AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as
of February 22, 1998, among Networks Associates, Inc., a Delaware corporation
("Parent"), Thor Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and Trusted Information Systems, Inc., a
Delaware corporation ("Company").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("Delaware Law"), Parent and Company intend to enter into a
business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger
(as defined in Section 1.1) is consistent with and in furtherance of the
long-term business strategy of Company and fair to, and in the best interests
of, Company and its stockholders, (ii) has approved this Agreement, the Merger
and the other transactions contemplated by this Agreement and (iii) has
determined to recommend that the stockholders of Company adopt and approve this
Agreement and approve the Merger.
C. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain affiliates of Company are entering into Voting Agreements in
substantially the form attached hereto as Exhibit A (the "Company Voting
Agreements").
D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
Company shall execute and deliver a Stock Option Agreement in favor of Parent in
substantially the form attached hereto as Exhibit B (the "Company Stock Option
Agreement"). The Board of Directors of Company has approved the Company Stock
Option Agreement.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
F. It is also intended by the parties hereto that the Merger shall qualify
for accounting treatment as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation. Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "Certificate of
Merger") (the time of such filing (or such later time as may be agreed in
writing by Company and Parent and specified in the Certificate of Merger) being
the "Effective Time") as soon as practicable on or after the Closing Date (as
herein defined). Unless the context otherwise requires, the term "Agreement" as
used herein refers collectively to this Agreement and Plan of Reorganization and
the Certificate of Merger. The closing of the Merger (the "Closing") shall take
place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, at a time and date to be specified by the parties, which shall be
no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time the
Certificate of Incorporation of the Surviving Corporation shall be amended so
that the name of the Surviving Corporation shall be "Trusted Information
Systems, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be, at the Effective Time, the Bylaws of the
Surviving Corporation until thereafter amended.
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1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Company or the holders of any
of the following securities:
(a) Conversion of Company Common Stock. Each share of Common
Stock, $0.01 par value per share, of Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time, other than any shares
of Company Common Stock to be canceled pursuant to Section 1.6(b), will be
canceled and extinguished and automatically converted (subject to Sections
1.6(e) and (f)) into the right to receive 0.3230 (the "Exchange Ratio") shares
of Common Stock of Parent (the "Parent Common Stock") upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.7 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 1.9).
(b) Cancellation of Parent-Owned Stock. Each share of Company
Common Stock held by Company or owned by Merger Sub, Parent or any direct or
indirect wholly owned subsidiary of Company or of Parent immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all options to purchase Company Common Stock then outstanding
under Company's Amended and Restated Employee Stock Option Plan (the "Employee
Option Plan"), Company's Amended and Restated 1996 Directors Stock Option Plan
(the "Directors' Plan") and Amended and Restated 1996 Stock Option Plan (the
"1996 Option Plan" and together with the Employee Option Plan and the Directors'
Plan, the "Company Stock Option Plans") shall be assumed by Parent in accordance
with Section 5.8 hereof. Rights outstanding under Company's Employee Stock
Purchase Plan (the "ESPP") shall be treated as set forth in Section 5.8.
(d) Capital Stock of Merger Sub. Each share of Common Stock,
$0.01 par value per share, of Merger Sub (the "Merger Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of Common Stock, $0.01
par value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
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(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such holder) shall
receive from Parent an amount of cash (rounded to the nearest whole cent) equal
to the product of (i) such fraction, multiplied by (ii) the average closing
price of one share of Parent Common Stock for the five (5) most recent days that
Parent Common Stock has traded ending on the trading day immediately prior to
the Effective Time, as reported on the Nasdaq National Market System ("Nasdaq").
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall select a bank or trust
company reasonably acceptable to Company to act as the exchange agent (the
"Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I, the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock, and cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 1.6(f) and any dividends or distributions to which holders
of shares of Company Common Stock may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) of a certificate or certificates (the "Certificates"), which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into shares of Parent Common
Stock pursuant to Section 1.6, cash in lieu of any fractional shares pursuant to
Section 1.6(f) and any dividends or other distributions pursuant to Section
1.7(d), (i) a letter of transmittal in customary form (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall
contain such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d). Upon surrender of Certificates 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 in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock into which their
shares of Company Common Stock were converted at the Effective Time, payment in
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lieu of fractional shares which such holders have the right to receive pursuant
to Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(d) as to the
payment of dividends, to evidence only 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 1.6(f) and
any dividends or distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock represented thereby until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, the
Exchange Agent shall deliver to the record holders thereof, without interest,
certificates representing whole shares of Parent Common Stock issued in exchange
therefor along with payment in lieu of fractional shares pursuant to Section
1.6(f) hereof and the amount of any such dividends or other distributions with a
record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If certificates representing
shares of Parent Common Stock are to be issued in a name other than that in
which the Certificates surrendered in exchange therefor are registered, it will
be a condition of the issuance thereof that the Certificates so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
persons 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 certificates representing shares of Parent Common Stock in any name other
than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
I.
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1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificates to deliver a customary indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
(b) It is intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
1.11 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 assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated thereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in writing in the disclosure letter and
referencing a specific representation supplied by Company to Parent dated as of
the date hereof and certified by a duly authorized officer of Company (the
"Company Schedules"), as follows:
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2.1 Organization of Company.
(a) Company and each of its subsidiaries (i) is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is organized; (ii) has the
corporate or other power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted; and (iii) except
as would not be material to Company, is duly qualified or licensed to do
business in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary.
(b) Company has delivered to Parent a true and complete list
of all of Company's subsidiaries as of the date of this Agreement, indicating
the jurisdiction of organization of each subsidiary and Company's equity
interest therein.
(c) Company has delivered or made available to Parent a true
and correct copy of the Certificate of Incorporation and Bylaws of Company and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither Company nor
any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing instruments.
2.2 Company Capital Structure. The authorized capital stock of Company
consists of 40,000,000 shares of Common Stock, $0.01 par value per share, of
which there were 13,825,196 shares issued and outstanding as of January 31, 1998
(with no shares held in treasury) and 5,000,000 shares of Preferred Stock, $0.01
par value per share, of which no shares are issued or outstanding. All
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of Company or any agreement
or document to which Company is a party or by which it is bound. As of January
31, 1998, Company had reserved an aggregate of 1,704,956 shares of Company
Common Stock, net of exercises, for issuance pursuant to the Company Stock
Option Plans and an aggregate of 369,273 shares of Company Common Stock for
issuance pursuant to the Company's ESPP. As of January 31, 1998, there were
options outstanding to purchase an aggregate of 1,394,687 shares of Company
Common Stock pursuant to the Company Stock Option Plans. In addition, as of May
28, 1998, the Company will be obligated to issue options to purchase 1,250
shares of Common Stock to each outside member of its Board of Directors pursuant
to the Directors' Plan in connection with the Company's 1998 annual meeting of
shareholders. As of May 28, 1998, the Company also will be obligated to issue
approximately 38,000 shares of Common Stock to employees of the Company pursuant
to the ESPP. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. The Company Schedules list for
each person who held options to acquire shares of Company Common Stock as of
January 3, 1998, the name of the holder of such option, the exercise price of
such option, the number of shares as to which such option had vested at such
date, the vesting schedule for such option and whether the exercisability of
such option will be accelerated in any way by the transactions contemplated by
this Agreement, and indicates the extent of acceleration, if any.
