Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
XXXXXX.XXX, INC.
MERENGUE ACQUISITION CORP.
and
MARKET GUIDE INC.
Dated as of June 23, 1999
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.........................................................2
SECTION 1.01 Certain Defined Terms...................................2
ARTICLE II THE MERGER.........................................................6
SECTION 2.01 The Merger .............................................6
SECTION 2.02 Closing.................................................6
SECTION 2.03 Effective Time..........................................7
SECTION 2.04 Effect of the Merger....................................7
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors
and Officers of Surviving Corporation...................7
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES................7
SECTION 3.01 Conversion of Shares....................................7
SECTION 3.02 Exchange of Shares Other than Dissenting Shares
and Treasury Shares.....................................8
SECTION 3.03 Stock Transfer Books...................................10
SECTION 3.04 No Fractional Share Certificates.......................10
SECTION 3.05 Options to Purchase Company Common Stock...............11
SECTION 3.06 Certain Adjustments....................................12
SECTION 3.07 Dissenters' Rights.....................................12
SECTION 3.08 Lost, Stolen or Destroyed Certificates.................12
SECTION 3.09 Taking of Necessary Action; Further Action.............12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY.........................13
SECTION 4.01 Organization and Qualification; Subsidiaries...........13
SECTION 4.02 Certificate of Incorporation and Bylaws................13
SECTION 4.03 Capitalization.........................................14
SECTION 4.04 Authority Relative to This Agreement...................14
SECTION 4.05 No Conflict; Required Filings and Consents.............15
SECTION 4.06 Permits; Compliance with Laws..........................15
SECTION 4.07 SEC Filings; Financial Statements......................16
SECTION 4.08 Absence of Certain Changes or Events...................17
SECTION 4.09 Employee Benefit Plans; Labor Matters..................17
SECTION 4.10 Pooling; Certain Tax Matters...........................20
SECTION 4.11 Contracts..............................................20
SECTION 4.12 Litigation.............................................20
SECTION 4.13 Environmental Matters..................................21
SECTION 4.14 Intellectual Property..................................21
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SECTION 4.15 Taxes..................................................23
SECTION 4.16 Insurance ............................................24
SECTION 4.17 Properties ............................................25
SECTION 4.18 Affiliates ............................................25
SECTION 4.19 Opinion of Financial Advisor...........................25
SECTION 4.20 Brokers................................................25
SECTION 4.21 Certain Business Practices.............................26
SECTION 4.22 Section 912 of the NYBCL Not Applicable................26
SECTION 4.23 Business Activity Restriction..........................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........26
SECTION 5.01 Organization and Qualification; Subsidiaries...........26
SECTION 5.02 Certificate of Incorporation and Bylaws................27
SECTION 5.03 Capitalization.........................................27
SECTION 5.04 Authority Relative to This Agreement...................28
SECTION 5.05 No Conflict; Required Filings and Consents.............28
SECTION 5.06 Permits; Compliance with Laws..........................29
SECTION 5.07 Absence of Certain Changes or Events...................29
SECTION 5.08 SEC Filings; Financial Statements......................30
SECTION 5.09 Pooling; Certain Tax Matters...........................31
SECTION 5.10 Litigation.............................................31
SECTION 5.11 Taxes..................................................31
SECTION 5.12 Brokers ...............................................31
SECTION 5.13 Certain Business Practices.............................31
SECTION 5.14 Section 203 of the DGCL Not Applicable.................32
SECTION 5.15 No Prior Activities....................................32
SECTION 5.16 Employee Benefit Plans; Labor Matters..................32
SECTION 5.17 Intellectual Property..................................34
ARTICLE VI COVENANTS.........................................................35
SECTION 6.01 Conduct of Business by Company Pending the Closing.....35
SECTION 6.02 Notices of Certain Events..............................37
SECTION 6.03 Access to Information; Confidentiality.................37
SECTION 6.04 No Solicitation of Transactions........................38
SECTION 6.05 Tax-Free Transaction; Pooling..........................40
SECTION 6.06 Control of Operations..................................40
SECTION 6.07 Further Action; Consents; Filings......................40
SECTION 6.08 Additional Reports.....................................41
SECTION 6.09 Tax Information........................................41
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ARTICLE VII ADDITIONAL AGREEMENTS............................................41
SECTION 7.01 Registration Statement; Joint Proxy Statement..........41
SECTION 7.02 Stockholders' Meetings.................................43
SECTION 7.03 Affiliates......................................... 44
SECTION 7.04 Directors' and Officers' Indemnification and
Insurance..............................................44
SECTION 7.05 No Shelf Registration..................................45
SECTION 7.06 Public Announcements...................................45
SECTION 7.07 NNM Listing............................................45
SECTION 7.08 Blue Sky ..............................................45
SECTION 7.09 Company Stock Options/Registration Statements
on Form S-8............................................45
SECTION 7.10 Employee Matters.......................................46
SECTION 7.11 Board Representation...................................46
ARTICLE VIII CONDITIONS TO THE MERGER........................................47
SECTION 8.01 Conditions to the Obligations of Each Party to
Consummate the Merger..................................47
SECTION 8.02 Conditions to the Obligations of Company...............48
SECTION 8.03 Conditions to the Obligations of Parent................48
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................49
SECTION 9.01 Termination............................................49
SECTION 9.02 Effect of Termination..................................51
SECTION 9.03 Amendment..............................................51
SECTION 9.04 Waiver.................................................51
SECTION 9.05 Termination Fee; Expenses..............................51
ARTICLE X GENERAL PROVISIONS.................................................52
SECTION 10.01 Non-Survival of Representations and Warranties........52
SECTION 10.02 Notices...............................................52
SECTION 10.03 Severability .........................................53
SECTION 10.04 Assignment; Binding Effect; Benefit...................54
SECTION 10.05 Incorporation of Exhibits.............................54
SECTION 10.06 Governing Law.........................................54
SECTION 10.07 Waiver of Jury Trial..................................54
SECTION 10.08 Headings; Interpretation..............................55
SECTION 10.09 Counterparts..........................................55
SECTION 10.10 Entire Agreement......................................55
ANNEXES
ANNEX A Company Stockholder Agreement
ANNEX B Parent Stockholder Agreement
ANNEX C Form of Company Affiliate Agreement
ANNEX D Form of Stockholder Affiliate Agreement
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of June 23,
1999 (as amended, supplemented or otherwise modified from time to time, this
"Agreement"), among XXXXXX.XXX, INC., a Delaware corporation ("Parent"), MARKET
GUIDE INC., a New York corporation ("Company"), and MERENGUE ACQUISITION CORP. a
New York corporation and a direct wholly owned subsidiary of Parent ("Merger
Sub"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the boards of directors of Parent and Company have determined
that it is advisable and in the best interests of their respective companies and
stockholders to enter into a business combination by means of the merger of
Merger Sub with and into Company (the "Merger") and have approved and adopted
this Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain stockholders of
Company have entered into a stockholder agreement (each, a "Company Stockholder
Agreement") in the form attached hereto as Annex A;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Company to enter into this Agreement, certain stockholders of
Parent have entered into a stockholder agreement (each, a "Parent Stockholder
Agreement") in the form attached hereto as Annex B;
WHEREAS, for financial reporting purposes, it is intended that the
Merger be accounted for as a "pooling of interests" under United States
generally accepted accounting principles ("U. S. GAAP") and the accounting
standards of the United States Securities and Exchange Commission (the "SEC");
and
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger shall qualify as a tax-free reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended (together with the rules and
regulations promulgated thereunder, the "Code"), and that this Agreement shall
be, and hereby is, adopted as a plan of reorganization for purposes of Section
368 of the Code;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms . Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below (such meanings to be equally applicable to
the singular and plural forms of the terms defined):
"Affiliate" shall mean, with respect to any person, any other person
that controls, is controlled by or is under common control with the first
person.
"Blue Sky Laws" shall mean state securities or "blue sky" laws.
"Business Day" shall mean any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in the City of New
York.
"Company Competing Transaction" shall mean any of the following
involving Company (other than the Merger):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) any sale, lease, exchange, transfer or other disposition of
33% or more of the assets of such party and its subsidiaries, taken as a
whole, in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 33% or more of the
outstanding voting securities of such party or the filing of a
registration statement under the Securities Act in connection therewith;
or
(iv) any person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined under Section 13(d) of the Exchange Act) having been formed
(other than a group consisting exclusively of those individuals who
execute a Company Affiliate Agreement) which beneficially owns or has
the right to acquire beneficial ownership of, 33% or more of the
outstanding voting securities of such party;
(v) any solicitation in opposition to the approval of this
Agreement by the stockholders of such party; or
(vi) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the
foregoing.
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"Company Disclosure Schedule" shall mean the disclosure schedule
delivered by Company to Parent prior to the execution of this Agreement and
forming a part hereof.
"Company Material Adverse Effect" shall mean any change in or effect
on the business of Company and the Company Subsidiaries that, individually or in
the aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Company and the
Company Subsidiaries, taken as a whole, provided, however, that in no event
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shall a decrease in the trading price of Company Common Stock be considered a
Company Material Adverse Effect.
"Company Stock Plans" shall mean Company's 1995 Key Employee Incentive
Plan and Company's 1995 Independent Director's Stock Incentive Plan.
"Confidentiality Agreement" shall mean the confidentiality agreement,
dated as of April 26, 1999, between Parent and Company.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"$" shall mean United States Dollars.
"Encumbrances" shall mean all claims, security interests, liens,
pledges, charges, escrows, options, proxies, rights of first refusal, preemptive
rights, mortgages, hypothecations, prior assignments, title retention
agreements, indentures, security agreements or any other encumbrance of any
kind.
"Environmental Law" shall mean any Law and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material.
"Environmental Permit" shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Expenses" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by such party or on its behalf in
connection with or related to the authorization,
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preparation, negotiation, execution and performance of its obligations pursuant
to this Agreement and the consummation of the Merger, the preparation, printing,
filing and mailing of the Registration Statement and the Joint Proxy Statement,
the solicitation of stockholder approvals, the filing of HSR Act notice, if any,
and all other matters related to the transactions contemplated hereby and the
closing of the Merger.
"Governmental Entity" shall mean any United States Federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.
"Hazardous Material" shall mean (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, friable asbestos-
containing materials or polychlorinated biphenyls or (ii) any chemical, material
or substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"HSR Act" shall mean Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, together with the rules and regulations promulgated
thereunder.
"IRS" shall mean the United States Internal Revenue Service.
"Law" shall mean any Federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement or
rule of law of the United States or any other jurisdiction, and any other
similar act or law.
"NNM" shall mean the Nasdaq National Market.
"NSCM" shall mean the Nasdaq Small-Cap Market.
"NYBCL" shall mean the New York Business Corporation Law.
"Parent Combination Transaction" shall mean any of the following
involving Parent (other than the Merger):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) (A) any sale, lease, exchange, transfer or other
disposition of 33% or more of the assets of such party and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions or (B) any purchase of assets by Parent, in a single
transaction, the consideration for which exceeds $150 million;
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(iii) any tender offer or exchange offer for 33% or more of the
outstanding voting securities of such party or the filing of a
registration statement under the Securities Act in connection therewith;
or
(iv) any person having acquired beneficial ownership or the right
to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) having been formed
which beneficially owns or has the right to acquire beneficial ownership
of, 33% or more of the outstanding voting securities of such party;
(v) any solicitation in opposition to the approval of this
Agreement by the stockholders of such party; or
(vi) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the
foregoing.
"Parent Competing Transaction" shall mean any merger, consolidation,
business combination or other similar transaction involving Parent in which the
other party to such competing transaction required, as a condition to such
transaction being effected, that Parent not consummate the transactions
contemplated by this Agreement.
"Parent Disclosure Schedule" shall mean the disclosure schedule
delivered by Parent to Company prior to the execution of this Agreement and
forming a part hereof.
"Parent Material Adverse Effect" shall mean any change in or effect on
the business of Parent and the Parent Subsidiaries that, individually or in the
aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and the
Parent Subsidiaries, taken as a whole, provided, however, that in no event shall
a decrease in the trading price of Parent Common Stock be considered a Parent
Material Adverse Effect.
"Parent Stock Plans" shall mean Parent's 1999 Stock Option Plan.
"Permitted Encumbrances" shall mean (i) liens for Taxes, assessments
and other governmental charges not yet due and payable, (ii) immaterial unfiled
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens arising or incurred in the ordinary course of business which are not yet
due and payable and (iii) equipment leases with third parties entered into in
the ordinary course of business.
"Person" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association, entity or government or political subdivision, agency or
instrumentality of a government.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
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"Subsidiary" shall mean, with respect to any person, any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other subsidiary
of such person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"Tax" shall mean (i) any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Entity or taxing authority ("Taxing Authority"),
including, without limitation, taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges; (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, combined,
consolidated or unitary group for any taxable period; and (iii) any liability
for the payment of amounts of the type described in (i) or (ii) as a result of
being a transferee of, or a successor in interest to, any person or as a result
of an express or implied obligation to indemnify any person.
"Tax Return" shall mean any return, statement or form (including,
without limitation, any estimated tax reports or return, withholding tax reports
or return and information report or return) required to be filed with respect to
any Taxes.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the NYBCL, at the
Effective Time (as defined in Section 2.03), Merger Sub shall be merged with and
into Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and Company shall continue as the surviving corporation
of the Merger as a wholly owned subsidiary of Parent (the "Surviving
Corporation").
SECTION 2.02 Closing. Unless this Agreement shall have been terminated
and the Merger herein contemplated shall have been abandoned pursuant to Section
9.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VIII, the consummation of the Merger shall take place as promptly as
practicable (and in any event within three business days) after satisfaction or
waiver of the conditions set forth in Article VIII, at a closing (the "Closing")
to be held at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date, time or place is
agreed to by Parent and Company.
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SECTION 2.03 Effective Time. At and after the time of the Closing, the
parties shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Department of State of the State
of New York in such form as required by, and executed in accordance with the
relevant provisions of, the NYBCL (the date and time of such filing, or such
later date and time as may be set forth therein, being the "Effective Time").
SECTION 2.04 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the NYBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in
Company as the Surviving Corporation, and all debts, liabilities and duties of
Company and Merger Sub shall become the debts, liabilities and duties of Company
as the Surviving Corporation.
