.17 Subsequent Financial Statements..........................49
Section 5.18 Nasdaq Qualification.....................................50
Section 5.19 Employee Plans and Arrangements..........................50
49
ARTICLE VI
CONDITIONS............................................................51
Section 6.1 Conditions to the Obligations of Each Party..............51
Section 6.2 Conditions to the Obligations of Parent and Sub..........51
Section 6.3 Conditions to the Obligations of the Company.............53
ARTICLE VII
TERMINATION...........................................................54
Section 7.1 Termination..............................................54
Section 7.2 Effect of Termination....................................55
Section 7.3 Amendment................................................56
Section 7.4 Extension; Waiver........................................57
ARTICLE VIII
MISCELLANEOUS.........................................................57
Section 8.1 Fees and Expenses........................................57
Section 8.2 Nonsurvival of Representations and Warranties............57
Section 8.3 Notices..................................................58
Section 8.4 Interpretation...........................................59
Section 8.5 Counterparts.............................................60
Section 8.6 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership..................................... 60
Section 8.7 Severability.............................................60
Section 8.8 Governing Law............................................60
Section 8.9 Assignment...............................................60
EXHIBITS
A Form of Voting Agreement
B-1 Form of Non-Competition Agreement
B-2 Form of Employment Agreement
C Form of Option Agreement
D-1 Form of Certificate of Merger
D-2 Form of Delaware Certificate of Merger
E Form of Affiliate Agreement
F-1 Form of Xxxxxx Xxxxxxx PLLC Opinion
F-2 Form of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP Opinion
50
INDEX OF DEFINED TERMS
Acquisition Agreement...................................................5.7(b)
Agreement.............................................................Preamble
Alternative Transaction.................................................5.7(a)
Ancillary Agreements..................................................Recitals
Assertion.................................................................5.12
Audit..................................................................3.11(j)
Certificate of Merger......................................................1.2
Certificates............................................................2.1(d)
Closing....................................................................1.3
Closing Date...............................................................1.3
Code..................................................................Recitals
Company...............................................................Preamble
Company Agreement.......................................................3.3(c)
Company Balance Sheet.....................................................3.21
Company Benefit Plans...................................................3.8(a)
Company Board...........................................................3.3(b)
Company Common Stock....................................................2.1(a)
Company Financial Statements...............................................3.4
Company Option Plans.......................................................2.6
Company Options............................................................2.6
Company SEC Documents......................................................3.4
Special Meeting.........................................................5.7(a)
Company Shareholder Approval............................................3.3(a)
Company Warrants ..........................................................2.7
Confidentiality Agreement..................................................5.3
DGCL.......................................................................1.1
Disclosure Schedule................................................Article III
Effective Time.............................................................1.2
Employment Agreements.................................................Recitals
Environmental Claims......................................................3.14
Environmental Laws........................................................3.14
ERISA...................................................................3.8(a)
Exchange Act............................................................3.3(c)
Exchange Agent.............................................................2.2
Exchange Ratio..........................................................2.1(a)
GAAP.......................................................................3.4
Governmental Entity.....................................................3.3(c)
HMO.....................................................................3.8(d)
Indemnified Liability.....................................................5.12
Indemnified Parties.......................................................5.12
Indemnified Party.........................................................5.12
Indemnitors ..............................................................5.12
Intellectual Property..................................................3.16(a)
IRS.....................................................................3.8(a)
License Agreements.....................................................3.16(b)
Licensed Software......................................................3.16(k)
Liens...................................................................3.2(c)
material adverse effect....................................................3.1
Materials of Environmental Concern........................................3.14
Merger.....................................................................1.1
Merger Consideration....................................................2.1(a)
Merger Filing..............................................................1.2
Michigan Secretary of State................................................1.2
Millennial Date Data...................................................3.16(k)
Non-Competition Agreements ...........................................Recitals
Option Agreement .....................................................Recitals
Parent................................................................Preamble
Parent Common Stock.....................................................2.1(a)
Parent Preferred Stock..................................................4.2(a)
Parent Registration Statement...........................................5.8(a)
Parent SEC Documents.......................................................4.6
Proxy Statement/Prospectus..............................................5.8(a)
Real Property.............................................................3.11
Requisite Regulatory Approvals.............................................5.4
51
Restraints..............................................................6.1(b)
Rights .................................................................3.2(b)
SEC........................................................................3.4
Securities Act.............................................................3.4
Software...............................................................3.16(j)
Sub ..................................................................Preamble
Subsequent Determination ...............................................5.6(b)
Subsidiary.................................................................3.1
Superior Proposal ......................................................5.6(b)
Surviving Corporation......................................................1.1
System.................................................................3.16(l)
Tax ...................................................................3.11(j)
Tax Authority .........................................................3.11(j)
Tax Returns ...........................................................3.11(j)
Taxes .................................................................3.11(j)
Third Party.............................................................5.6(a)
Third Party Expenses.......................................................8.1
Trade Secrets..........................................................3.16(a)
Trademarks.............................................................3.16(a)
Voting Agreements ....................................................Recitals