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2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Company equity security, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except for securities Company owns free and clear of
all claims and encumbrances, directly or indirectly through one or more
subsidiaries, and except for shares of capital stock or other similar ownership
interests of certain subsidiaries of Company that are owned by certain nominee
equity holders as required by the applicable law of the jurisdiction of
organization of such subsidiaries, as of the date of this Agreement, there are
no equity securities, partnership interests or similar ownership interests of
any class of equity security of any subsidiary of Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Section 2.2, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Company or any of its
subsidiaries is a party or by which it is bound obligating Company or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of Company or any of its subsidiaries or
obligating Company or any of its subsidiaries to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this Agreement
and except as described in Section 2.3 of the Company Schedules, except as
contemplated by this Agreement, there are no registration rights and, to the
knowledge of Company, there are no voting trusts, proxies, rights plan,
antitakeover plan or other agreements or understandings to which Company is a
party or by which it is bound with respect to any equity security of any class
of Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries. Stockholders
of Company will not be entitled to dissenters' rights under applicable state law
in connection with the Merger.
2.4 Authority.
(a) Company has all requisite corporate power and authority to
enter into this Agreement and the Company Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Company,
subject only to the approval and adoption of this Agreement and the approval of
the Merger by Company's stockholders and the filing of the Certificate of Merger
pursuant to Delaware Law. A vote of the holders of a majority of the outstanding
shares of the Company Common Stock is sufficient for Company's stockholders to
approve and adopt this Agreement and approve the Merger. This Agreement and the
Company Stock Option Agreement have been duly executed and delivered by Company
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and, execution and delivery by Parent and Merger Sub, constitute a valid and
binding obligation of Company, enforceable against Company in accordance with
its terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. The execution and delivery of
this Agreement and the Company Option Agreement by Company do not, and the
performance of this Agreement and the Company Option Agreement by Company will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
Company or the equivalent organizational documents of any of its subsidiaries,
(ii) subject to obtaining the approval and adoption of this Agreement and the
approval of the Merger by Company's stockholders as contemplated in Section 5.2
and compliance with the requirements set forth in Section 2.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Company or any of its subsidiaries or by which Company or any of its
subsidiaries or any of their respective properties is bound or affected other
than any conflict or violation which would not result in material liability to
the Company, or (iii) result in any material breach of or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or impair Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a material lien or encumbrance on any of the material properties or
assets of Company or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which Company or any
of its subsidiaries is a party or by which Company or any of its subsidiaries or
its or any of their respective assets are bound or affected. The Company
Schedules list all consents, waivers and approvals under any of Company's or any
of its subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby, which, if individually or in the aggregate not obtained, would result in
a material loss of benefits to Company or Surviving Corporation or, to the
Company's knowledge, Parent as a result of the Merger.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("Governmental Entity"), is required to be obtained or made by Company
in connection with the execution and delivery of this Agreement and the Company
Stock Option Agreement or the consummation of the Merger, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) the filing of the Proxy Statement/Prospectus (as defined in
Section 2.18) with the Securities and Exchange Commission ("SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal, foreign and state
securities (or related) laws and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the securities or antitrust laws of
any foreign country, and (iv) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to Company or Parent or have a material adverse effect on the ability of the
parties hereto to consummate the Merger.
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2.5 SEC Filings; Company Financial Statements.
(a) Company has filed all forms, reports and documents
required to be filed by Company with the SEC since October 10, 1996 and has made
available to Parent such forms, reports and documents in the form filed with the
SEC. All such required forms, reports and documents (including those that
Company may file subsequent to the date hereof) are referred to herein as the
"Company SEC Reports." As of their respective dates, the Company SEC Reports (i)
were prepared in accordance with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Company SEC Reports
(the "Company Financials"), including each Company SEC Reports filed after the
date hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (ii)
was prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (iii) fairly presented the consolidated
financial position of Company and its subsidiaries as at the respective dates
thereof and the consolidated results of Company's operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring
year-end adjustments. The balance sheet of Company contained in Company SEC
Reports as of September 26, 1997 is hereinafter referred to as the "Company
Balance Sheet." Except as disclosed in the Company Financials, since the date of
the Company Balance Sheet neither Company nor any of its subsidiaries has any
liabilities required under GAAP to be set forth on a balance sheet (absolute,
accrued, contingent or otherwise) which are, individually or in the aggregate,
material to the business, results of operations or financial condition of
Company and its subsidiaries taken as a whole, except for liabilities incurred
since the date of the Company Balance Sheet in the ordinary course of business
consistent with past practices.
(c) Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act.
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2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect (as defined in
Section 8.3(c)) on Company, (ii) any declaration, setting aside or payment of
any dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of Company's or any of its subsidiaries' capital stock, or any
purchase, redemption or other acquisition by Company of any of Company's capital
stock or any other securities of Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of Company's or any of its subsidiaries'
capital stock, (iv) any granting by Company or any of its subsidiaries of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Company or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Company or any of its subsidiaries of any increase in
severance or termination pay or any entry by Company or any of its subsidiaries
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Company of the nature contemplated hereby, (v) entry by
Company or any of its subsidiaries into any licensing or other agreement with
regard to the acquisition or disposition of any material Intellectual Property
(as defined in Section 2.9) other than licenses in the ordinary course of
business consistent with past practice or any amendment or consent with respect
to any licensing agreement filed or required to be filed by Company with the
SEC, (vi) any material change by Company in its accounting methods, principles
or practices, except as required by concurrent changes in GAAP, or (vii) any
material revaluation by Company of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) Company and each of its subsidiaries have timely filed (taking into
account applicable extensions) all federal and material state, local and foreign
returns, estimates, information statements and reports ("Returns") relating to
Taxes required to be filed by Company and each of its subsidiaries with any Tax
authority, except such Returns which are not material to Company, and have paid
all Taxes shown to be due on such Returns.
15
(ii) Company and each of its subsidiaries as of the Effective Time will
have withheld with respect to its employees all federal and state income taxes,
Taxes pursuant to the Federal Insurance Contribution Act ("FICA"), Taxes
pursuant to the Federal Unemployment Tax Act ("FUTA") and other Taxes required
to be withheld, which amounts are material individually or in the aggregate.