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation. Unless otherwise agreed by Parent and Company
before the Effective Time, at the Effective Time:
(a) the Certificate of Incorporation and the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation, until thereafter
amended as provided by Law and such Certificate of Incorporation or Bylaws;
provided, however, that Article I of the Certificate of Incorporation of
the Surviving Corporation shall be amended to read as follows: "The name of
the corporation is MARKET GUIDE INC.";
(b) the officers of Merger Sub immediately prior to the Effective Time
shall serve in their respective offices of the Surviving Corporation from
and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal;
and
(c) the directors of Merger Sub immediately prior to the Effective Time
shall serve as the directors of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or
appointed and qualified or until their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Conversion of Shares. At the Effective time, by virtue of
the Merger, and without any action on the part of Parent, Merger Sub, Company or
the holders of any of the following securities:
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(a) Each share of Common Stock, $.001 par value per share, of Company
("Company Common Stock") issued and outstanding immediately before the Effective
Time (excluding (i) shares of Company Common Stock, if any, held by persons who
have not voted such shares for approval of the Merger and with respect to which
such persons shall have perfected dissenters' rights in accordance with the
NYBCL ("Dissenting Shares"), (ii) those held in the treasury of Company, and
(iii) those owned by any wholly owned subsidiary of Company) and all rights in
respect thereof, shall, forthwith cease to exist and be converted into and
become exchangeable for 1.00 share (the "Exchange Ratio") of common stock, $.01
par value, of Parent ("Parent Common Stock").
(b) Each share of Company Common Stock held in the treasury of Company
or owned by any wholly owned subsidiary of Company immediately prior to the
Effective Time shall be canceled and retired and no shares of stock or other
securities of Parent, the Surviving Corporation or any other corporation shall
be issuable, and no payment of other consideration shall be made, with respect
thereto.
(c) Each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation. From and after the Effective Time,
each outstanding certificate theretofore representing shares of Merger Sub
common stock shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of Surviving Corporation common stock into which
such shares of Merger Sub common stock shall have been converted. Promptly after
the Effective Time, the Surviving Corporation shall issue to Parent a stock
certificate representing 100 shares of Surviving Corporation common stock in
exchange for the certificate that formerly represented shares of Merger Sub
common stock, which shall be surrendered by Parent and cancelled.
SECTION 3.02 Exchange of Shares Other than Dissenting Shares and
Treasury Shares
(a) Exchange Agent. As of the Effective Time, Parent shall enter into
an agreement with a bank or trust company reasonably acceptable to Company to
act as exchange agent for the Merger (the "Exchange Agent") as may be designated
by Parent.
(b) Parent to Provide Common Stock and Cash. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for the
benefit of the holder of Company Common Stock: (i) Certificates of Parent Common
Stock ("Parent Certificates") representing the number of whole shares of Parent
Common Stock issuable pursuant to Section 3.01(a) in exchange for shares of
company Common Stock outstanding immediately prior to the Effective Time; and
(ii) sufficient funds to permit payment in lieu of fractional shares pursuant to
Section 3.04.
(c) Exchange Procedures. The Exchange Agent shall mail to each holder
of record of certificates of Company Common Stock ("Company Certificates"),
whose shares were converted into the right to receive shares of Parent Common
Stock (and cash in lieu of fractional
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shares pursuant to Section 3.04) promptly after the Effective Time (and in any
event no later than three business days after the later to occur of the
Effective Time and receipt by Parent of a complete list from Company of the
names and addresses of its holders of record): (i) a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Company Certificates shall pass, only upon receipt of the Company
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Parent may reasonably specify); and (ii) instructions for
use in effecting the surrender of the Company Certificates in exchange for
Parent Certificates (and cash in lieu of fractional shares). Upon surrender of a
Company Certificate for cancellation to the Exchange Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed, and such other documents as
may be reasonably required by the Exchange Agent, the holder of such Company
Certificate shall be entitled to receive in exchange therefor a Parent
Certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to this Article III and payment of
cash in lieu of fractional shares which such holder has the right to receive
pursuant to Section 3.04, and the Company Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Company
Certificate that, prior to the Effective Time, represented shares of Company
Common Stock will be deemed from and after the Effective Time, for all purposes
other than the payment of dividends and distributions, to evidence the ownership
of the number of full shares of Parent Common Stock into which such shares of
Company Common Stock shall have been so converted and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 3.04. Notwithstanding any other provision of this Agreement, no
interest will be paid or will accrue on any cash payable to holders of Company
Certificates pursuant to the provisions of this Article III.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Company Certificate shall surrender
such Company Certificate. Subject to the effect of applicable escheat or similar
laws, following surrender of any such Company Certificate, there shall be paid
to the record holder of the Parent Certificates issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 3.02(d)) with
respect to such shares of Parent Common Stock.
(e) Transfer of Ownership. If any Parent Certificate is to be issued
in a name, or cash in lieu of fractional shares paid to a person, other than
that in which the Company Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance and/or payment thereof that
the Company Certificate so surrendered will be properly endorsed and otherwise
in proper form for transfer and that the person requesting such exchange will
have paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a Parent Certificate for shares of Parent
Common Stock in any name other than that of the registered holder of the Company
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
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(f) Termination of Exchange Agent Funding. Any portion of funds
(including any interest earned thereon) or Parent Certificates held by the
Exchange Agent which have not been delivered to holders of Company Certificates
pursuant to this Article III within six months after the Effective Time shall
promptly be paid or delivered, as appropriate, to Parent, and thereafter holders
of Company Certificates who have not theretofore complied with the exchange
procedures set forth in and contemplated by this Section 3.02 shall thereafter
look only to Parent (subject to abandoned property, escheat and similar laws)
only as general creditors thereof for their claim for shares of Parent Stock,
any cash in lieu of fractional shares of Parent Common Stock and any dividends
or distributions (with a record date after the Effective Time) with respect to
Parent Common Stock to which they are entitled.
(g) No Liability. Notwithstanding anything to the contrary in this
Section 3.02, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person in respect of any shares of Parent Common
Stock or cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 3.03 Stock Transfer Books.
(a) At the Effective Time, the stock transfer books of Company shall
each be closed, and there shall be no further registration of transfers of
shares of Company Common Stock thereafter on the records of any such stock
transfer books. In the event of a transfer of ownership of shares of Company
Common Stock that is not registered in the stock transfer records of Company at
the Effective Time, a certificate or certificates representing the number of
full shares of Parent Common Stock into which such shares of Company Common
Stock shall have been converted shall be issued to the transferee together with
a cash payment in lieu of fractional shares, if any, in accordance with Section
3.04 hereof, and a cash payment in the amount of dividends, if any, in
accordance with Section 3.02(d) hereof, if the certificate or certificates
representing such shares of Company Common Stock is or are surrendered as
provided in Section 3.02(c) hereof, accompanied by all documents required to
evidence and effect such transfer and by evidence of payment of any applicable
stock transfer tax.
(b) Notwithstanding anything to the contrary herein, certificates
surrendered for exchange by any person constituting an affiliate of Company
shall not be exchanged until Parent shall have received from such Person an
affiliate letter as provided in Section 7.03.
SECTION 3.04 No Fractional Share Certificates. No scrip or fractional
share Parent Certificate shall be issued upon the surrender for exchange of
Company Certificates, and an outstanding fractional share interest shall not
entitle the owner thereof to vote, to receive dividends or to any rights of a
stockholder of Parent or of Surviving Corporation with respect to such
fractional share interest. As promptly as practicable following the Effective
Time, Parent shall deposit with the Exchange Agent an amount in cash sufficient
for the Exchange Agent to pay each holder of Company Common Stock an amount in
cash, rounded to the nearest whole cent, equal to the product obtained by
multiplying (i) the fractional share interest to which such holder would
otherwise be entitled (after taking into account all shares of Company Common
Stock held at the Effective Time by such holder) by (ii) the Final Average
Closing Price. As
11
soon as practicable after the determination of the amount of cash, if any, to be
paid to holders of Company Common Stock with respect to any fractional share
interests, the Exchange Agent shall make available such amounts, net of any
required withholding taxes, to such holders of Company Common Stock, subject to
and in accordance with the terms of Section 3.02 hereof.
SECTION 3.05 Options to Purchase Company Common Stock. At the
Effective Time, the Company Stock Plans and each option granted by Company to
purchase shares of Company Common Stock pursuant to the Company Stock Plans or
otherwise listed on Schedule 3.05 of the Company Disclosure Schedule ("Company
Stock Options"), which is outstanding and unexercised immediately prior to the
Effective Time, shall be assumed by Parent and converted into an option or
warrant, as the case may be, to purchase shares of Parent Common Stock in such
number and at such exercise price as provided below and otherwise having the
same terms and conditions as in effect immediately prior to the Effective Time
(except to the extent that such terms, conditions and restrictions may be
altered in accordance with their terms as a result of the Merger contemplated
hereby and except that all references in each such Company Stock Option to
Company shall be deemed to refer to Parent):
(a) the number of shares of Parent Common Stock to be subject to the
new option or warrant, as the case may be, shall be equal to the product of
(x) the number of shares of Company Common Stock subject to the original
Company Stock Option immediately prior to the Effective Time and (y) the
Exchange Ratio;
(b) the exercise price per share of Parent Common Stock under the new
option or warrant shall be equal to (x) the exercise price per share of
Company Common Stock in effect under the original Company Stock Option
immediately prior to the Effective Time divided by (y) the Exchange Ratio;
and
(c) in effecting such assumption and conversion, the aggregate number
of shares of Parent Common Stock to be subject to each assumed Company
Stock Option will be rounded down, if necessary, to the next whole share
and the aggregate exercise price shall be rounded up, if necessary, to the
next whole cent.
The adjustments provided herein with respect to any options that are
"incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with the requirements of Section 424(a) of the
Code. Pursuant to the terms of the Company Stock Plans, the execution of this
Agreement will result in accelerated vesting of all such options as of the date
hereof.
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SECTION 3.06 Certain Adjustments. If between the date of this
Agreement and the Effective Time, (a) the outstanding shares of Parent Common
Stock or Company Common Stock shall be changed into a different number of shares
by reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, or (b) the number of
shares of Company Common Stock on a fully diluted basis is in excess of that
specified in Section 4.03 and disclosed in Schedule 4.03 of the Company
Disclosure Schedule (regardless of whether such excess is a result of an
additional issuance of capital stock except as otherwise permitted pursuant to
this Agreement or a correction to such Sections), and if such excess number of
shares of Company Common Stock exceeds 1% of the number of shares of Company
Common Stock specified in Section 4.03 and disclosed in Schedule 4.03 of the
Company Disclosure Schedule, then, in either case, the Exchange Ratio
established pursuant to the provisions of Section 3.01 shall be adjusted
accordingly to provide to Parent the same economic effect as contemplated by
this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange, dividend or increase.
SECTION 3.07 Dissenters' Rights. Any Dissenting Shares shall not be
converted into, or be exchangeable for, the right to receive Parent Common Stock
but shall instead be converted into the right to receive such consideration as
may be determined to be due with respect to such Dissenting Shares pursuant to
New York Law unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost his right of appraisal and payment, as the
case may be. Company shall give Parent prompt notice of any Dissenting Shares
(and shall also give Parent prompt notice of any withdrawals of such demands for
appraisal rights) and Parent shall have the right to direct all negotiations and
proceedings with respect to such demands. Neither Company nor the Surviving
Corporation shall, except with the prior written consent of Parent, voluntarily
make any payments with respect to, or settle or offer to settle, any such demand
for appraisal rights. If, after the Effective Time, any Dissenting Shares shall
lose their status as Dissenting Shares, Parent shall issue and deliver, upon
surrender by such shareholder of certificate or certificates representing shares
of Company Capital Stock, the number of shares of Parent Common Stock to which
such shareholder would otherwise be entitled pursuant to this Article III.
SECTION 3.08 Lost, Stolen or Destroyed Certificates. In the event any
Company Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Company
Certificates, upon the making of an affidavit of that fact by the holder
thereof, such shares of Parent Common Stock (and cash in lieu of fractional
shares) as may be required pursuant to Section 3.01, provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Company
Certificates to indemnify Parent against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Company Certificates alleged to have been lost, stolen or destroyed.
SECTION 3.09 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all
13
assets, property, rights, privileges, powers and franchises of Company, the
officers and directors of Company are fully authorized in the name of their
corporation or otherwise to take, and will use good faith efforts to take, all
such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Merger Sub,
subject to the exceptions specifically disclosed in writing in the Company
Disclosure Schedule, all such exceptions to be referenced to a specific
representation set forth in this Article IV, that:
SECTION 4.01 Organization and Qualification; Subsidiaries
(a) Each of Company and each directly and indirectly owned subsidiary
of Company (the "Company Subsidiaries") has been duly organized and is validly
existing and in good standing (to the extent applicable) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Company
and each Company Subsidiary is duly qualified or licensed to do business, and is
in good standing (to the extent applicable), in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(b) Schedule 4.01 of the Company Disclosure Schedule sets forth, as of
the date of this Agreement, a true and complete list of each Company Subsidiary,
together with (i) the jurisdiction of incorporation or organization of each
Company Subsidiary and the percentage of each Company Subsidiary's outstanding
capital stock or other equity interests owned by Company or another Company
Subsidiary and (ii) an indication of whether each Company Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Schedule 4.01 of the Company Disclosure Schedule, neither
Company nor any Company Subsidiary owns an equity interest in any partnership or
joint venture arrangement or other business entity.
SECTION 4.02 Certificate of Incorporation and Bylaws. The copies of
Company's certificate of incorporation and bylaws previously presented to Parent
by Company are true, complete and correct copies thereof. Such certificate of
incorporation and bylaws are in full force and effect. Company is not in
violation of any of the provisions of its certificate of incorporation or
bylaws.
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SECTION 4.03 Capitalization
(a) The authorized capital stock of Company consists of 20,000,000
shares of Company Common Stock and no shares of preferred stock ("Company
Preferred Stock"). As of the date hereof, (i) 4,801,380 shares of Company Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of Company Common Stock are held in the
treasury of Company, (iii) no shares of Company Common Stock are held by Company
Subsidiaries, (iv) 850,000 shares of Company Common Stock are reserved for
future issuance pursuant to Company Stock Options, (v) no shares of Company
Preferred Stock are outstanding, and (vi) 125,000 shares of Company Common Stock
are reserved for issuance pursuant to Company's Employee Stock Purchase Plan
(the "Company ESPP"), of which 57,788 shares have been issued. The name of each
holder of a Company Stock Option, the grant date of each Company Stock Option,
the number of shares of Company Common Stock for which each Company Stock Option
is exercisable, the vesting or exercise schedule and the exercise price of each
Company Stock Option are set forth in Schedule 4.03 of the Company Disclosure
Schedule. Except for shares of Company Common Stock issuable pursuant to Company
Stock Plans and the Company ESPP and as otherwise set forth in Schedule 4.03 of
the Company Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which Company or any
Company Subsidiary is a party or by which Company or any Company Subsidiary is
bound relating to the issued or unissued capital stock of Company or any Company
Subsidiary or obligating Company or any Company Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Company or any Company
Subsidiary. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or any capital
stock of any Company Subsidiary. Each outstanding share of capital stock of each
Company Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by Company or another Company Subsidiary
is free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on Company's or such other
Company Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever. There are no material outstanding contractual obligations of Company
or any Company Subsidiary to provide funds to, or make any material investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other entity or person.
(b) The officers and directors of Company, in the aggregate, own of
record and beneficially more than forty-one percent (41%) of the Company Common
Stock outstanding, on a fully-diluted basis.
SECTION 4.04 Authority Relative to This Agreement. Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Company and
the consummation by Company of the
15
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of this Agreement by the holders of two-thirds of the outstanding
shares of Company Common Stock entitled to vote with respect thereto at the
Company Stockholders' Meeting (as defined in Section 7.01), and the filing and
recordation of the Certificate of Merger as required by the DGCL). This
Agreement has been duly executed and delivered by Company and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the legal, valid and binding obligation of Company, enforceable against Company
in accordance with its terms, except to the extent that enforceability hereof
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
principles of equity regarding the availability of remedies.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Company do not, and
the performance by Company of its obligations hereunder, and the consummation of
the Merger will not, (i) conflict with or violate any provision of the
certificate of incorporation or bylaws of Company or any equivalent
organizational documents of any Company Subsidiary, (ii) assuming that all
filings and notifications described in Section 4.05(b) have been made, conflict
with or violate any Law applicable to Company or any Company Subsidiary or by
which any property or asset of Company or any Company Subsidiary is bound or
affected or (iii) except as otherwise set forth on Schedule 4.05(a) of the
Company Disclosure Schedule, result in any breach of or constitute a default (or
an event which with the giving of notice or lapse of time or both could
reasonably be expected to become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of Company or
any Company Subsidiary pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation.
(b) The execution and delivery of this Agreement by Company do not, and
the performance by Company of its obligations hereunder and the consummation of
the Merger will not, require any consent, approval, authorization or permit of,
or filing by Company with or notification by Company to, any Governmental
Entity, except pursuant to applicable requirements of the Exchange Act, the
Securities Act, Blue Sky Laws, the rules and regulations of the NSCM, the
premerger notification requirements of the HSR Act, and the filing and
recordation of the Certificate of Merger as required by the NYBCL.
SECTION 4.06 Permits; Compliance with Laws. Company and the Company
Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, establishment registrations, product listings, permits, approvals and
orders of any Governmental Entity necessary for Company or any Company
Subsidiary to own, lease and operate its properties and assets or otherwise to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and, as of the date of this Agreement, none of the
16
Company Permits has been suspended or cancelled nor is any such suspension or
cancellation pending or, to the knowledge of Company, threatened. Neither
Company nor any Company Subsidiary is in conflict with, or in default or
violation of, (i) any Law applicable to Company or any Company Subsidiary or by
which any property or asset of Company or any Company Subsidiary is bound or
affected or (ii) any Company Permits, except for such conflicts, defaults or
violations that could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Schedule 4.06 of the Company
Disclosure Schedule sets forth, as of the date of this Agreement, all actions,
proceedings, investigations or surveys pending or, to the knowledge of Company,
threatened against Company or any Company Subsidiary that could reasonably be
expected to result in the suspension or cancellation of any other Company
Permit. Since March 1, 1996, neither Company nor any Company Subsidiary has
received from any Governmental Entity any written notification with respect to
possible conflicts, defaults or violations of Laws.
SECTION 4.07 SEC Filings; Financial Statements.
(a) Company has timely filed all forms, reports, statements and
documents required to be filed by it (A) with the SEC and the NSCM since January
1, 1995 (collectively, together with any such forms, reports, statements and
documents Company may file subsequent to the date hereof until the Closing, the
"Company Reports") and (B) since January 1, 1995 with any other Governmental
Entities. Each Company Report (i) was prepared in accordance with the
requirements of the Securities Act, the Exchange Act or the rules and
regulations of the NSCM, as the case may be, and (ii) did not at the time it was
filed 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 made therein, in the light of the circumstances under which they were
made, not misleading. Each form, report, statement and document referred to in
clause (B) of this paragraph was prepared in all material respects in accordance
with the requirements of applicable Law. No Company Subsidiary is subject to the
periodic reporting requirements of the Exchange Act or required to file any
form, report or other document with the SEC, the NSCM, any other stock exchange
or any other comparable Governmental Entity.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company Reports was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly the consolidated financial position of Company and the Company
Subsidiaries as at the respective dates thereof, and their consolidated results
of operations, stockholders' equity and cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of Company and the Company Subsidiaries as of
February 28, 1999 as reported in the Company Reports, none of Company or any
Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
U.S.
17
GAAP, except for liabilities or obligations incurred in the ordinary course of
business consistent with past practice since February 28, 1999.
SECTION 4.08 Absence of Certain Changes or Events. Except as otherwise
set forth on Schedule 4.08 of the Company Disclosure Schedule, since February
28, 1999, Company and the Company Subsidiaries have conducted their businesses
only in the ordinary course consistent with past practice and, since such date,
there has not been (i) any Company Material Adverse Effect, (ii) any event that
could reasonably be expected to prevent or materially delay the performance of
Company's obligations pursuant to this Agreement and the consummation of the
Merger by Company, (iii) any material change by Company in its accounting
methods, principles or practices, (iv) any declaration, setting aside or payment
of any dividend or distribution in respect of the shares of Company Common Stock
or any redemption, purchase or other acquisition of any of Company's securities,
(v) except in the ordinary course of business consistent with past practice, any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Company or any Company Subsidiary, (vi) any issuance or sale of any stock,
notes, bonds or other securities other than pursuant to the exercise of
outstanding securities, or entering into any agreement with respect thereto,
(vii) any amendment to the Company's certificate of incorporation or bylaws,
(viii) other than in the ordinary course of business, any (x) purchase, sale,
assignment or transfer of any material assets, (y) mortgage, pledge or the
institution of any lien, encumbrance or charge on any material assets or
properties, tangible or intangible, except for liens for taxes not yet
delinquent and such other liens, encumbrances or charges which do not,
individually or in the aggregate, have a Company Material Adverse Effect, or (z)
waiver of any rights of material value or cancellation or any material debts or
claims, (ix) any incurrence of any material liability (absolute or contingent),
except for current liabilities and obligations incurred in the ordinary course
of business consistent with past practice, (x) any incurrence of any damage,
destruction or similar loss, whether or not covered by insurance, materially
affecting the business or properties of Company or any Company Subsidiary, or
(xi) any entering into any transaction of a material nature other than in the
ordinary course of business, consistent with past practices.
SECTION 4.09 Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit fund, plan, program,
arrangement and contract (including, without limitation, any "pension" plan,
fund or program, as defined in Section 3(2) of ERISA, and any "employee benefit
plan", as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
to or required to be contributed to by Company or any Company Subsidiary or
other trade or business (whether or not incorporated) treated as a single
employer with Company (a "Company ERISA Affiliate") pursuant to Code Section
414(b), (c), (m) or (o) is a party, or with respect to which Company or any
Company ERISA Affiliate could incur liability under Section 4069, 4212(c) or
4204 of ERISA or Section 412 of the Code, or to which Company or any Company
ERISA Affiliate is a party (the "Company Benefit Plans"),
18
Company has delivered or made available to Parent a true, complete and correct
copy of (i) such Company Benefit Plan and the most recent summary plan
description related to such Company Benefit Plan, if a summary plan description
is required therefor, (ii) each trust agreement or other funding arrangement
relating to such Company Benefit Plan, (iii) the most recent annual report (Form
5500) filed with the IRS) with respect to such Company Benefit Plan, (iv) the
most recent actuarial report or financial statement relating to such Company
Benefit Plan and (v) the most recent determination letter issued by the IRS with
respect to such Company Benefit Plan, if it is qualified under Section 401(a) of
the Code. Neither Company nor any Company Affiliate has any express or implied
commitment, whether legally enforceable or not, to modify, change or terminate
any Company Benefit Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable laws, including,
without limitation, ERISA and the Code, and all contributions required to be
made under the terms of any of the Company Benefit Plans as of the date of this
Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Reports prior to the date of this Agreement. With respect to the Company Benefit
Plans, no event has occurred and, to the knowledge of Company, there exists no
condition or set of circumstances in connection with which Company or any
Company ERISA Affiliate could be subject to any material liability (other than
for routine benefit liabilities) under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law.
(c) Company on behalf of itself and all of the Company ERISA Affiliates
hereby represents that: (i) each Company Benefit Plan which is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received or is currently awaiting receipt of a favorable determination letter
from the IRS as to its qualified status under the Code, and each trust
established in connection with any Company which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and to Company's
knowledge no fact or event has occurred since the date of such determination
letter from the IRS to adversely affect the qualified status of any such Company
Benefit Plan or the exempt status of any such trust; (ii) to Company's knowledge
there has been no prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) with respect to any Company Benefit Plan;
(iii) each Company Benefit Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability, other than (A) liability for ordinary administrative expenses
typically incurred in a termination event or (B) if the Company Benefit Plan is
a pension benefit plan subject to Part 2 of Title I of ERISA, liability for the
accrued benefits as of the date of such termination (if and to the extent
required by ERISA) to the extent that either there are sufficient assets set
aside in a trust or insurance contract to satisfy such liability or such
liability is reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date of this
Agreement. No suit, administrative proceeding, action or other litigation has
been brought, or to the knowledge of Company is threatened, against or with
respect to any such Company Benefit Plan, including any audit or inquiry by the
Internal Revenue Service or United States Department of Labor (other than
routine benefits claims).
19
(d) No Company Benefit Plan is a multiemployer pension plan (as defined
in Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA
and neither the Company nor any Company ERISA Affiliate has sponsored or
contributed to or been required to contribute to a multiemployer pension plan or
other pension plan subject to Title IV of ERISA. No material liability under
Title IV of ERISA has been incurred by Company or any Company ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents a
material risk to Company or any Company ERISA Affiliate of incurring or being
subject (whether primarily, jointly or secondarily) to a material liability
thereunder. None of the assets of Company or any Company ERISA Affiliate is, or
may reasonably be expected to become, the subject of any lien arising under
ERISA or Section 412(n) of the Code.
(e) With respect to each Company Benefit Plan required to be set forth
in the Company Disclosure Schedule that is subject to Title IV or Part 3 of
Title I of ERISA or Section 412 of the Code, (i) no reportable event (within the
meaning of Section 4043 of ERISA, other than an event that is not required to be
reported before or within 30 days of such event) has occurred or is expected to
occur, (ii) there was not an accumulated funding deficiency (within the meaning
of Section 302 of ERISA or Section 412 of the Code), whether or not waived, as
of the most recently ended plan year of such Company Benefit Plan; and (iii)
there is no "unfunded benefit liability" (within the meaning of Section
4001(a)(18) of ERISA).
(f) Company has scheduled on Schedule 4.09(f) of the Company Disclosure
Schedule and has delivered to Parent true, complete and correct copies of (i)
all employment agreements with officers and all consulting agreements of Company
and each Company ERISA Affiliate providing for annual compensation in excess of
$100,000, (ii) all severance plans, agreements, programs and policies of Company
and each Company ERISA Affiliate with or relating to their respective employees,
directors or consultants, and (iii) all plans, programs, agreements and other
arrangements of Company and each Company ERISA Affiliate with or relating to
their respective employees, directors or consultants which contain "change of
control" provisions. Except as set forth in Schedule 4.09(f) of the Company
Disclosure Schedule, which discloses the Company's estimate of excess parachute
payments based on assumptions described therein, no payment or benefit which
will be made by Company or any Company ERISA Affiliate under any Company Benefit
Plan or other arrangement will constitute an excess parachute payment under Code
Section 280(G)(1), and the consummation of the transactions contemplated by this
Agreement will not individually or in conjunction with any other possible event
(including termination of employment) (i) entitle any current or former employee
or other service provider of Company or any Company ERISA Affiliate to severance
benefits or any other payment, compensation or benefit (including forgiveness of
indebtedness), except as expressly provided by this Agreement, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation or benefit due any such employee or service provider.
(g) Neither Company nor any Company Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by Company or any Company Subsidiary. As of the
date of this Agreement, there is no labor dispute, strike or work stoppage
against Company or any Company Subsidiary pending or, to the knowledge of
20
Company, threatened which may interfere with the respective business activities
of Company or any Company Subsidiary. As of the date of this Agreement, to the
knowledge of Company, none of Company, any Company Subsidiary, or any of their
respective representatives or employees has committed any unfair labor practice
in connection with the operation of the respective businesses of Company or any
Company Subsidiary, and there is no charge or complaint against Company or any
Company Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing.
(h) Except as required by Law, no Company Benefit Plan provides any of
the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. To Company's knowledge, Company and the
Company ERISA Affiliates are in compliance with (i) the requirements of the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the regulations
(including proposed regulations) thereunder and (ii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 and the
regulations (including the proposed regulations) thereunder.
SECTION 4.10 Pooling; Certain Tax Matters. Neither Company nor, to the
knowledge of Company, any of its affiliates has taken or agreed to take any
action (other than actions contemplated by this Agreement) that could reasonably
be expected to prevent (a) the Merger from being treated for accounting purposes
as a "pooling of interests" in accordance with U.S. GAAP and the accounting
standards of the SEC or (b) the Merger from constituting a "reorganization"
under Section 368 of the Code. Company is not aware of any agreement or plan to
which Company or any of its affiliates is a party or other circumstances
relating to Company or any of its affiliates that could reasonably be expected
to prevent the Merger from being so treated as a "pooling of interests" or from
so qualifying as a reorganization under Section 368 of the Code.
SECTION 4.11 Contracts. Schedule 4.11 of the Company Disclosure
Schedule sets forth a list of each contract or agreement that is material to the
business, assets, liabilities, financial condition or results of operations of
Company and Company Subsidiaries taken as a whole (each, a "Material Contract").