(iii) Neither Company nor any of its subsidiaries has been delinquent in
the payment of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against Company or any of its subsidiaries, nor has Company or any of
its subsidiaries executed any unexpired waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax.
(iv) Except as set forth on Schedule 2.7 of the Company Schedules, no audit
or other examination of any Return of Company or any of its subsidiaries by any
Tax authority is presently in progress, nor has Company or any of its
subsidiaries been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by Company or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Company or any of its subsidiaries or any representative thereof.
(vi) Neither Company nor any of its subsidiaries has any liability for
unpaid Taxes which has not been accrued for or reserved on the Company Balance
Sheet, whether asserted or unasserted, contingent or otherwise, which is
material to Company, other than any liability for unpaid Taxes that may have
accrued since the date of the Company Balance Sheet in connection with the
operation of the business of Company and its subsidiaries in the ordinary
course.
(vii) There is no contract, agreement, plan or arrangement to which Company
is a party as of the date of this Agreement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of
Company or any of its subsidiaries that, individually or collectively, could
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code.
(viii) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Company.
16
(ix) Except for any such agreement or arrangement solely between the
Company and its subsidiaries, neither Company nor any of its subsidiaries is
party to or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement.
(x) Except as may be required as a result of the Merger, Company and its
subsidiaries have not been and will not be required to include any material
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or Section 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 Closing.
(xi) None of Company's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(xii) The Company Schedules list (A) any foreign Tax holidays, (B) any
intercompany transfer pricing agreements, or other arrangements that have been
established by Company or any of its subsidiaries with any Tax authority and (C)
any expatriate programs or policies affecting Company or any of its
subsidiaries.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company Schedules list the real property interests
owned by Company or any subsidiary as of the date of this Agreement. The Company
Schedules list all material real property leases to which Company or any
subsidiary is a party as of the date of this Agreement and each amendment
thereto that is in effect as of the date of this Agreement. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a claim in an amount
greater than $50,000.
(b) Each of Company and its subsidiaries has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any liens,
pledges, charges, claims, security interests or other encumbrances of any sort
("Liens"), except as reflected in the Company Financials and except for liens
for taxes not yet due and payable and such Liens or other imperfections of title
and encumbrances, if any, which are not material in character, amount or extent,
and which do not materially detract from the value, or materially interfere with
the present use, of the property subject thereto or affected thereby.
17
2.9 Intellectual Property.
(a) Each of Company and its subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications for
such patents, trademarks, trade names, service marks and copyrights, and all
patent rights, trade secrets, schematics, technology, know-how, computer
software and tangible or intangible proprietary information or material or other
intellectual property or proprietary rights that are used to conduct its
business as currently conducted (collectively, "Intellectual Property"). Each of
Company and its subsidiaries has taken reasonable measures to protect the
proprietary nature of each item of Intellectual Property that it considers
confidential, and to maintain in confidence all trade secrets and confidential
information that it presently owns or uses, except where the failure to own,
license or possess legally enforceable rights to use such Intellectual Property
would not, individually or in the aggregate, be expected to result in a material
loss of benefits or loss to the Company's business.
(i) Section 2.12(a)(i) of the Disclosure Schedule lists all material
patents and patent applications and all material trademarks, registered
copyrights, trade names and service marks owned by, or licensed exclusively to,
Company or any of its subsidiaries and which are currently used in connection
with the business of Company or its subsidiaries, including the jurisdictions in
which each such Intellectual Property right has been issued or registered or in
which any such application for such issuance or registration has been filed.
(ii) Section 2.12(a)(ii) of the Disclosure Schedule lists all material
written licenses, sublicenses and other agreements to which Company or any of
its subsidiaries is a party and pursuant to which any person is authorized to
use any Intellectual Property rights (excluding (a) source or object code
end-user licenses granted to end-users in the ordinary course of business that
permit use of software products without a right to modify, distribute or
sublicense the same ("End-User Licenses")) and (b) licenses, sublicenses or
other agreements with resellers, distributors, original equipment manufacturers
and other third party intermediaries that grant non-exclusive rights to use or
modify (for purposes of establishing program interfaces) and resell or
sublicense source or object code which (A) did not in any individual case
represent $50,000 or more of revenues to the Company in 1997 on a consolidated
basis, (B) were in all material respects in the standard forms of agreements
provided by the Company to Acquiror, and (C) the Company has no reason to
believe it will be material to the Company's or any of its subsidiaries'
business or could reasonably be expected to have a material loss to the Company.
(iii) Section 2.12(a)(iii) of the Disclosure Schedule lists all material
written licenses, sublicenses and other agreements as to which Company or any of
its subsidiaries is a party and pursuant to which Company or any such Subsidiary
is authorized to use any third party Intellectual Property, including software
("Third Party Intellectual Property Rights") which are incorporated in any
existing product or service of Company or any of its subsidiaries ("Embedded
Products").
18
(iv) Section 2.12(a)(iv) of the Disclosure Schedule lists all material
written agreements or other arrangements under which Company or any of its
subsidiaries has provided or agreed to provide source code of any product of the
Company or any of its subsidiaries to any third party, except for software
development kits provided either to agent integration providers or by shrink
wrap licenses.
Company has made available to Acquiror correct and complete
copies of all such patents, registrations, applications (owned by Company or any
of its subsidiaries), and all licenses, sublicenses and agreements referred to
above and as amended to date. Except for retail purchases of software, neither
Company nor any of its subsidiaries is a party to any oral license, sublicense
or agreement which, if reduced to written form, would be required to be listed
in Section 2.12 of the Disclosure Schedule under the terms of this Section
2.12(a).
(b) With respect to each material item of Intellectual
Property that Company or any of its subsidiaries owns: (i) other than common law
trademarks, and subject to such rights as have been granted by Company or any of
its subsidiaries under non-exclusive license agreements and joint development
agreements entered into by Company or any of its subsidiaries (copies of which
have previously been made available or disclosed in writing to Acquiror),
Company or its subsidiaries possesses all right, title, interest in and to such
item; and (ii) such item is not subject to any outstanding judgment, order,
decree, stipulation or injunction that materially interferes with the conduct of
Company's or any of its subsidiaries' business as currently conducted. With
respect to each item of Third Party Intellectual Property Rights that is
material to the business of the Company or any of its subsidiaries: (i) the
license, sublicense or other agreement covering such item is legal, valid,
binding, enforceable and in full force and effect with respect to Company or its
subsidiaries, and, to Company's knowledge, is legal, valid, binding, enforceable
and in full force and effect with respect to each other party thereto; (ii)
neither Company nor any of its subsidiaries is in material breach or default
thereunder, and to Company's knowledge no other party to such license,
sublicense or other agreement is in material breach or default thereunder, and
no event has occurred which with notice or lapse of time would constitute a
material breach or default by Company or any of its subsidiaries or permit
termination, modification or acceleration thereunder by the other party thereto;
(iii) the underlying item of Third Party Intellectual Property is not subject to
any outstanding judgment, order, decree, stipulation or injunction to which
Company or any of is subsidiaries is a party or has been specifically named that
materially interferes with the conduct of Company's or any of its subsidiaries'
business as currently conducted, nor to Company's knowledge subject to any other
outstanding judgment, order, decree, stipulation, or injunction that materially
interferes with the conduct of Company's or any of its subsidiaries' business as
currently conducted.