Except as set forth in Schedule 4.11 of the Company Disclosure Schedule, neither
Company nor any Company Subsidiary is in material violation of or default under
(nor does there exist any condition which with the passage of time or the giving
of notice could reasonably be expected to cause such a material violation of or
default under) any Material Contract. Each Material Contract is in full force
and effect and is a legal, valid and binding obligation of Company or a Company
Subsidiary and, to the knowledge of Company, each of the other parties thereto,
enforceable in accordance with its terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
SECTION 4.12 Litigation. There is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of Company, threatened against
Company or any Company Subsidiary that could reasonably be expected to have,
individually or in the aggregate,
21
a Company Material Adverse Effect or materially interfere with Company's ability
to consummate the transactions contemplated herein. Company is not aware of any
facts or circumstances which could reasonably be expected to result in the
denial of insurance coverage under policies issued to Company and Company
Subsidiaries in respect of such suits, claims, actions, proceedings and
investigations, except in any case as could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Neither
Company nor any Company Subsidiary is subject to any outstanding order, writ,
injunction or decree which could reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect or materially interfere with
Company's ability to consummate the transactions contemplated herein.
SECTION 4.13 Environmental Matters. Except as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) Company and the Company Subsidiaries are in compliance with all
applicable Environmental Laws and all Company Permits required by Environmental
Laws; (ii) all past noncompliance of Company or any Company Subsidiary with
Environmental Laws or Environmental Permits has been resolved without any
pending, ongoing or future obligation, cost or liability; and (iii) neither
Company nor any Company Subsidiary has released a Hazardous Material at, or
transported a Hazardous Material to or from, any real property currently or
formerly owned, leased or occupied by Company or any Company Subsidiary, in
violation of any Environmental Law.
SECTION 4.14 Intellectual Property.
(a) All trademarks, trade names, service marks, trade dress, and all
goodwill associated with any of the foregoing, patents, Internet domain names,
copyrights and any renewal rights therefor, technology, supplier lists, trade
secrets, know-how, computer software programs or applications in both source and
object code form, technical documentation of such software programs,
registrations and applications for any of the foregoing and all other tangible
or intangible proprietary information or materials that are or have been used
(including without limitation in the development of) Company's business and/or
in any product, technology or process (i) currently being or formerly
manufactured, published or marketed by Company or (ii) previously or currently
under development for possible future manufacturing, publication, marketing or
other use by Company are hereinafter referred to as the "Company Intellectual
Property."
(b) The Company Disclosure Schedule contains a true and complete list
of Company's patents, patent applications, trademarks, trademark applications,
trade names, service marks, service xxxx applications, Internet domain names,
Internet domain name applications, copyrights and copyright registrations and
applications all such existing worldwide, owned by Company and includes details
of all due dates for further filings, maintenance, payments or other actions
falling due within twelve (12) months of the Closing Date. All of Company's
patents, patent applications, registered trademarks, and trademark applications,
and registered copyrights remain in good standing with all fees and filings due
as of the Closing Date duly made and the due dates specified in the Company
Disclosure Schedule are accurate and complete.
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(c) The Company Intellectual Property consists solely of items and
rights which are: (i) owned by Company; or (ii) rightfully used by Company
pursuant to a valid license (the "Company Licensed Intellectual Property"), the
parties and date of each such license agreement and each material agreement in
which Company is the licensor or owner of the subject rights in the agreement
being set forth on Schedule 4.14(c) of the Company Disclosure Schedule. Company
has all rights in Company Intellectual Property necessary to carry out Company's
current activities (and had all rights necessary to carry out its former
activities at the time such activities were being conducted), including without
limitation, to the extent required to carry out such activities, rights to make,
use, reproduce, modify, adopt, create derivative works based on, translate,
distribute (directly and indirectly), transmit, display and perform publicly,
license, rent and lease and, other than with respect to the Company Licensed
Intellectual Property, assign and sell, the Company Intellectual Property.
(d) The reproduction, manufacturing, distribution, licensing,
sublicensing or sale of any Company Intellectual Property, now used or offered
or proposed for use, licensing or sale by Company does not infringe on any
patent, copyright, trademark, service xxxx, trade name, trade dress, firm name,
Internet domain name, logo, trade dress, of any person and does not constitute a
misappropriation of any trade secret. No claims (i) challenging the validity,
effectiveness or ownership by Company of any of the Company Intellectual
Property, or (ii) to the effect that the use, distribution, licensing,
sublicensing or sale of the Company Intellectual Property as now used or offered
or proposed for use, licensing, sublicensing or sale by Company infringes or
will infringe on any intellectual property or other proprietary right of any
person have been asserted or, to the knowledge of Company, are threatened by any
person or have been made or threatened by any person against the Company's
distributors. To the knowledge of Company, there is no unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property by
any third party, employee or former employee.
(e) All Company Intellectual Property has been solely developed by full
time employees within the scope of his or her employment with the Company. All
employee contribution or participation in the conception and development of the
Company Intellectual Property on behalf of Company constitutes work prepared by
an employee within the scope of his or her employment in accordance with
applicable federal and state law that has accorded Company ownership of all
tangible and intangible property thereby arising.
(f) Company is not, nor as a result of the execution or delivery of
this Agreement, or performance of Company's obligations hereunder, will Company
be, in violation of any material license, sublicense, agreement or instrument to
which Company is a party or otherwise bound, nor will execution or delivery of
this Agreement, or performance of Company's obligations hereunder, cause the
diminution, termination or forfeiture of any material Company Intellectual
Property, except for violations, diminutions, terminations or forfeitures that
would not reasonably be expected to have a Company Material Adverse Effect.
(g) Schedule 4.14(g) of the Company Disclosure Schedule contains a true
and complete list of all of Company's internally-developed software programs
(the "Company Software Programs"). Company owns full and unencumbered right and
good, valid and
23
marketable title to such Company Software Programs and all material Company
Intellectual Property free and clear of all mortgages, pledges, liens, security
interests, conditional sales agreements or encumbrances.
(h) The source code and system documentation relating to the Company
Software Programs (i) have at all times been maintained in strict confidence,
(ii) have been disclosed by Company only to employees on a need to know basis in
connection with the performance of their duties to Company, and (iii) to the
Company's knowledge, have not been disclosed to any third party.
(i) The Company Software Programs (i) have been designed to ensure year
2000 compatibility, which includes, but is not limited to, being able to provide
specific dates and calculate spans of dates within and between twentieth century
and twenty-first century, prior to, including and following January 1, 2000;
(ii) operate and will operate in accordance with their specifications and
correctly process day and date calculations for dates prior and up to December
31, 1999, and on and after January 1, 2000, prior to, during and after the
calendar year 2000; and (iii) shall not end abnormally or provide invalid or
incorrect results as a result of date data, specifically including date data
which represents or references different centuries or more than one century.
(j) Except as set forth in the Company Disclosure Schedule, Company
does not owe any outstanding or past due royalties or other payments to third
parties in respect of Company Licensed Intellectual Property. All royalties or
other payments set forth in the Company Disclosure Schedule that have accrued
prior to the Closing Date have been paid.
(k) To the Company's knowledge, the Company Software Programs contain
no "viruses". For the purposes of this Agreement, "virus" means any computer
code intentionally designed to disrupt, disable or harm in any manner the
operation of any software or hardware.
SECTION 4.15 Taxes.
(a) Company and each of Company Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Company or any
Company Subsidiary is or has been a member, have properly completed and timely
filed all Tax Returns required to be filed by them and have paid all Taxes shown
thereon to be due. Company has provided adequate accruals in accordance with
generally accepted accounting principles in its February 28, 1999 balance sheet
contained in the Company Reports (the "February 1999 Balance Sheet") for any
Taxes that have not been paid, whether or not shown as being due on any Tax
Returns. Company and the Company Subsidiaries have no material liability for
unpaid Taxes accruing after February 28, 1999.
(b) There is (i) no material claim for Taxes that is a lien against the
property of Company or any Company Subsidiary or is being asserted against
Company or any Company Subsidiary other than liens for Taxes not yet due and
payable, (ii) no audit of any Tax Return of Company or any Company Subsidiary
being conducted by a Tax Authority; (iii) no extension of the statute of
limitations on the assessment of any Taxes granted by Company or any Company
24
Subsidiary and currently in effect, and (iv) no agreement, contract or
arrangement to which Company or any Company Subsidiary is a party that may
result in the payment of any amount that would not be deductible by reason of
Section 280G or Section 404 of the Code.
(c) There has been no change in ownership of Company or any Company
Subsidiaries that has caused the utilization of any losses of such entities to
be limited pursuant to Section 382 of the Code, and any loss carryovers
reflected on the February 1999 Balance Sheet are properly computed and
reflected.
(d) Company and the Company Subsidiaries have not been and will not be
required to include any material adjustment in taxable income for Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger.
(e) Neither Company nor any Company Subsidiary has filed or will file
any consent to have the provisions of Section 341(f)(2) of the Code (or
comparable provisions of any state Tax laws) apply to Company or any Company
Subsidiary.
(f) Neither Company nor any Company Subsidiary is a party to any Tax
sharing or Tax allocation agreement nor does Company or any Company Subsidiary
have any liability or potential liability to another party under any such
agreement.
(g) Neither Company nor any Company Subsidiary has filed any
disclosures under Section 6662 or comparable provisions of state, local or
foreign law to prevent the imposition of penalties with respect to any Tax
reporting position taken on any Tax Return.
(h) Neither Company nor any Company Subsidiary has ever been a member
of a consolidated, combined or unitary group of which Company was not the
ultimate parent corporation.
(i) Company and each Company Subsidiary has in its possession receipts
for any Taxes paid to foreign Tax authorities. Neither Company nor any Company
Subsidiary has ever been a "personal holding company" within the meaning of
Section 542 of the Code or a "United Sates real property holding corporation"
within the meaning of Section 897 of the Code.
SECTION 4.16 Insurance. Company and each Company Subsidiary is
presently insured, and during each of the past five calendar years has been
insured, against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. The policies of
fire, theft, liability and other insurance maintained with respect to the assets
or businesses of Company and Company Subsidiaries provide reasonably adequate
coverage against loss. Company has heretofore furnished to Parent a complete and
correct list as of the date hereof of all insurance policies maintained by
Company or the Company Subsidiaries, and has made available to Parent complete
and correct copies of all such policies, together with all riders and amendments
thereto. All such policies are in full force and effect and all premiums due
thereon have been paid to the date hereof. Company and the Company Subsidiaries
have complied in all material respects with the terms of such policies.
25
SECTION 4.17 Properties. Company and the Company Subsidiaries have
good and valid title, free and clear of all Encumbrances, except for Permitted
Encumbrances, to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Company's consolidated
financial statements contained in the Company's Annual Report on Form 10-K for
the period ended February 28, 1999 as being owned by Company and the Company
Subsidiaries as of the date thereof, other than (i) any properties or assets
that have been sold or otherwise disposed of in the ordinary course of business
since the date of such financial statements, (ii) liens disclosed in the notes
to such financial statements and (iii) liens arising in the ordinary course of
business after the date of such financial statements. All buildings, and all
fixtures, equipment and other property and assets that are material to its
business on a consolidated basis, held under leases or sub-leases by Company or
any Company Subsidiary are held under valid instruments enforceable in
accordance with their respective terms, subject to applicable laws of
bankruptcy, insolvency or similar laws relating to creditors' rights generally
and to general principles of equity (whether applied in a proceeding in law or
equity). Substantially all of Company's and the Company Subsidiaries' equipment
in regular use has been reasonably maintained and is in serviceable condition,
reasonable wear and tear excepted.
SECTION 4.18 Affiliates. Schedule 4.18 of the Company Disclosure
Schedule sets forth the names and addresses of each person who is, in Company's
reasonable judgment, an affiliate (as such term is used in Rule 145 under the
Securities Act or under applicable SEC accounting releases with respect to
pooling of interests accounting treatment) of Company.
SECTION 4.19 Opinion of Financial Advisor. Xxxxxxxxx, Xxxxxx &
Xxxxxxxx ("Company Financial Advisor") has delivered to the board of directors
of Company its opinion to the effect that the Exchange Ratio to be received by
the holders of shares of Company Common Stock is fair to such holders from a
financial point of view.
SECTION 4.20 Brokers.
(a) No broker, finder or investment banker (other than Company
Financial Advisor) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of Company. Company has heretofore made available to Parent true,
complete and correct copies of all agreements between Company and Company
Financial Advisor pursuant to which such firm would be entitled to any payment
relating to the Merger.
(b) Attached hereto as Schedule 4.20(b) of the Company Disclosure
Schedule are true, complete and correct copies of all agreements between Company
and the Company Financial Advisor. Other than as attached hereto as Schedule
4.20(b) of the Company Disclosure Schedule, there are no other agreements
between Company and the Company Financial Advisor.
26
SECTION 4.21 Certain Business Practices. Neither Company nor any
Company Subsidiary nor any directors, officers, agents or employees of Company
or any Company Subsidiary (in their capacities as such) has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity or (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
SECTION 4.22 Section 912 of the NYBCL Not Applicable. The Board of
Directors of Company has approved the Merger and this Agreement, and such
approval is sufficient to render inapplicable to the Merger and this Agreement
and the transactions contemplated hereby the provisions of Section 912 of the
NYBCL, assuming that Parent and its "associates" and "affiliates" (as defined
therein) collectively beneficially own, and have beneficially owned at all times
during the five (5) year period prior to the date hereof, less than twenty
percent (20%) of the Company Common Stock outstanding.
SECTION 4.23 Business Activity Restriction. Except as set forth in
Schedule 4.23 of the Company Disclosure Schedule, there is no non-competition or
other similar agreement, commitment, judgment, injunction, order or decree to
which Company or any subsidiary of Company is a party or subject to that has or
could reasonably be expected to have the effect of prohibiting or impairing the
conduct of business by Company. Company has not entered into any agreement under
which Company is restricted from selling, licensing or otherwise distributing
any of its technology or products to, or providing services to, customers or
potential customers or any class of customers, in any geographic area, during
any period of time or in any segment of the market or line of business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Each of Parent and Merger Sub hereby represents and warrants to
Company, subject to the exceptions specifically disclosed in the Parent
Disclosure Schedule, all such exceptions to be referenced to a specific
representation set forth in this Article V, that:
SECTION 5.01 Organization and Qualification; Subsidiaries.
(a) Parent and each directly and indirectly owned subsidiary of Parent,
including Merger Sub, (the "Parent Subsidiaries") has been duly organized and is
validly existing and in good standing (to the extent applicable) under the laws
of the jurisdiction of its incorporation or organization, as the case may be,
and has the requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. Parent and each Parent Subsidiary,
including Merger Sub, is duly qualified or licensed to do business, and is in
good standing (to the extent applicable), in each jurisdiction where the
character of the properties owned, leased or operated by it or the
27
nature of its business makes such qualification or licensing necessary, except
for such failures to be so qualified or licensed and in good standing that could
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(b) Schedule 5.01 of the Parent Disclosure Schedule sets forth, as of
the date of this Agreement, a true and complete list of each Parent Subsidiary,
together with (i) the jurisdiction of incorporation or organization of each
Parent Subsidiary and the percentage of each Parent Subsidiary's outstanding
capital stock or other equity interests owned by Parent or another Parent
Subsidiary and (ii) an indication of whether each Parent Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Neither Parent nor any Parent Subsidiary owns an equity interest in any
partnership or joint venture arrangement or other business entity that is
material to the business, assets, liabilities, financial condition or results of
operations of Parent and the Parent Subsidiaries, taken as a whole.
SECTION 5.02 Certificate of Incorporation and Bylaws. The copies of
each of Parent's and Merger Sub's certificate of incorporation and bylaws
previously provided to Company by Parent are true, complete and correct copies
thereof. Such certificates of incorporation and bylaws are in full force and
effect. Parent is not in violation of any of the provisions of its certificate
of incorporation or bylaws.
SECTION 5.03 Capitalization.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of Parent Common Stock and 5,000,000 shares of preferred stock. As of the
date hereof (i) 21,843,891 shares of Parent Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no shares of Parent Common Stock are held in the treasury of Parent, (iii) no
shares of Parent Common Stock are held by the Parent Subsidiaries, (iv)
3,088,425 shares of Parent Common Stock are reserved for future issuance
pursuant to outstanding options and warrants to purchase Parent Common Stock
("Parent Stock Options"), (v) no shares of Parent preferred stock are issued and
outstanding and (vi) 750,000 shares of Parent Common Stock are reserved for
issuance pursuant to the Parent ESPP, of which no shares have been issued.
Except for the shares of Parent Common Stock issuable pursuant to the Parent
Stock Plans and the Parent ESPP, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which Parent is a
party or by which Parent is bound relating to the issued or unissued capital
stock of Parent or any Parent Subsidiary or obligating Parent or any Parent
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, Parent or any Parent Subsidiary. All shares of Parent Common Stock
subject to issuance as aforesaid, upon issuance prior to the Effective Time on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no outstanding contractual obligations of Parent or any Parent
Subsidiary to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or any capital stock of any Parent Subsidiary. Each outstanding
share of capital stock of each Parent Subsidiary is duly authorized, validly
issued, fully paid and nonassessable and each such share owned by Parent or
another Parent Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Parent's or such
28
other Parent Subsidiary's voting rights, charges and other encumbrances of any
nature whatsoever. There are no material outstanding contractual obligations of
Parent or any Parent Subsidiary to provide funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Parent Subsidiary or any other person.
(b) The officers and directors of Parent, in the aggregate, own of
record and beneficially more than ten percent (10%) of the Parent Common Stock
outstanding, on a fully-diluted basis.
SECTION 5.04 Authority Relative to This Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action, and no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate such transactions (other than the approval of this Agreement and the
Merger by the holders of a majority of the outstanding shares of Parent Common
Stock present at the Parent Shareholders' Meeting and the consent of Parent as
sole shareholder of Merger Sub). This Agreement has been duly executed and
delivered by each of Parent and Merger Sub and, assuming the due authorization,
execution and delivery by Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub enforceable against Parent and
Merger Sub in accordance with its terms.
SECTION 5.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the performance by Parent and Merger Sub of their obligations
hereunder and the consummation of the Merger will not, (i) conflict with or
violate any provision of the articles of incorporation or bylaws of Parent or
any equivalent organizational documents of any Parent Subsidiary, (ii) assuming
that all consents, approvals, authorizations and permits described in Section
5.05(b) have been obtained and all filings and notifications described in
Section 5.05(b) have been made, conflict with or violate any Law applicable to
Parent or any other Parent Subsidiary or by which any property or asset of
Parent or any Parent Subsidiary is bound or affected or (iii) result in any
breach of or constitute a default (or an event which with the giving of notice
or lapse of time or both could reasonably be expected to become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or any Parent Subsidiary pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the performance by Parent and Merger Sub of their obligations
hereunder and the consummation of the Merger will not, require any consent,
approval, authorization or permit of, or filing by Parent with or notification
by Parent to, any Governmental Entity, except pursuant to
29
applicable requirements of the Exchange Act, the Securities Act, Blue Sky Laws,
the rules and regulations of the NNM, the premerger notification requirements of
the HSR Act, if any, and the filing and recordation of the Certificate of Merger
as required by the DGCL.
SECTION 5.06 Permits; Compliance with Laws. Parent and the Parent
Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, establishment registrations, product listings, permits, approvals and
orders of any Governmental Entity necessary for Parent or any Parent Subsidiary
to own, lease and operate its properties and assets or otherwise to carry on its
business as it is now being conducted (collectively, the "Parent Permits"), and,
as of the date of this Agreement, none of the Parent Permits has been suspended
or cancelled nor is any such suspension or cancellation pending or, to the
knowledge of Parent, threatened. Neither Parent nor any Parent Subsidiary is in
conflict with, or in default or violation of, (i) any Law applicable to Parent
or any Parent Subsidiary or by which any property or asset of Parent or any
Parent Subsidiary is bound or affected or (ii) any Parent Permits, except for
such conflicts, defaults or violations that could not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Schedule 5.06 of the Parent Disclosure Schedule sets forth, as of the date of
this Agreement, all actions, proceedings, investigations or surveys pending or,
to the knowledge of Parent, threatened against Parent or any Parent Subsidiary
that could reasonably be expected to result in the suspension or cancellation of
any material Parent Permit. Since January 1, 1996, neither Parent nor any Parent
Subsidiary has received from any Governmental Entity any written notification
with respect to possible conflicts, defaults or violations of Laws.
SECTION 5.07 Absence of Certain Changes or Events. Except as otherwise
set forth on Schedule 5.07 of the Parent Disclosure Schedule, since March 17,
1999, Parent and the Parent Subsidiaries have conducted their businesses only in
the ordinary course consistent with past practice and, since such date, there
has not been (i) any Parent Material Adverse Effect, (ii) any event that could
reasonably be expected to prevent or materially delay the performance of
Parent's obligations pursuant to this Agreement and the consummation of the
Merger by Parent, (iii) any material change by Parent in its accounting methods,
principles or practices, (iv) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of Parent Common Stock or any
redemption, purchase or other acquisition of any of Parent's securities, (v)
except in the ordinary course of business consistent with past practice, any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Parent or any Parent Subsidiary, (vi) any issuance or sale of any stock, notes,
bonds or other securities other than pursuant to the exercise of outstanding
securities, or entering into any agreement with respect thereto, (vii) any
amendment to the Parent's certificate of incorporation or bylaws, (viii) other
than in the ordinary course of business, any (x) purchase, sale, assignment or
transfer of any material assets, (y) mortgage, pledge or the institution of any
lien, encumbrance or charge on any material assets or properties, tangible or
intangible, except for liens for taxes not yet delinquent and such other liens,
encumbrances or charges which do not, individually or in the
30
aggregate, have a Parent Material Adverse Effect, or (z) waiver of any rights of
material value or cancellation or any material debts or claims, (ix) any
incurrence of any material liability (absolute or contingent), except for
current liabilities and obligations incurred in the ordinary course of business
consistent with past practice, (x) any incurrence of any damage, destruction or
similar loss, whether or not covered by insurance, materially affecting the
business or properties of Parent or any Parent Subsidiary, or (xi) any entering
into any transaction of a material nature other than in the ordinary course of
business, consistent with past practices.
SECTION 5.08 SEC Filings; Financial Statements.
(a) Parent has timely filed all forms, reports, statements and
documents required to be filed by it (A) with the SEC and the NNM since March
17, 1999 (collectively, together with any such forms, reports, statements and
documents Parent may file subsequent to the date hereof until the Closing, the
"Parent Reports") and (B) with any other Governmental Entities. Each Parent
Report (i) was prepared in accordance with the requirements of the Securities
Act, the Exchange Act or the NNM, as the case may be, and (ii) did not at the
time it was filed 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 made therein, in the light of the circumstances under which
they were made, not misleading. Each form, report, statement and document
referred to in clause (B) of this paragraph was prepared in all material
respects in accordance with the requirements of applicable Law. No Parent
Subsidiary is subject to the periodic reporting requirements of the Exchange Act
or required to file any form, report or other document with the SEC, the NNM,
any other stock exchange or any other comparable Governmental Entity.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Parent Reports was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each presented
fairly the consolidated financial position of Parent and the Parent Subsidiaries
as at the respective dates thereof, and their consolidated results of
operations, stockholders' equity and cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of Parent and the Parent Subsidiaries as of December
31, 1998 as reported in the Parent Reports, none of Parent or any Parent
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with U.S. GAAP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with past practice since December 31, 1998.
31
SECTION 5.09 Pooling; Certain Tax Matters. Neither Parent nor, to the
knowledge of Parent, any of its affiliates has taken or agreed to take any
action (other than actions contemplated by this Agreement) that could reasonably
be expected to prevent (a) the Merger from being treated for accounting purposes
as a "pooling of interests" in accordance with U.S. GAAP and the accounting
standards of the SEC or (b) the Merger from constituting a "reorganization"
under Section 368 of the Code. Parent is not aware of any agreement, plan or
other circumstance that could reasonably be expected to prevent the Merger from
being so treated as a "pooling of interests" or from so qualifying as a
reorganization under Section 368 of the Code.
SECTION 5.10 Litigation. There is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of Parent, threatened against
Parent or any Parent Subsidiary that could reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect or materially
interfere with Parent's ability to consummate the transactions contemplated
herein, and, to the knowledge of Parent, there are no existing facts or
circumstances that could reasonably be expected to result in such a suit, claim,
action, proceeding or investigation. Parent is not aware of any facts or
circumstances which could reasonably be expected to result in the denial of
insurance coverage under policies issued to Parent and Parent Subsidiaries in
respect of such suits, claims, actions, proceedings and investigations, except
in any case as could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. Neither Parent nor any Parent
Subsidiary is subject to any outstanding order, writ, injunction or decree which
could reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or materially interfere with Parent's ability to
consummate the transactions contemplated herein.
SECTION 5.11 Taxes. Parent and each of Parent Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
Parent or any Parent Subsidiary is or has been a member, have properly completed
and timely filed all Tax Returns required to be filed by them and have paid all
Taxes shown thereon to be due. Parent has provided adequate accruals in
accordance with generally accepted accounting principles in its December 31,
1998 balance sheet contained in the Parent Reports for any Taxes that have not
been paid, whether or not shown as being due on any Tax Returns. Parent and the
Parent Subsidiaries have no material liability for unpaid Taxes accruing after
December 31, 1998.
SECTION 5.12 Brokers. No broker, finder or investment banker (other
than (BancBoston Xxxxxxxxx Xxxxxxxx (the "Parent Financial Advisor")) is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent. Parent
has heretofore made available to Company true, complete and correct copies of
all agreements between Parent and Parent Financial Advisor pursuant to which
such firm would be entitled to any payment relating to the Merger.
SECTION 5.13 Certain Business Practices. Neither Parent nor any Parent
Subsidiary nor any directors, officers, agents or employees of Parent or any
Parent Subsidiary (in their capacities as such) has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity or (ii) made any unlawful payment to
32
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
SECTION 5.14 Section 203 of the DGCL Not Applicable. The Board of
Directors of Parent has approved the Merger and this Agreement, and such
approval is sufficient to render inapplicable to the Merger, to this Agreement
and the transactions contemplated hereby the provisions of Section 203 of the
DGCL, assuming that Company and its "affiliates" (as defined therein)
collectively beneficially own, and have beneficially owned at all times during
the five (5) year period prior to the date hereof, less than twenty percent
(20%) of the Parent Common Stock outstanding.
SECTION 5.15 No Prior Activities. Except for liabilities incurred in
connection with its incorporation or organization, and consummation of this
Agreement and the transactions contemplated hereby, Merger Sub has not incurred
any liabilities, and has not engaged in any business or activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
person or entity. Merger Sub is a wholly owned subsidiary of Parent.
SECTION 5.16 Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit fund, plan, program,
arrangement and contract (including, without limitation, any "pension" plan,
fund or program, as defined in Section 3(2) of ERISA, and any "employee benefit
plan", as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
to or required to be contributed to by Parent or any Parent Subsidiary or other
trade or business (whether or not incorporated) treated as a single employer
with Parent (a "Parent ERISA Affiliate") pursuant to Code Section 414(b), (c),
(m) or (o) is a party, or with respect to which Parent or any Parent ERISA
Affiliate could incur liability under Section 4069, 4212(c) or 4204 of ERISA or
Section 412 of the Code, or to which Parent or any Parent ERISA Affiliate is a
party (the "Parent Benefit Plans"), Parent has delivered or made available to
Parent a true, complete and correct copy of a summary of such Parent Benefit
Plan.
(b) Each Parent Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable laws, including,
without limitation, ERISA and the Code, and all contributions required to be
made under the terms of any of the Parent Benefit Plans as of the date of this
Agreement have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Parent
Reports prior to the date of this Agreement. With respect to the Parent Benefit
Plans, no event has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances in connection with which Parent or any Parent
ERISA Affiliate could be subject to any material liability (other than for
routine benefit liabilities) under the terms of such Parent Benefit Plans,
ERISA, the Code or any other applicable Law.
(c) Parent on behalf of itself and all of the Parent ERISA Affiliates
hereby represents that: (i) each Parent Benefit Plan which is intended to be
qualified under Section
33
401(a) of the Code or Section 401(k) of the Code has received a favorable
determination letter from the IRS as to its qualified status under the Code, and
each trust established in connection with any Parent which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and to
Parent's knowledge no fact or event has occurred since the date of such
determination letter from the IRS to adversely affect the qualified status of
any such Parent Benefit Plan or the exempt status of any such trust; and (ii) to
Parent's knowledge there has been no prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Parent
Benefit Plan. No suit, administrative proceeding, action or other litigation has
been brought, or to the knowledge of Parent is threatened, against or with
respect to any such Parent Benefit Plan, including any audit or inquiry by the
Internal Revenue Service or United States Department of Labor (other than
routine benefits claims).