(c) Except as set forth in Section 2.12 of the Disclosure
Schedule, neither Company nor any of its subsidiaries (i) has been named in any
suit, action or proceeding which involves a claim of infringement or
misappropriation of any Intellectual Property right of any third party or (ii)
has received any written notice alleging any such claim of infringement or
misappropriation. Company has made available to Acquiror correct and complete
copies of all such suits, actions or proceedings or written notices. To the
Company's knowledge, the manufacturing, marketing, licensing or sale of the
products or performance of the service offerings of Company and its subsidiaries
do not currently infringe, and have not infringed, any Intellectual Property
right of any third party or to Company's knowledge any patent rights of third
parties; and to the knowledge of Company, the Intellectual Property rights of
Company and its subsidiaries are not being infringed by activities, products or
services of any third party.
19
(d) Except as set forth in Section 2.12 of the Disclosure
Schedule, the execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will neither cause the
Company nor any of its subsidiaries to be in violation or default under any
license, sublicense or agreement, nor terminate nor modify nor entitle any other
party to any such license, sublicense or agreement to terminate or modify such
license, sublicense or agreement, nor limit in any way the Company's or any of
its subsidiaries' ability to conduct its business or use or provide the use of
the Intellectual Property or intellectual property rights of others, which
violation, default, termination, modification or limitation would reasonably be
expected, individually or in the aggregate, to result in a material loss of
benefit or loss to the Company.
(e) Except for Embedded Products for which the Company has
valid non-exclusive licenses which are disclosed in Section 2.12 of the
Disclosure Schedule and which are adequate for each of the Company's and its
subsidiaries' business as presently conducted and except for usual and customary
rights retained by the United States government with respect to Intellectual
Property developed under research contracts with the Federal government (the
"Retained Fed Rights"), the Company is the sole and exclusive owner or the
licensee of, with all right, title and interest in and to the Intellectual
Property (free and clear of any liens or encumbrances), and has sole and
exclusive rights (and is not contractually obligated to pay any compensation to
any third party in respect thereof) to the use and distribution therefor or the
material covered thereby in connection with the services or products in respect
of which the Intellectual Property are being used, except where the failure to
have such rights would not reasonably be expected to result in a material loss
of benefit or loss to the Company. To the Company's knowledge, the government
has never exercised, and the Company has no notice that the government intends
to exercise, its rights to use or provide to others the use of the Retained Fed
Rights with respect to the Intellectual Property in a manner that would be
material to the Company's non-governmental business. The Retained Fed Rights do
not materially interfere with the conduct of the Company's business.
(f) The Company has heretofore delivered to Acquiror copies of
the Company's and each of its subsidiaries' standard forms of End-User Licenses.
Except as disclosed in Section 2.12 of the Disclosure Schedule (which describe
the material variations from the standard form of End-User License), neither the
Company nor any of its subsidiaries has entered into any End-User Licenses which
contain terms materially different than as set forth in the standard forms of
such agreements made available to Acquiror.
20
(g) The Company and each of its subsidiaries has taken
reasonable security measures to safeguard and maintain the secrecy,
confidentiality and value of, and its property rights in, all Intellectual
Property. All officers, employees and consultants of the Company or any of its
subsidiaries who have access to proprietary information or Intellectual Property
have executed and delivered to the Company or any of its subsidiaries an
agreement regarding the protection of proprietary information and the assignment
to the Company or any of its subsidiaries of all Intellectual Property arising
from the services performed for the Company or any of its subsidiaries by such
persons. No current or prior officers, employees or consultants of the Company
or any of its subsidiaries claim any ownership interest in any material
Intellectual Property as a result of having been involved in the development of
such property while employed by or consulting to the Company or any of its
subsidiaries, or otherwise. Except as set forth in Section 2.12 of the
Disclosure Schedule and except for the Embedded Products, all of the
Intellectual Property have been developed by employees of the Company or any of
its subsidiaries, within the scope of their employment.
(h) The Company and each of its subsidiaries has sufficient
right, title and interest in and to all material software development tools, not
entirely developed internally, used by the Company or any of its subsidiaries in
the development of any of the computer software included in the Intellectual
Property.
(i) To the knowledge of the Company's management, as of the
date hereof, there are no material defects in the Company's or any of its
subsidiaries' software products, and there are no errors in any documentation,
specifications, manuals, user guides, promotional material, internal notes and
memos, technical documentation, drawings, flow charts, diagrams, source language
statements, demo disks, benchmark test results, and other written materials
related to, associated with or used or produced in the development of the
Company's or any of its subsidiaries' software products (collectively, the
"Design Documentation"), which defects or errors would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company. The occurrence in or use by the computer software products currently
sold by the Company or any of its subsidiaries, of dates on or after January 1,
2000 (the "Millennial Dates") will not adversely affect the performance of the
software with respect to date dependent data, computations, output or other
functions (including without limitation, calculating, computing and sequencing)
and the software will create, sort and generate output data related to or
including Millennial Dates without errors or omissions.
(j) No government funding or university or college facilities
were used in the development of the Company's or any of its subsidiaries'
software products and the software was not developed pursuant to any contract or
other agreement with any person or entity except pursuant to contracts or
agreements listed in Section 2.12 of the Disclosure Schedule.
21
(k) To the knowledge of the Company's management, Section
2.12(k) of the Disclosure Schedule list all material warranty claims (including
any pending claims) related to the Company's or any of its subsidiaries'
products and the nature of such claims, except for customary product support and
maintenance. To the knowledge of the Company's management, except as set forth
in Section 2.12(k) of the Disclosure Schedule, neither the Company nor any of
its subsidiaries has made any material oral or written representations or
warranties with respect to its products or services.
(l) Except as set forth on Schedule 2.12(k), the Company and
its subsidiaries have been and are in compliance with the Export Administration
Act of 1979, as amended, and all regulations promulgated thereunder.
2.10 Compliance; Permits; Restrictions.
(a) Neither Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or in violation of (i) any
law, rule, regulation, order, judgment or decree applicable to Company or any of
its subsidiaries or by which Company or any of its subsidiaries or any of their
respective properties is bound or affected, or (ii) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Company or any of its subsidiaries is a
party or by which Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for conflicts, violations and
defaults that (individually or in the aggregate) would not cause Company to lose
any material benefit or incur any material liability. To the knowledge of the
Company, no investigation or review by any Governmental Entity is pending or has
been threatened in a writing delivered to Company against Company or any of its
subsidiaries, nor, to Company's knowledge, has any Governmental Entity indicated
an intention to conduct an investigation of Company or any of its subsidiaries.
There is no material agreement, judgment, injunction, order or decree binding
upon Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of Company or any of its subsidiaries, any acquisition of material
property by Company or any of its subsidiaries or the conduct of business by
Company as currently conducted.
(b) Company and its subsidiaries hold, to the extent legally
required, all permits, licenses, variances, exemptions, orders and approvals
from governmental authorities that are material to and required for the
operation of the business of Company as currently conducted (collectively, the
"Company Permits") except for any such failure which would not individually or
in the aggregate be material to the Company. Company and its subsidiaries are in
compliance in all material respects with the terms of the Company Permits,
except where the failure to be in compliance with the terms of the Company
Permits would not be material to Company.
2.11 Litigation. Except as disclosed in the Company Schedules, there
are no claims, suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against, relating to or affecting Company or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could reasonable be expected, either singularly or in the aggregate with all
such claims, actions or proceedings, to have a material loss to the Company's
business. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Company the legal right of Company to design. manufacture,
offer or sell any of its products in the present manner or style thereof.
22
Except as disclosed in the Company Schedules, neither Company nor any
Subsidiary has ever been subject to an audit, compliance review, investigation
or like contract review by the GSA office of the Inspector General or other
Governmental Entity or agent thereof in connection with any government contract
(a "Government Audit"), to Company's knowledge no Government Audit is threatened
or reasonably anticipated, and in the event of such Government Audit, to the
knowledge of the Company no basis exists for a finding of noncompliance with any
material provision of any government contract or a refund of any amounts paid or
owed by any Governmental Entity pursuant to such government contract. For each
item disclosed in the Company Schedule pursuant to this Section 2.11 a true and
complete copy of all material correspondence and documentation with respect
thereto has been provided to Parent.
2.12 Brokers' and Finders' Fees. Except for fees payable to X.X. Xxxxxx
Securities Inc. and Updata Capital, Inc. pursuant to engagement letters, each
dated January 21, 1998, copies of which have been provided to Parent, Company
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.13 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.13(a)(i) below (which definition shall apply
only to this Section 2.13), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common control
with Company within the meaning of Section 414(b), (c), (m) or (o) of the Code
and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by Company or any Affiliate for the benefit of any Employee
(iii) "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended
23
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or retired employee,
officer, or director of Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or similar agreement or contract between Company or any Affiliate and any
Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as amended;
(ix) "International Employee Plan" shall mean each Company Employee Plan
that has been adopted or maintained by Company, whether informally or formally,
for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as defined below)
which is a "multiemployer plan," as defined in Section 3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. The Company Schedules contain an accurate and
complete list of each Company Employee Plan and each material Employee
Agreement. Company does not have any plan or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or material Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
24
(c) Documents. Company has provided to Parent: (i) correct and
complete copies of all documents embodying to each Company Employee Plan and
each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee
Plan or related trust; (iii) if the Company Employee Plan is funded, the most
recent annual and periodic accounting of Company Employee Plan assets; (iv) the
most recent summary plan description together with the summary of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (v) all IRS determination, opinion, notification and advisory
letters, and rulings relating to Company Employee Plans and copies of all
applications and correspondence to or from the IRS or the DOL with respect to
any Company Employee Plan; (vi) all material written agreements and contracts
relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (vii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to
Company; (viii) all standard COBRA forms and related notices; and (ix) all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(d) Employee Plan Compliance. (i) Company has performed in all
material respects all obligations required to be performed by it under, is not
in default or violation of, and has no knowledge of any default or violation by
any other party to each Company Employee Plan, and each Company Employee Plan
has been established and maintained in all material respects in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including but not limited to ERISA or the Code; (ii) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination letter from the IRS with respect to each such
Plan as to its qualified status under the Code, including all amendments to the
Code effected by the Tax Reform Act of 1986 and subsequent legislation, or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination; (iii) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Company Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of Company, threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent,
Company or any of its Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (vi) there are no audits, inquiries
or proceedings pending or, to the knowledge of Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan; and
(vii) neither Company nor any Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan under Section 402(i) of ERISA or Sections
4975 through 4980 of the Code.
25
(e) Pension Plans. Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Company contributed to or been
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and Company has
never represented, promised or contracted (whether in oral or written form) to
any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Neither Company nor any Affiliate has, prior to the
Effective Time, and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its Employees.
(i) Effect of Transaction
(i) Except as set forth on Section 2.13(i) of the Company Schedules, the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made by Company or its
Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. Company: (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees, which amounts
are material individually or in the aggregate; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending,
threatened or reasonably anticipated claims or actions against Company under any
worker's compensation policy or long-term disability policy. To Company's
knowledge, no employee of Company has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee being employed by Company and disclosing to Company
or using trade secrets or proprietary information of any other person or entity.
26
(k) Labor. No work stoppage or labor strike against Company is
pending, threatened or reasonably anticipated. Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Company. Neither Company nor any
of its subsidiaries has engaged in any unfair labor practices within the meaning
of the National Labor Relations Act. Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by Company.
(l) International Employee Plan. Each International Employee
Plan has been established, maintained and administered in material compliance
with its terms and conditions and with the requirements prescribed by any and
all statutory or regulatory laws that are applicable to such International
Employee Plan. Furthermore, no International Employee Plan has unfunded
liabilities, that as of the Effective Time, will not be offset by insurance or
fully accrued. Except as required by law, no condition exists that would prevent
Company or Parent from terminating or amending any International Employee Plan
at any time for any reason.
2.14 Environmental Matters.
(a) Hazardous Material. Except as would not result in material
liability to Company, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "Hazardous Material") are present, as a result of the
actions of Company or any of its subsidiaries or any affiliate of Company, or,
to Company's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that Company or any of its
subsidiaries has at any time owned, operated, occupied or leased.
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(b) Hazardous Materials Activities. Except as would not result
in a material liability to Company (in any individual case or in the aggregate)
(i) neither Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"Company Environmental Permits") necessary for the conduct of Company's and its
subsidiaries' Hazardous Material Activities and other businesses of Company and
its subsidiaries as such activities and businesses are currently being
conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Company's knowledge, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction has been threatened by any Governmental Entity
against Company or any of its subsidiaries in a writing delivered to Company
concerning any Company Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of Company or any of its subsidiaries. Company is not aware
of any fact or circumstance which could involve Company or any of its
subsidiaries in any environmental litigation or impose upon Company any material
environmental liability.