(d) No Parent Benefit Plan is a multiemployer pension plan (as defined
in Section 3(37) of ERISA) or other pension plan subject to Title IV of ERISA
and neither the Parent nor any Parent ERISA Affiliate has sponsored or
contributed to or been required to contribute to a multiemployer pension plan or
other pension plan subject to Title IV of ERISA. No material liability under
Title IV of ERISA has been incurred by Parent or any Parent ERISA Affiliate that
has not been satisfied in full, and no condition exists that presents a material
risk to Parent or any Parent ERISA Affiliate of incurring or being subject
(whether primarily, jointly or secondarily) to a material liability thereunder.
None of the assets of Parent or any Parent ERISA Affiliate is, or may reasonably
be expected to become, the subject of any lien arising under ERISA or Section
412(n) of the Code.
(e) With respect to each Parent Benefit Plan that is subject to Title
IV or Part 3 of Title I of ERISA or Section 412 of the Code, (i) no reportable
event (within the meaning of Section 4043 of ERISA, other than an event that is
not required to be reported before or within 30 days of such event) has occurred
or is expected to occur, (ii) there was not an accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the Code), whether
or not waived, as of the most recently ended plan year of such Parent Benefit
Plan; and (iii) there is no "unfunded benefit liability" (within the meaning of
Section 4001(a)(18) of ERISA).
(f) Neither Parent nor any Parent Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by Parent or any Parent Subsidiary and no collective bargaining
agreement is being negotiated by Parent or any Parent Subsidiary. As of the date
of this Agreement, there is no labor dispute, strike or work stoppage against
Parent or any Parent Subsidiary pending or, to the knowledge of Parent,
threatened which may interfere with the respective business activities of Parent
or any Parent Subsidiary. As of the date of this Agreement, to the knowledge of
Parent, none of Parent, any Parent Subsidiary, or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of Parent or any
Parent Subsidiary, and there is no charge or complaint against Parent or any
Parent Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing.
34
(g) Except as required by Law, no Parent Benefit Plan provides any of
the following retiree benefits to any person: medical, disability or life
insurance benefits. To Parent's knowledge, Parent and the Parent ERISA
Affiliates are in material compliance with (i) the requirements of the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the regulations
(including proposed regulations) thereunder and (ii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 and the
regulations (including the proposed regulations) thereunder.
SECTION 5.17 Intellectual Property.
(a) All trademarks, trade names, service marks, trade dress, and all
goodwill associated with any of the foregoing, patents, Internet domain names,
copyrights and any renewal rights therefor, technology, supplier lists, trade
secrets, know-how, computer software programs or applications in both source and
object code form, technical documentation of such software programs,
registrations and applications for any of the foregoing and all other tangible
or intangible proprietary information or materials that are or have been used
(including without limitation in the development of) Parent's business and/or in
any product, technology or process (i) currently being or formerly manufactured,
published or marketed by Parent or (ii) previously or currently under
development for possible future manufacturing, publication, marketing or other
use by Parent are hereinafter referred to as the "Parent Intellectual Property."
(b) Parent has all rights in Parent Intellectual Property necessary to
carry out Parent's current activities. No claims have been asserted or
threatened against Parent that challenge the validity or ownership of any Parent
Intellectual Property or allege that the use, reproduction, manufacturing,
distribution, licensing, sublicensing or sale of Parent Intellectual Property
infringes on any intellectual property or proprietary right of any person or
constitutes a misappropriation of any trade secret. All of Parent's patents,
patent applications, registered trademarks and trademark applications and
registered copyrights are in good standing with all fees and filings due as of
the Closing Date duly made. Parent owns full and unencumbered rights and good,
valid and marketable title to all of Parent's internally developed software.
35
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business by Company Pending the Closing.
Company agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, (x) the
respective businesses of Company and the Company Subsidiaries shall be conducted
only in, and Company and the Company Subsidiaries shall not take any action
except in, the ordinary course of business consistent with past practice and (y)
Company shall use all reasonable efforts to keep available the services of such
of the current officers, significant employees and consultants of Company and
the Company Subsidiaries and to preserve the current relationships of Company
and the Company Subsidiaries with such of the corporate partners, customers,
suppliers and other persons with which Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. Without limitation, neither Company nor any Company
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of Parent:
(a) amend or otherwise change its certificate of incorporation
or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of Company or any Company Subsidiary of any
class, or securities convertible into or exchangeable or exercisable for
any shares of such capital stock, or any options, warrants or other
rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom
interest), of Company or any Company Subsidiary, other than the issuance
of shares of Company Common Stock pursuant to the exercise of stock
options therefor outstanding as of the date of this Agreement or (ii)
any material property or assets of Company or any Company Subsidiary
except (A) transactions pursuant to existing contracts, (B)
dispositions, leases or licenses of inventory in the ordinary course of
business consistent with past practice and (C) shares of Company Common
Stock issued pursuant to the Company ESPP in the ordinary course of
business consistent with past practice;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any
division thereof, other than the purchase of assets in the ordinary
course of business consistent with past practice; (ii) incur any
indebtedness for borrowed money (other than indebtedness with respect to
working capital in amounts consistent with past practice) or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person
(other than a Company Subsidiary) for borrowed money or make any loans
or advances material to the business, assets, liabilities, financial
condition or results of
36
operations of Company and the Company Subsidiaries, taken as a whole;
(iii) terminate, cancel or request any material change in, or agree to
any material change in, any Company Material Contract or other License
Agreement, in each case other than in the ordinary course of business
consistent with past practice; (iv) make or authorize any capital
expenditure, other than capital expenditures in the ordinary course of
business consistent with past practice that have been budgeted for
fiscal year 2000 and disclosed in writing to Parent and that are not, in
the aggregate, in excess of $625,000 for Company and the Company
Subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not
be permitted under this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that any Company Subsidiary may pay
dividends or make other distributions to Company or any other Company
Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock
except repurchases of unvested shares at cost in connection with the
termination of the employment relationship with any employee pursuant to
stock option or purchase agreements in effect on the date hereof;
(f) amend or change the period (or permit any acceleration,
amendment or change) of exercisability of options granted under the
Company Stock Plans or authorize cash payments in exchange for any
Company Stock Options granted under any of such plans;
(g) amend the terms of, repurchase, redeem or otherwise
acquire, or permit any Company Subsidiary to repurchase, redeem or
otherwise acquire, any of its securities or any securities of any Company
Subsidiary;
(h) increase the compensation payable or to become payable to
its directors, officers, consultants or employees, grant any rights to
severance or termination pay to, or enter into any employment or
severance agreement which provides benefits upon a change in control of
Company that would be triggered by the Merger with, any director,
officer, consultant or other employee of Company or any Company
Subsidiary who is not currently entitled to such benefits from the
Merger, establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer, consultant or
employee of Company or any Company Subsidiary, except to the extent
required by applicable Law or the terms of a collective bargaining
agreement, or enter into or amend any contract, agreement, commitment or
arrangement between Company or any Company Subsidiary and any of
Company's directors, officers, consultants or employees, except for
increases in compensation paid to
37
persons who are not directors or officers of Company in the ordinary
course of business consistent with past practice;
(i) 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 claims,
liabilities or obligations (A) in the ordinary course of business and
consistent with past practice or (B) claims, liabilities or obligations
reflected on the February 1999 Balance Sheet or (C) as otherwise set
forth on Schedule 6.01 of the Company Disclosure Schedule;
(j) except as required by any Governmental Entity, make any
material change with respect to Company's accounting policies,
principles, methods or procedures, including, without limitation, revenue
recognition policies, other than as required by U.S. GAAP;
(k) make any material Tax election or settle or compromise any
material Tax liability; or
(l) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of
Company contained in this Agreement untrue or incorrect or prevent
Company from performing or cause Company not to perform its covenants
hereunder or result in any of the conditions to the Merger set forth
herein not being satisfied.
SECTION 6.02 Notices of Certain Events. Each of Parent and Company
shall give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the Merger; (ii) any notice or other communication from any
Governmental Entity in connection with the Merger; (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting Parent or the Parent
Subsidiaries or Company or the Company Subsidiaries, respectively, which, if
pending on the date hereof, would have been required to have been disclosed in
this Agreement, or that relate to the consummation of the Merger; (iv) the
occurrence of a default or event that, with the giving of notice or lapse of
time or both, will become a default under any Parent Material Contract or
Company Material Contract, respectively; and (v) any change that could
reasonably be expected to have a Parent Material Adverse Effect or a Company
Material Adverse Effect, respectively, or to delay or impede the ability of
either Parent or Company, respectively, to perform their respective obligations
pursuant to this Agreement and to effect the consummation of the Merger.
SECTION 6.03 Access to Information; Confidentiality.
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which Parent or Company or any of the Parent
Subsidiaries or the Company Subsidiaries is a party or pursuant to applicable
Law or the regulations or requirements
38
of any stock exchange or other regulatory organization with whose rules a party
hereto is required to comply, from the date of this Agreement to the Effective
Time, Parent and Company shall (and shall cause the Parent Subsidiaries and
Company Subsidiaries, respectively, to) (i) provide to the other (and its
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, "Representatives")) access at
reasonable times upon prior notice to its and its subsidiaries' officers,
employees, agents, properties, offices and other facilities and to the books and
records thereof, and (ii) furnish promptly such information concerning its and
its subsidiaries' business, properties, contracts, assets, liabilities and
personnel as the other party or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 6.03 shall affect or be deemed
to modify any representation or warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement with respect to the information disclosed
pursuant to this Section 6.03.
SECTION 6.04 No Solicitation of Transactions.
(a) Company shall not, directly or indirectly, and shall cause its
Representatives not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing nonpublic information), any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to its stockholders) that constitutes, or may reasonably be expected to
lead to, any Company Competing Transaction, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain a Company Competing Transaction, or agree to or endorse
any Company Competing Transaction, or authorize or permit any of Company's
Representatives or subsidiaries, or any Representative retained by Company's
subsidiaries, to take any such action; provided, however, that nothing contained
in this Section 6.04 shall prohibit the board of directors of Company (i) from
complying with Rule 14d-9 or 14e-2(a) promulgated under the Exchange Act with
regard to a tender or exchange offer not made in violation of this Section 6.04
or (ii) prior to receipt of the approval by the stockholders of Company of this
Agreement and the Merger from providing information (subject to a
confidentiality agreement at least as restrictive as the Confidentiality
Agreement) in connection with, and negotiating, another unsolicited, bona fide
written proposal regarding a Company Competing Transaction that (i) Company's
board of directors shall have concluded in good faith, after considering
applicable state law, on the basis of advice of independent outside counsel of
nationally recognized reputation, that failure to take such action would not be
a proper exercise of the Company's board of directors' fiduciary duties to
Company's stockholders under applicable law, (ii) if any cash consideration is
involved, shall not be subject to any financing contingency, and with respect to
which Company's board of directors shall have determined in the proper exercise
of its fiduciary duties to Company's stockholders that the acquiring party is
capable of consummating such Company Competing Transaction on the terms
proposed, and (iii) Company's board of directors shall have determined (based
upon the opinion of Company's independent financial advisors of nationally
recognized reputation) in the proper exercise of its fiduciary duties to
Company's stockholders that such Company Competing Transaction provides greater
value to the stockholders of Company than
39
the Merger (and Company's independent financial advisors of nationally
recognized reputation opine in writing that such Company Competing Transaction
is superior from a financial point of view) (any such Company Competing
Transaction being referred to herein as a "Company Superior Proposal"). Company
shall notify Parent promptly if any proposal or offer, or any inquiry or contact
with any person with respect thereto, regarding a Company Competing Transaction
is made, such notice to include the identity of the person making such proposal,
offer, inquiry or contact, and the terms of such Company Competing Transaction.
Company immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Company Competing Transaction. Company shall not release any third party
from, or waive any provision of, any confidentiality or standstill agreement to
which it is a party.
(b) Parent shall not, directly or indirectly, and shall cause its
Representatives not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing nonpublic information), any inquiries or the
making of any proposal or offer (including, without limitation, any proposal or
offer to its stockholders) that constitutes, or may reasonably be expected to
lead to, any Parent Competing Transaction, or enter into or maintain or continue
discussions or negotiate with any person in furtherance of such inquiries or to
obtain a Parent Competing Transaction, or agree to or endorse any Parent
Competing Transaction, or authorize or permit any of Parent's Representatives or
subsidiaries, or any Representative retained by Parent's subsidiaries, to take
any such action; provided, however, that nothing contained in this Section 6.04
shall prohibit the board of directors of Parent (i) from complying with Rule
14d-9 or 14e-2(a) promulgated under the Exchange Act with regard to a tender or
exchange offer not made in violation of this Section 6.04 or (ii) prior to
receipt of the approval by the stockholders of Parent of this Agreement and the
Merger from providing information (subject to a confidentiality agreement at
least as restrictive as the Confidentiality Agreement) in connection with, and
negotiating, another unsolicited, bona fide written proposal regarding a Parent
Competing Transaction that (i) Parent's board of directors shall have concluded
in good faith, after considering applicable state law, on the basis of advice of
independent outside counsel of nationally recognized reputation, that failure to
take such action would not be a proper exercise of the Parent's board of
directors' fiduciary duties to Parent's stockholders under applicable law, (ii)
if any cash consideration is involved, shall not be subject to any financing
contingency, and with respect to which Parent's board of directors shall have
determined in the proper exercise of its fiduciary duties to Parent's
stockholders that the acquiring party is capable of consummating such Parent
Competing Transaction on the terms proposed, and (iii) Parent's board of
directors shall have determined (based upon the opinion of Parent's independent
financial advisors of nationally recognized reputation) in the proper exercise
of its fiduciary duties to Parent's stockholders that such Parent Competing
Transaction provides greater value to the stockholders of Parent than the Merger
(and Parent's independent financial advisors of nationally recognized reputation
opine in writing that such Parent Competing Transaction is superior from a
financial point of view) (any such Parent Competing Transaction being referred
to herein as a "Parent Superior Proposal"). Parent shall notify Company promptly
if any proposal or offer, or any inquiry or contact with any person with respect
thereto, regarding a Parent Competing Transaction is made, such notice to
include the identity of the person making such proposal, offer, inquiry or
contact, and the terms of such Parent Competing Transaction. Parent
40
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to a Parent
Competing Transaction. Parent shall not release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which it is a
party.
SECTION 6.05 Tax-Free Transaction; Pooling.