2.15 Agreements, Contracts and Commitments. Except as otherwise set forth
in the Company Schedules, neither Company nor any of its subsidiaries is a party
to or is bound by:
(a) any employment or consulting agreement, contract or
commitment with any officer or director or higher level employee or member of
Company's Board of Directors, other than those that are terminable by Company or
any of its subsidiaries on no more than thirty days notice without liability or
financial obligation, except to the extent general principles of wrongful
termination law may limit Company's or any of its subsidiaries' ability to
terminate employees at will;
(b) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
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(c) any agreement of indemnification or any guaranty other
than any agreement of indemnification entered into in connection with the sale
or license of software products in the ordinary course of business;
(d) any agreement, contract or commitment containing any
covenant limiting in any respect the right of Company or any of its subsidiaries
to engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by Company or any of its subsidiaries
after the date of this Agreement of a material amount of assets not in the
ordinary course of business or pursuant to which Company has any material
ownership interest in any corporation, partnership, joint venture or other
business enterprise other than Company's subsidiaries;
(f) any joint marketing or development agreement currently in
force under which Company or any of its subsidiaries have continuing material
obligations to jointly market any product, technology or service and which may
not be canceled without penalty upon notice of 90 days or less, or any material
agreement pursuant to which Company or any of its subsidiaries have continuing
material obligations to jointly develop any intellectual property that will not
be owned, in whole or in part, by Company or any of its subsidiaries and which
may not be canceled without penalty upon notice of 90 days or less; or
(g) any agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any Company product,
service or technology except as a distributor in the normal course of business.
Neither Company nor any of its subsidiaries, nor to Company's knowledge
any other party to a Company Contract (as defined below), is in breach,
violation or default under, and neither Company nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the material terms or conditions of any of the agreements, contracts or
commitments to which Company or any of its subsidiaries is a party or by which
it is bound that are required to be disclosed in the Company Schedules pursuant
to clauses (a) through (h) above or pursuant to Section 2.9 hereof (any such
agreement, contract or commitment, a "Company Contract") in such a manner as
would permit any other party to cancel or terminate any such Company Contract,
or would permit any other party to seek material damages or other remedies (for
any or all of such breaches, violations or defaults, in the aggregate).
2.16 Pooling of Interests. To the knowledge of Company, based on
consultation with its independent accountants, neither Company nor any of its
directors, officers, affiliates or stockholders has taken or agreed to take any
action which would preclude Parent's ability to account for the Merger as a
pooling of interests.
2.17 Change of Control Payments. The Company Schedules set forth each
plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers and directors of
Company as a result of or in connection with the Merger.
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2.18 Statements; Proxy Statement/Prospectus. The information supplied
by Company for inclusion in the Registration Statement (as defined in Section
3.4(b)) shall not at the time the Registration Statement is filed with the SEC
and at the time it becomes effective under the Securities Act contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The information
supplied by Company for inclusion in the proxy statement/prospectus to be sent
to (a) the stockholders of Company in connection with the meeting of Company's
stockholders to consider the approval and adoption of this Agreement and the
approval of the Merger (the "Company Stockholders' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement/Prospectus") shall not, on the date the Proxy
Statement/Prospectus is first mailed to Company's stockholders or at the time of
the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders'
Meeting which has become false or misleading. The Proxy Statement/Prospectus
will comply as to form in all material respects with the provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. If at
any time prior to the Effective Time any event relating to Company or any of its
affiliates, officers or directors should be discovered by Company which is
required to be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, Company shall promptly inform
Parent. Notwithstanding the foregoing, Company makes no representation or
warranty with respect to any information supplied by Parent or Merger Sub which
is contained in any of the foregoing documents.
2.19 Board Approval. The Board of Directors of Company has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of Company and its stockholders, and (ii) to recommend that the
stockholders of Company approve and adopt this Agreement and approve the Merger.
2.20 Fairness Opinion. Company's Board of Directors has received a written
opinion from X. X. Xxxxxx Securities Inc. dated as of the date hereof, to the
effect that as of the date hereof, the Merger and the Exchange Ratio are fair to
Company's stockholders from a financial point of view and has delivered to
Parent a copy of such opinion.
2.21 Section 203 of the Delaware General Corporation Law Not
Applicable. The Board of Directors of Company has taken all actions so that the
restrictions contained in Section 203 of the Delaware General Corporation Law
applicable to a "business combination" (as defined in such Section 203) will not
apply to the execution, delivery or performance of this Agreement or to the
consummation of the Merger or the other transactions contemplated by this
Agreement.
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2.22 Customs. Company has acted with reasonable care to properly value
and classify, in accordance with applicable tariff laws, rules and regulations,
all goods that Company or any of its subsidiaries import into the United States
or into any other country (the "Imported Goods"). To Company's knowledge, there
are currently no material claims pending against Company by the U.S. Customs
Service (or other foreign customs authorities) relating to the valuation,
classification or marking of the Imported Goods.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to Company, subject to the
exceptions specifically disclosed in writing in the disclosure letter and
referencing a specific representation supplied by Parent to Company dated as of
the date hereof and certified by a duly authorized officer of Parent (the
"Parent Schedules"), as follows:
3.1 Organization of Parent and Merger Sub.
(a) Each of Parent and Merger Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; (ii) has the corporate or other power and
authority to own, lease and operate its assets and property and to carry on its
business as now being conducted; and (iii), except as would not be material to
Parent, is duly qualified or licensed to do business in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary.
(b) Parent has delivered or made available to Company a true
and correct copy of the Certificate of Incorporation and Bylaws of Parent, each
as amended to date, and each such instrument is in full force and effect.
Neither Parent nor any of its subsidiaries is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent governing
instruments.
3.2 Parent and Merger Sub Capital Structure. The authorized capital
stock of Parent consists of 300,000,000 shares of Common Stock, of which there
were 69,920,883 shares issued and outstanding as of December 31, 1997, and
5,000,000 shares of Preferred Stock, of which one share of Series A Preferred
Stock is issued and outstanding. All outstanding shares of Parent Common Stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of Parent or any agreement or document to which Parent is a party or
by which it is bound. The authorized capital stock of Merger Sub consists of 100
shares of Common Stock, $0.01 par value, all of which, as of the date hereof,
are issued and outstanding and are held by Parent. Merger Sub was formed on or
about February 19, 1998, for the purpose of consummating the Merger and has no
material assets or liabilities except as necessary for such purpose.
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3.3 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into, as applicable, this Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub, subject only to the filing of the
Certificate of Merger pursuant to Delaware Law. 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 the valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms, except as enforceability may be limited
by bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement by each of Parent and Merger Sub does
not, and the performance of this Agreement by each of Parent and Merger Sub will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
Parent or Merger Sub, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Merger Sub or by which any of
their respective properties is bound or affected or (iii) result in any material
breach of or constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under, or impair Parent's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a material lien or encumbrance on any of the material
properties or assets of Parent or Merger Sub pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any of their respective properties are
bound or affected.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required to
be obtained or made by Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the Merger, except for (i) the
filing of a Form S-4 (or any similar successor form thereto) Registration
Statement (the "Registration Statement") with the SEC in accordance with the
Securities Act, (ii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws and the HSR
Act and the securities or antitrust laws of any foreign country, and (v) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not be material to Parent or Company or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger.