(a) From and after the date of this Agreement, each party hereto shall
use all reasonable efforts to cause the Merger to qualify, and shall not
knowingly take any actions or cause any actions to be taken which could
reasonably be expected to prevent the Merger from (a) qualifying as a
"reorganization" under Section 368(a) of the Code or (b) being treated for
financial accounting purposes as a "pooling of interests" in accordance with
U.S. GAAP and the accounting standards of the SEC.
(b) Parent shall execute and deliver a certificate, in form reasonably
acceptable to Company, signed by an officer of Parent, setting forth factual
representations and covenants that will serve as a basis for the tax opinion
required under Section 8.02(c) hereof.
SECTION 6.06 Control of Operations. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the operations of Company and the Company Subsidiaries prior to the
Effective Time. Prior to the Effective Time, Company shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its operations.
SECTION 6.07 Further Action; Consents; Filings.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Merger, (ii) obtain from Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Parent or Company or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and (iii) make all necessary
filings, and thereafter make any other required or appropriate submissions, with
respect to this Agreement and the Merger required under (A) the rules and
regulations of the NNM and the NSCM, (B) the Securities Act, the Exchange Act
and any other applicable Federal or state securities Laws, (C) the HSR Act, if
any, and (D) any other applicable Law. The parties hereto shall cooperate and
consult with each other in connection with the making of all such filings,
including by providing copies of all such documents to the nonfiling parties and
their advisors prior to filing, and none of the parties shall file any such
document if any of the other parties shall have reasonably objected to the
filing of such document. No party shall consent to any voluntary extension of
any statutory deadline or waiting period or to any voluntary delay of the
consummation of the Merger at the behest of any Governmental Entity without the
consent and agreement of the other parties hereto, which consent shall not be
unreasonably withheld or delayed.
41
(b) Each of Company and Parent will give (or will cause their
respective subsidiaries to give) any notices to third persons, and use, and
cause their respective subsidiaries to use, reasonable efforts to obtain any
consents from third persons necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
SECTION 6.08 Additional Reports. Company and Parent shall each furnish
to the other copies of any reports of the type referred to in Sections 4.07 and
5.06, which it files with the SEC on or after the date hereof, and Company and
Parent, as the case may be, covenant and warrant that as of the respective dates
thereof, such reports will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Any unaudited consolidated interim financial statements
included in such reports (including any related notes and schedules) will fairly
present the financial position of Company and its consolidated subsidiaries or
Parent and its consolidated subsidiaries, as the case may be, as of the dates
thereof and the results of operations and changes in financial position or other
information including therein for the periods or as of the date then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and U.S. GAAP consistently applied during the
periods involved (except as otherwise disclosed in the notes thereto).
SECTION 6.09 Tax Information. Company shall provide the following
information to Parent not later than two weeks after the date of this Agreement:
(i) a complete list of the types of Tax Returns being filed by Company and each
Company Subsidiary in each taxing jurisdiction, (ii) a list of all closed years
with respect to each such type of Tax Return filed in each jurisdiction, and
(iii) a list of any deferred intercompany gain with respect to transactions to
which Company or any Company Subsidiary has been a party. Company shall provide
Parent and its accountants, counsel and other representatives reasonable access,
during normal business hours during the period prior to the Effective Time, to
all of Company's and Company Subsidiaries' Tax Returns and other records and
workpapers relating to Taxes.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Registration Statement; Joint Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement,
Parent and Company shall jointly prepare and shall file with the SEC a document
or documents that will constitute (i) the prospectus forming part of the
registration statement on Form S-4 of Parent (together with all amendments
thereto, the "Registration Statement"), in connection with the registration
under the Securities Act of Parent Common Stock to be issued to Company's
stockholders pursuant to the Merger and (ii) the joint proxy statement with
respect to the Merger relating to the special meetings of Company's stockholders
to be held to consider approval of this Agreement and the Merger (the "Company
Stockholders' Meeting") and of Parent's
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stockholders to be held to consider approval of the issuance of Parent Common
Stock (the "Share Issuance") to Company's stockholders pursuant to the Merger
(the "Parent Stockholders' Meeting") (together with any amendments thereto, the
"Joint Proxy Statement"). Copies of the Joint Proxy Statement shall be provided
to the NNM in accordance with its rules. Each of the parties hereto shall use
all reasonable efforts to cause the Registration Statement to become effective
as promptly as practicable after the date hereof, and, prior to the effective
date of the Registration Statement, the parties hereto shall take all action
required under any applicable Laws in connection with the issuance of shares of
Parent Common Stock pursuant to the Merger. Parent or Company, as the case may
be, shall furnish all information concerning Parent or Company as the other
party may reasonably request in connection with such actions and the preparation
of the Registration Statement and the Joint Proxy Statement. Each of Parent and
Company shall notify the other of the receipt of any comments from the SEC on
the Registration Statement and the Joint Proxy Statement and of any requests by
the SEC for any amendments or supplements thereto or for additional information
and shall provide to each other promptly copies of all correspondence between
Parent, Company or any of their representatives and advisors and the SEC. As
promptly as practicable after the effective date of the Registration Statement,
the Joint Proxy Statement shall be mailed to the stockholders of Company and of
Parent. Each of the parties hereto shall cause the Joint Proxy Statement to
comply as to form and substance as to such party in all material respects with
the applicable requirements of (i) the Exchange Act, (ii) the Securities Act,
(iii) the rules and regulations of the NNM.
(b) The Joint Proxy Statement shall include (i) the approval of the
Merger and the recommendation of the board of directors of Company to Company's
stockholders that they vote in favor of approval of this Agreement and the
Merger, and (ii) the opinion of Company Financial Advisor referred to in Section
4.19. The Joint Proxy Statement shall include the approval of the Share Issuance
and the recommendation of the board of directors of Parent to Parent's
stockholders that they vote in favor of approval of the Share Issuance.
(c) No amendment or supplement to the Joint Proxy Statement or the
Registration Statement shall be made without the approval of Parent and Company,
which approval shall not be unreasonably withheld or delayed. Each of the
parties hereto shall advise the other parties hereto, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment of the Joint Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(d) None of the information supplied by Company for inclusion or
incorporation by reference in the Registration Statement or the Joint Proxy
Statement shall, at the respective times filed with the SEC or other regulatory
agency and, in addition, (A) in the case of the Joint Proxy Statement, at the
date it or any amendments or supplements thereto are mailed to stockholders of
Parent and Company, at the time of the Company Stockholders' Meeting, at the
time of the Parent Shareholders' Meeting and at the Effective Time and (B) in
the case of the Registration Statement, when it becomes effective under the
Securities Act and at the Effective
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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, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event or circumstance
relating to Company or any Company Subsidiary, or their respective officers or
directors, should be discovered by Company that should be set forth in an
amendment or a supplement to the Registration Statement or the Joint Proxy
Statement, Company shall promptly inform Parent. All documents that Company is
responsible for filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable requirements of the rules
and regulations of the Securities Act and the Exchange Act.
(e) None of the information supplied by Parent for inclusion or
incorporation by reference in the Registration Statement or the Joint Proxy
Statement shall, at the respective times filed with the SEC or other regulatory
agency and, in addition, (A) in the case of the Joint Proxy Statement, at the
date it or any amendments or supplements thereto are mailed to stockholders of
Parent and Company, at the time of Company Stockholders' meeting, at the time of
the Parent Shareholders' Meeting and at the Effective Time and (B) in the case
of the Registration Statement, when it becomes effective under the Securities
Act and at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If, at any time prior to the Effective Time, any
event or circumstance relating to Parent or any Parent Subsidiary, or their
respective officers or directors, should be discovered by Parent that should be
set forth in an amendment or a supplement to the Registration Statement or the
Joint Proxy Statement, Parent shall promptly inform Company. All documents that
Parent is responsible for filing with the SEC in connection with the Merger will
comply as to form in all material respects with the applicable requirements of
the rules and regulations of the Securities Act and the Exchange Act.
SECTION 7.02 Stockholders' Meetings. Company shall call and hold the
Company Stockholders' Meeting and Parent shall call and hold the Parent
Stockholders' Meeting as promptly as practicable after the date hereof for the
purpose of voting upon the approval of this Agreement and the Merger or the
Share Issuance, as the case may be, pursuant to the Joint Proxy Statement, and
Company and Parent shall use all reasonable efforts to hold the Parent
Stockholders' Meeting and the Company Stockholders' Meeting on the same day and
as soon as practicable after the date on which the Registration Statement
becomes effective. Except as otherwise contemplated by this Agreement, Company
shall use all reasonable efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement and the Merger pursuant to the Joint
Proxy Statement and shall take all other action necessary or advisable to secure
the vote or consent of stockholders required by the NYBCL or applicable other
stock exchange requirements to obtain such approval. Except as otherwise
contemplated by this Agreement, Parent shall use all reasonable efforts to
solicit from its stockholders proxies in favor of the Share Issuance pursuant to
the Joint Proxy Statement and shall take all other action necessary or advisable
to secure the vote or consent of stockholders required by the DGCL or applicable
stock exchange requirements to obtain such approval. Each of the parties hereto
shall take all other action necessary or, in the opinion of the other parties
hereto, advisable to promptly and
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expeditiously secure any vote or consent of stockholders required by applicable
Law and such party's certificate of incorporation and bylaws to effect the
Merger.
SECTION 7.03 Affiliates.
(a) Company will use reasonable efforts to obtain an executed letter
agreement substantially in the form of Annex C hereto from (i) each person
identified in Schedule 4.18 of the Company Disclosure Schedule within 15 days
following the execution and delivery of this Agreement and (ii) from any person
who, to the knowledge of Company, may be deemed to have become an affiliate of
Company after the date of this Agreement and prior to the Effective Time as soon
as practicable after attaining such status. The foregoing notwithstanding,
Parent shall be entitled to place legends as specified in the Affiliate
Agreement on the certificates evidencing any of the Parent Common Stock to be
received by (i) any affiliate of Company or (ii) any person Parent reasonably
identifies (by written notice to Company) as being a person who may be deemed an
"affiliate" within the meaning of Rule 145 promulgated under the Securities Act,
and to issue appropriate stop transfer instructions to the transfer agent for
such Parent Common Stock, consistent with the terms of the Affiliate Agreement,
regardless of whether such person has executed Affiliate Agreement and
regardless of whether such person's name and address appear on Schedule 4.18 of
the Company Disclosure Schedule.
(b) Parent will use reasonable efforts to obtain an executed letter
agreement substantially in the form of Annex D hereto from (i) each officer and
director of Parent within 15 days following the execution and delivery of this
Agreement and (ii) from any person who, to the knowledge of Parent, may be
deemed to have become an affiliate of Parent after the date of this Agreement
and prior to the Effective Time as soon as practicable after attaining such
status.
SECTION 7.04 Directors' and Officers' Indemnification and Insurance.
(a) The provisions with respect to indemnification that are set forth
in the certificate of incorporation and bylaws of the Surviving Corporation
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time were
directors, officers, employees or agents of Company.
(b) From and after the Effective Time, Parent shall indemnify and hold
harmless each present and former director and officer of Company (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters relating to their service
as such an officer or director existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that Company would have been permitted under
Delaware law and its charter documents (each as in effect on the date hereof) to
indemnify such Indemnified Parties.
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(c) For a period of five years after the Effective Time, Parent shall
use its best efforts to maintain in effect the directors' and officers'
liability insurance policies maintained by Company; provided, however, that in
no event shall Parent be required to expend in any one year in excess of 150% of
the annual premium currently paid by Company for such coverage, which Company
hereby represents is $33,000, and provided further, that if the premium for such
coverage exceeds such amount, Parent shall purchase a policy with the greatest
coverage available for such 150% of the annual premium.
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 7.04.
SECTION 7.05 No Shelf Registration. Parent shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Parent Common Stock received
pursuant hereto by the persons who may be deemed to be "affiliates" of Company
within the meaning of Rule 145 promulgated under the Securities Act.
SECTION 7.06 Public Announcements. The initial press release
concerning the Merger shall be a joint press release and, thereafter, Parent and
Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
Merger and shall not issue any such press release or make any such public
statement without the prior written approval of the other, except to the extent
required by applicable Law or the requirements of the rules and regulations of
the NNM or the NSCM, in which case the issuing party shall use all reasonable
efforts to consult with the other party before issuing any such release or
making any such public statement.
SECTION 7.07 NNM Listing. Prior to the Effective Time, Parent shall
file with the NNM a Notification Form for Listing of Additional Shares with
respect to the Parent Common Stock issued or issuable in connection with the
Merger and shall use all reasonable efforts to have such Parent Common Stock
approved for quotation on the NNM.
SECTION 7.08 Blue Sky. Parent shall use all reasonable efforts to
obtain prior to the Effective Time all necessary permits and approvals required
under Blue Sky Laws to permit the distribution of the shares of Parent Common
Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.09 Company Stock Options/Registration Statements on
Form S-8. Parent shall reserve for issuance the number of shares of Parent
Common Stock that will be issuable upon exercise of Company Stock Options
assumed pursuant to Section 3.05 hereof. Within 20 business days after the
Effective Time, Parent shall file with the SEC one or more registration
statements on Form S-8 for the shares of Parent Common Stock issuable with
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respect to Company Stock Options and will maintain the effectiveness of such
registration statements for so long as any of such options or other rights
remain outstanding. The Company ESPP shall be terminated prior to the Effective
Date. Parent shall use reasonable commercial efforts to take any actions
necessary on the part of Parent to enable subsequent transactions by persons who
formerly held Company Stock Options in Parent Common Stock after the Effective
Time to be exempt from the application of Section 16(b) of the Exchange Act, to
the extent permitted thereunder.
SECTION 7.10 Employee Matters. Simultaneously with the Merger, the
Surviving Corporation shall assume all employment agreements and termination
benefit agreements and arrangements which are in effect at Company on the date
hereof. Company and Parent agree to cooperate and take such reasonable actions
as may be required to effect an orderly transition of benefits coverage under
Company's 401(k) plan, including but not limited to, termination of such plan.