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3.4 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required
to be filed by Parent with the SEC since January 1, 1997, and has made available
to Company such forms, reports and documents in the form filed with the SEC. All
such required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "Parent SEC
Reports." As of their respective dates, the Parent SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) The Company's revenue recognition practices and policies
have been and will be consistent with SOP 97-2. Each of the consolidated
financial statements (including, in each case, any related notes thereto)
contained in the Parent SEC Reports (the "Parent Financials"), including any
Parent SEC Reports filed after the date hereof until the Closing, (i) complied
as to form in all material respects with the published rules and regulations of
the SEC with respect thereto, (ii) was prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (iii) fairly presented the consolidated financial position of Parent and its
subsidiaries as at the respective dates thereof and the consolidated results of
Parent's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments. The balance sheet of
Parent contained in Parent SEC Reports as of December 31, 1997 is hereinafter
referred to as the "Parent Balance Sheet."
3.5 Absence of Certain Changes or Events. Since the date of the Parent
Balance Sheet there has not been any Material Adverse Effect on Parent.
3.6 Statements; Proxy Statement/Prospectus. The information supplied by
Parent for inclusion in the Registration Statement shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The information supplied by Parent
for inclusion in the Proxy Statement/Prospectus shall not, on the date the Proxy
Statement/Prospectus is first mailed to Company's stockholders or at the time of
the Company Stockholders' Meeting contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Time, any event relating to Parent or any of its affiliates, officers
or directors should be discovered by Parent which is required to be set forth in
an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Parent shall promptly inform Company. Notwithstanding the
foregoing, Parent makes no representation or warranty with respect to any
information supplied by Company which is contained in any of the foregoing
documents.
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3.7 Valid Issuance. The Parent Common Stock to be issued in the Merger,
when issued in accordance with the provisions of this Agreement: (a) will be
validly issued, fully paid and nonassessable; and (b) will not be subject to any
restrictions on resale under the Securities Act, other than restrictions imposed
by Rule 145 promulgated under the Securities Act.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in all material respects, in the usual, regular
and ordinary course, in substantially the same manner as heretofore conducted
and in compliance with all applicable laws and regulations, pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
business dealings. In addition, Company will promptly notify Parent of any
material event involving its business or operations.
In addition, except as permitted by the terms of this Agreement, and
except as provided in Article 4 of the Company Schedules, without the prior
written consent of Parent, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Company shall not do any of the following and
shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
34
(b) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Parent, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company
Intellectual Property, or enter into grants to future patent rights, other than
non-exclusive licenses in the ordinary course of business and consistent with
past practice;
(d) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of Company or its subsidiaries, except
repurchases issued shared at fair market value in connection with employees
exercised of options pursuant to the Company's Stock Option Plan 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) Issue, deliver, sell, authorize, pledge or otherwise
encumber or propose any of the foregoing of, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than the issuance delivery and/or sale of (i)
shares of Company Common Stock pursuant to the exercise of stock options
therefor outstanding as of the date of this Agreement, and (ii) shares of
Company Common Stock issuable to participants in the ESPP consistent with the
terms thereof;
(g) Cause, permit or propose any amendments to its
Certificate of Incorporation, Bylaws or other charter documents (or similar
governing instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Company or enter into any material joint ventures,
strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Company, except sales of inventory in the ordinary course of
business consistent with past practice;
35
(j) Incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Company, enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than (i) in connection with the financing of ordinary
course trade payables consistent with past practice or (ii) pursuant to existing
credit facilities in the ordinary course of business;
(k) Adopt or amend any employee benefit plan or employee stock
purchase or employee stock option plan, or enter into any employment contract or
collective bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past practice
with employees who are terminable "at will,"), pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
or fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants other than in the ordinary course
of business, consistent with past practice, or change in any material respect
any management policies or procedures;
(l) Make any payments outside of the ordinary course of business
in excess of $250,000;
(m) except in the ordinary course of business, modify, amend
or terminate any material contract or agreement to which Company or any
subsidiary thereof is a party or waive, release or assign any material rights or
claims thereunder;
(n) enter into any contracts, agreements, or obligations
relating to the distribution, sale, license or marketing by third parties of
Company's products or products licensed by Company other than in the ordinary
course of business consistent with past practice;
(o) materially revalue any of its assets or, except as
required by GAAP, make any change in accounting methods, principles or
practices;
(p) Take any action that would be reasonably likely to
interfere with Parent's ability to account for the Merger as a pooling of
interests whether or not otherwise permitted by the provisions of this Article
IV;
(q) Engage in any action with the intent to directly
or indirectly adversely impact any of the transactions contemplated by this
Agreement; or
(r) Agree in writing or otherwise to take any of the
actions described in Article 4 (a) through (q) above.
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4.2 Conduct of Business by Parent. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, except as permitted by
the terms of this Agreement and except as provided in Article 4 of the Parent
Schedules, without the prior written consent of Company (which consent shall not
be unreasonably withheld), during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Parent shall not do any of the following:
(a) Declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
(b) Take any action that would be reasonably likely to
interfere with Parent's ability to account for the Merger as a pooling of
interests; or
(c) Acquire or enter into any agreement to acquire a majority
of the voting securities or substantially all of the assets of any corporation
or other business entity (other than Company), whether by merger, consolidation,
stock tender or otherwise, provided, however, that nothing herein shall prevent
Parent from doing any of the foregoing until such time as the consideration paid
by Parent (as determined in good faith by the Board of Directors of Parent as of
the time such acquisition is approved by such Board or as of such other time as
such Board may determine) to acquire such voting securities or assets (in any
individual case or in the aggregate) shall exceed $300,000,000.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement;
Other Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this
Agreement, Company and Parent will prepare, and file with the SEC, the Proxy
Statement/Prospectus and Parent will prepare and file with the SEC the
Registration Statement in which the Proxy Statement/Prospectus will be included
as a prospectus. Each of Company and Parent will respond to any comments of the
SEC, will use its respective commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and Company will cause the Proxy
Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. As promptly as practicable after the date of this Agreement, each of
Company and Parent will prepare and file any other filings required to be filed
by it under the Exchange Act, the Securities Act or any other Federal, foreign
or Blue Sky or related laws relating to the Merger and the transactions
contemplated by this Agreement (the "Other Filings"). Each of Company and Parent
will notify the other promptly upon the receipt of any comments from the SEC or
its staff or any other government officials and of any request by the SEC or its
staff or any other government officials for amendments or supplements to the
Registration Statement, the Proxy Statement/Prospectus or any Other Filing or
37
for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy
Statement/Prospectus, the Merger or any Other Filing. Each of Company and Parent
will cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 5.1(a) to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement/Prospectus, the
Registration Statement or any Other Filing, Company or Parent, as the case may
be, will promptly inform the other of such occurrence and cooperate in filing
with the SEC or its staff or any other government officials, and/or mailing to
stockholders of Company, such amendment or supplement.