As of the Effective Time, Parent shall cause the Surviving Corporation to honor
and satisfy all obligations and liabilities with respect to the Company Benefit
Plans. Notwithstanding the foregoing, the Surviving Corporation shall not be
required to continue any particular Company Benefit Plan after the Effective
Time, and any Company Benefit Plan may be amended or terminated in accordance
with its terms and applicable law. To the extent that any Company Benefit Plan
is terminated or amended after the Effective Time so as to reduce the benefits
that are then being provided with respect to participants thereunder, Parent
shall arrange for each individual who is then a participant in such terminated
or amended plan to participate in a comparable Parent Benefit Plan in accordance
with the eligibility criteria thereof, provided that (i) such participants shall
receive full credit for years of service with Company or any of Company
Subsidiaries prior to the Merger for purposes of eligibility and vesting, but
excluding benefit accrual or the amount of benefits, (ii) such participants
shall participate in the Parent Benefit Plans on terms no less favorable than
those offered by Parent to similarly situated employees of Parent and (iii)
Parent shall cause any and all pre-existing conditions limitations (to the
extent such limitations did not apply to a pre-existing condition under the
Company Benefit Plans) and eligibility waiting periods under any group health
plans to be waived with respect to such participants and their eligible
dependents.
SECTION 7.11 Board Representation. Company shall be entitled to
designate one individual (the "Company Nominee") to Parent's Board of Directors,
who shall be entitled to serve from the Effective Time and until his successor
shall be duly elected and qualified.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate
the Merger. The obligations of the parties hereto to consummate the Merger are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following conditions:
(a) the Registration Statement shall have been declared
effective by the SEC under the Securities Act and no stop order suspending
the effectiveness of the Registration Statement shall have been issued by
the SEC and no proceeding for that purpose shall have been initiated by the
SEC and not concluded or withdrawn;
(b) this Agreement and the Merger shall have been duly approved
by the requisite vote of stockholders of Company in accordance with the
NYBCL and by the requisite vote of the stockholders of Parent in accordance
with the rules of the NNM;
(c) no order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity which prohibits
or prevents the consummation of the Merger which has not been vacated,
dismissed or withdrawn prior to the Effective Time. Company and Parent
shall use their reasonable best efforts to have any of the foregoing
vacated, dismissed or withdrawn by the Effective Time;
(d) any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act or any other applicable
competition, merger control or similar Law shall have expired or been
terminated;
(e) all consents, approvals and authorizations legally required
to be obtained to consummate the Merger shall have been obtained from all
Governmental Entities, except where the failure to obtain any such consent,
approval or authorization could not reasonably be expected to result in a
Parent Material Adverse Effect or a Company Material Adverse Effect;
(f) The board of directors of Company shall not have revoked,
amended or modified, in any adverse respect, its approval of the Merger or
its recommendation to Company's stockholders described in Section
7.01(b)(i) ;
(g) The shares of Parent Common Stock to be issued in the Merger
shall have been authorized for listing on the NNM, subject to notice of
issuance;
(h) The board of directors of Parent shall not have revoked,
amended or modified, in any adverse respect, its approval of the Merger or
the Share Issuance or its recommendation to Parent's stockholders described
in Section 7.01(b) hereof; and
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(i) Each of Parent and Company shall have been advised in
writing by Ernst & Young LLP as of the date upon which the Effective Time
is to occur, in a form and in substance reasonably acceptable to Parent,
that the Merger can properly be accounted for as a "pooling of interests"
business combination in accordance with U.S. GAAP and the accounting
standards of the SEC.
SECTION 8.02 Conditions to the Obligations of Company. The obligations
of Company to consummate the Merger, or to permit the consummation of the Merger
are subject to the satisfaction or, if permitted by applicable Law, waiver of
the following further conditions:
each of the representations and warranties of Parent contained in
this Agreement shall be true, complete and correct in all material respects
both when made and on and as of the Effective Time as if made at and as of
the Effective Time (other than representations and warranties which address
matters only as of a certain date which shall be true, complete and correct
as of such certain date) and Company shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of Parent to such
effect;
(a) Parent shall have performed or complied in all material
respects with all covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time and Company shall
have received a certificate of the Chief Executive Officer and Chief
Financial Officer of Parent to that effect;
(b) Company shall use its reasonable best efforts to obtain an
opinion from its tax counsel substantially to the effect that, if the
Merger is consummated in accordance with the provisions of this Agreement,
under current law, for federal income tax purposes, the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code, which
opinion Company shall use its reasonable best efforts to obtain; and
(c) There shall have been no Parent Material Adverse Effect
since the date of this Agreement.
SECTION 8.03 Conditions to the Obligations of Parent. The
obligations of Parent to consummate the Merger are subject to the satisfaction
or waiver of the following further conditions:
(a) each of the representations and warranties of Company
contained in this Agreement shall be true, complete and correct in all
material respects both when made and on and as of the Effective Time as if
made at and as of the Effective Time (other than representations and
warranties which address matters only as of a certain date which shall be
true, complete and correct as of such certain date) and Parent shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Company to such effect;
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(b) Company shall have performed or complied in all material
respects with all covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time and Parent shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Company to that effect; and
(c) There shall have been no Company Material Adverse Effect
since the date of this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and Company;
(b) by either Parent or Company, if the Effective Time shall not
have occurred on or before November 30, 1999; provided, however, that the
right to terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have caused, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either Parent or Company, if any Governmental Order,
writ, injunction or decree preventing the consummation of the Merger shall
have been entered by any court of competent jurisdiction and shall have
become final and nonappealable;
(d) by Parent, if (i) the board of directors of Company
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to Parent or its stockholders or shall have
resolved to do so, (ii) the board of directors of Company shall have
recommended to the stockholders of Company a Company Competing Transaction
or shall have resolved to do so, (iii) a Company Competing Transaction
shall have been announced or otherwise publicly known and the board of
directors of Company shall have (A) failed to recommend against acceptance
of such by its stockholders (including by taking no position, or indicating
its inability to take a position, with respect to the acceptance of a
Company Competing Transaction involving a tender offer or exchange offer by
its stockholders), (B) failed to reconfirm its approval and recommendation
of this Agreement and the transactions contemplated hereby within 15
business days of the first announcement or other public knowledge of such
Competing Offer or (C) determined that such Company Competing Transaction
was a Company Superior Proposal and to take any of the actions allowed by
clause (ii) of Section 6.04(a), or (iv) the board of directors of Company
resolves to take any of the actions described above;
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(e) by Company, if (i) the board of directors of Parent
withdraws, modifies or changes its recommendation of this Agreement or the
Merger in a manner adverse to Company or its stockholders or shall have
resolved to do so, (ii) the board of directors of Parent shall have
recommended to the stockholders of Parent a Parent Competing Transaction or
shall have resolved to do so, (iii) a Parent Competing Transaction shall
have been announced or otherwise publicly known and the board of directors
of Parent shall have (A) failed to recommend against acceptance of such by
its stockholders (including by taking no position, or indicating its
inability to take a position, with respect to the acceptance of a Parent
Competing Transaction involving a tender offer or exchange offer by its
stockholders), (B) failed to reconfirm its approval and recommendation of
this Agreement and the transactions contemplated hereby within 15 business
days of a request made by the Company following the first announcement or
other public knowledge of such offer for a Parent Competing Transaction or
a Parent Combination Transaction, or (C) determined that such Parent
Competing Transaction was a Parent Superior Proposal and to take any of the
actions allowed by clause (ii) of Section 6.04(b), or (iv) the board of
directors of Parent resolves to take any of the actions described above;
(f) by Parent or Company, if (i) this Agreement and the Merger
shall fail to receive the requisite votes for approval at the Company
Stockholders' Meeting or any adjournment or postponement thereof or (ii) if
the Share Issuance shall fail to receive the requisite votes for approval
at the Parent Shareholders' Meeting or any adjournment or postponement
thereof;
(g) by Parent, 10 days after receipt by Company of a written
notice from Parent of a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, incomplete
or incorrect, in either case such that the conditions set forth in Section
8.03 would not be satisfied (a "Terminating Company Breach"); provided,
however, that if such Terminating Company Breach is curable by Company
through the exercise of its reasonable efforts within 10 days and for so
long as Company continues to exercise such reasonable efforts, Parent may
not terminate this Agreement under this Section 9.01(g); and provided,
further that the preceding proviso shall not in any event be deemed to
extend any date set forth in paragraph (b) of this Section 9.01;
(h) by Company, 10 days after receipt by Parent of a written
notice from Company of a breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become untrue, incomplete
or incorrect, in either case such that the conditions set forth in Section
8.02 would not be satisfied (a "Terminating Parent Breach"); provided,
however, that if such Terminating Parent Breach is curable by Parent
through the exercise of its reasonable efforts within 10 days and for so
long as Parent continues to exercise such reasonable efforts, Company may
not terminate this Agreement under this Section 9.01(h); and provided,
further that the preceding proviso shall not in any event be deemed to
extend any date set forth in paragraph (b) of this Section 9.01;
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The right of any party hereto to terminate this Agreement pursuant to this
Section 9.01 will remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 9.02 Effect of Termination. Except as provided in Section
9.05, in the event of termination of this Agreement pursuant to Section 9.01,
this Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of any party hereto or any of its affiliates or any
of its or their officers or directors, and all rights and obligations of each
party hereto shall cease; provided, however, that nothing herein shall relieve
any party hereto from liability for the willful or intentional breach of any of
its representations and warranties or the willful or intentional breach of any
of its covenants or agreements set forth in this Agreement.
SECTION 9.03 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after the
approval of this Agreement by the stockholders of Company, no amendment may be
made that changes the amount or type of consideration into which Company common
stock will be converted pursuant to this Agreement. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
SECTION 9.04 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for or waive compliance with the
performance of any obligation or other act of any other party hereto, (b) waive
any inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
SECTION 9.05 Termination Fee; Expenses.
(a) Except as set forth in this Section 9.05, all Expenses incurred in
connection with this Agreement and the Merger shall be paid by the party
incurring such Expenses, whether or not the Merger is consummated, except that
Parent and Company each shall pay one-half of all Expenses incurred solely for
printing, filing and mailing the Registration Statement and the Joint Proxy
Statement and all SEC and other regulatory filing fees incurred in connection
with the Registration Statement and the Joint Proxy Statement and any fees
required to be paid under the HSR Act.
(b) In the event that (i) Parent shall terminate this Agreement
pursuant to Section 9.01(d) or (ii) Parent shall terminate this Agreement due to
a Terminating Company Breach pursuant to Section 9.01(g), but only if such
breach was intentional, then Company shall pay to Parent (the "Company
Termination Fee") a sum equal to all of Parent's Expenses and an additional
amount equal to $4.5 million. Notwithstanding the foregoing, no fee shall be
paid
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pursuant to this Section 9.05(b) if Parent shall be in material breach of its
obligations hereunder. Any Company Termination Fee shall be paid in same day
funds within three (3) business days of the date of termination.
(c) In the event that (i) Company shall terminate this Agreement
pursuant to Section 9.01(e) or (ii) Company shall terminate this Agreement due
to a Terminating Parent Breach pursuant to Section 9.01(h), but only if such
breach was intentional, then Parent shall pay to Company (the "Parent
Termination Fee") a sum equal to all of Company's Expenses and an additional
amount equal to $4.5 million. Notwithstanding the foregoing, no fee shall be
paid pursuant to this Section 9.05(c) if Company shall be in material breach of
its obligations hereunder. Any Parent Termination Fee shall be paid in same day
funds within three (3) business days of the date of termination.
(d) Parent and Company agree that the agreements contained in Sections
9.05(b) and 9.05(c) above are an integral part of the transaction contemplated
by this Agreement and constituted liquidated damages and not a penalty. If
Company fails to pay to Parent any fee due under Section 9.05(b), Company shall
pay the cash and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit of other legal action, taken to
collect payment. Similarly, if Parent fails to pay to Company any fee due under
Section 9.05(c), Parent shall pay the cash and expenses (including legal fees
and expenses) in connection with any action, including the filing of any lawsuit
of other legal action, taken to collect payment.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be. This Section 10.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 10.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by registered or certified mail (postage prepaid, return
receipt requested) or by a nationally recognized courier service to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.02):
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(a) if to Company:
MARKET GUIDE INC.
0000 Xxxxxx Xxxxxx
Xxxxx X000
Xxxx Xxxxxxx, Xxx Xxxx 00000-0000
Attention: Chief Executive Officer
Telecopier: 000-000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq. and
Xxxxxx X. Xxxxxxx, Esq.
Telecopier: 000-000-0000
(b) if to Parent or Merger Sub:
XXXXXX.XXX, INC.
00 Xxxxxx Xxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Telecopier: 000-000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
SECTION 10.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner to the fullest
extent permitted by applicable Law in order that the Merger may be consummated
as originally contemplated to the fullest extent possible.
54
SECTION 10.04 Assignment; Binding Effect; Benefit. 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 hereto. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything contained in this Agreement to the contrary,
other than Section 7.04, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns any rights or remedies under or by
reason of this Agreement, provided, however, that the parties hereto
-------- -------
specifically acknowledge that the provisions of Section 7.04, 7.09 and 7.10
hereof are intended to be for the benefit of, and shall be enforceable by, the
current and former employees, officers and directors of Company and/or the
Company Subsidiaries affected thereby and their heirs and representatives, and
the provisions of Sections 3.02(c), 3.04 and 3.05 herein are intended to be for
the benefit of, and shall be enforceable by, stockholders of Company affected
thereby and their heirs and representatives.
SECTION 10.05 Incorporation of Exhibits. The Parent Disclosure
Schedule, the Company Disclosure Schedule and all Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part of this
Agreement for all purposes as if fully set forth herein. Parent and Company
acknowledge that the Parent Disclosure Schedule and the Company Disclosure
Schedule (i) are qualified in their entitety by reference to specific provisions
of this Agreement and (ii) are not intended to constitute and shall not be
construed as indicating that such matter is required to be disclosed, nor shall
such disclosure be construed as an admission that such information is material
with respect to Parent or Company, as the case may be, except to the extent
required by this Agreement and by applicable law.
SECTION 10.06 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY
LAW OTHER THAN THAT OF NEW YORK.
SECTION 10.07 Waiver of Jury Trial. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY
HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
55
SECTION 10.08 Headings; Interpretation. The descriptive headings
contained in this Agreement are included for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
SECTION 10.09 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.10 Entire Agreement. This Agreement (including the
Exhibits, the Parent Disclosure Schedule and the Company Disclosure Schedule)
and the Confidentiality Agreement constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
56
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
XXXXXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chief Financial Officer
MARKET GUIDE INC.
By: /s/ Xxxxxxx Xxxxxxxxxxxx
---------------------------
Name: Xxxxxxx Xxxxxxxxxxxx
Title: Chief Financial Officer and
Secretary
MERENGUE ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxx
---------------------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