(b) The Proxy Statement/Prospectus will include the
recommendation of the Board of Directors of Company in favor of adoption and
approval of this Agreement and approval of the Merger.
5.2 Meeting of Company Stockholders. Promptly after the date hereof,
Company will take all action necessary in accordance with the Delaware Law and
its Certificate of Incorporation and Bylaws to convene the Company Stockholders'
Meeting to be held as promptly as practicable, and in any event (to the extent
permissible under applicable law) within 45 days after the declaration of
effectiveness of the Registration Statement, for the purpose of voting upon this
Agreement and the Merger or the issuance of shares of Parent Common Stock
pursuant to the Merger, respectively. Company will use its commercially
reasonable efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Merger and will
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by the rules of Nasdaq or Delaware Law to obtain such
approvals.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have
previously executed a Mutual Confidentiality Agreement, dated as of February 4,
1998 (the "Confidentiality Agreement"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
(b) Access to Information. Each of Company and Parent will
afford the other and the other's accountants, counsel and other representatives
reasonable access during normal business hours to their properties, books,
records and personnel and during the period prior to the Effective Time to
obtain all information concerning the business, including the status of product
development efforts, properties, results of their operations and personnel, as
the other may reasonably request. No information or knowledge obtained by Parent
in any investigation pursuant to this Section 5.3 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
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5.4 No Solicitation.
(a) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to its terms Company
and its subsidiaries will not, nor will they authorize or permit any of their
respective officers or directors or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any Acquisition
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal. Company and its subsidiaries will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. Without limiting
the foregoing, it is understood that any action taken by any officer, director
or employee of Company or any of its subsidiaries or any investment banker,
attorney or other advisor or representative of Company or any of its
subsidiaries that if taken by the Company would constitute a breach by the
Company of the immediately preceding two sentences shall be deemed to be a
breach of this Section 5.4 by Company. For purposes of this Agreement,
"Acquisition Proposal" means any inquiry, proposal or offer from any person or
"group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) relating to any direct or indirect acquisition or
purchase of a substantial amount of assets of Company or any of its subsidiaries
(other than the purchase of Company's products in the ordinary course of
business) or more than a 20% interest in the total voting securities of Company
or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning 20% or more of the total voting securities of Company or any of its
subsidiaries or any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving Company or any of its subsidiaries, other than the
transactions contemplated by this Agreement.
(b) Neither the Board of Directors of Company nor any
committee thereof shall (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Merger or (ii) cause Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(an "Acquisition Agreement") with respect to any Acquisition Proposal. In
addition, from and after the date of this Agreement until the earlier of the
Effective Time and termination of this Agreement pursuant to its terms, Company
and its subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal.
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(c) In addition to the obligations of Company set forth in
paragraphs (a) and (b) of this Section 5.4, Company as promptly as practicable
shall advise Parent orally and in writing of any request for non-public
information which Company reasonably believes would lead to an Acquisition
Proposal or of any Acquisition Proposal, or any inquiry with respect to or which
Company reasonably should believe would lead to any Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or inquiry,
and the identity of the person making any such request, Acquisition Proposal or
inquiry. Company will keep Parent informed in all material respects of the
status and details (including material amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
(d) Nothing contained in this Section 5.4 or elsewhere in this
Agreement shall prohibit Company from (i) taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act or (ii) making any disclosure to Company's stockholders
if, in the good faith judgment of the majority of the members of the Board of
Directors of Company, after consultation with independent legal counsel, failure
to so disclose would be inconsistent with applicable laws; provided that none of
Company nor its Board of Directors nor any committee thereof shall withdraw or
modify, or publicly propose to withdraw or modify, its position with respect to
this Agreement or the Merger or approve or recommend, or propose to approve or
recommend, an Acquisition Proposal.
5.5 Public Disclosure. Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law or any listing agreement with a national securities exchange. The parties
have agreed to the text of the joint press release announcing the signing of
this Agreement.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
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including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, Company and its Board of
Directors shall, if any state takeover statute or similar statute or regulation
is or becomes applicable to the Merger, this Agreement or any of the
transactions contemplated by this Agreement, use all reasonable efforts to
ensure that the Merger and the other transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement and the transactions contemplated hereby.
Notwithstanding anything herein to the contrary, nothing in this Agreement shall
be deemed to require Parent or Company or any subsidiary or affiliate thereof to
agree to any divestiture by itself or any of its affiliates of shares of capital
stock or of any business, assets or property, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
(b) Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3(a) or 6.3(b) would not be satisfied, provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(c) Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2(a) or 6.2(b) would not be
satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.8 Stock Options and Employee Benefits.
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each a "Company Stock Option") under the Company
Stock Option Plans, whether or not exercisable, will be assumed by Parent. Each
Company Stock Option so assumed by Parent under this Agreement will continue to
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have, and be subject to, the same terms and conditions set forth in the
applicable Company Stock Option Plan immediately prior to the Effective Time
(including, without limitation, any repurchase rights or vesting provisions),
except that (i) each Company Stock Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(b) It is intended that Company Stock Options assumed by
Parent shall qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent Company Stock Options qualified
as incentive stock options immediately prior to the Effective Time and the
provisions of this Section 5.8 shall be applied consistent with such intent.
(c) At the Effective Time, each outstanding purchase right (an
"Assumed Purchase Right") under the ESPP shall be deemed to constitute a
purchase right to acquire, on the same terms and conditions as were applicable
under the ESPP immediately prior to the Effective Time, a number of shares of
Parent Common Stock determined as provided in the ESPP except that the purchase
price of such shares of Parent Common Stock under each Assumed Purchase Right
shall be the lower of (i) the quotient determined by dividing eighty-five
percent (85%) of the fair market value of the Company Common Stock on the
offering date of each assumed offering by the Exchange Ratio or (ii) eighty-five
percent (85%) of the fair market value of the Parent Common Stock on each
exercise date of the assumed offering occurring after the Effective Time. As
soon as practicable after the Effective Time, Parent shall deliver to the
participants in the ESPP appropriate notice setting forth such participants'
rights pursuant thereto and that the purchase rights pursuant to the ESPP shall
continue in effect on the same terms and conditions.
5.9 Form S-8. Parent agrees to file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options and Assumed Purchase Right within five days after the
Effective Time and intends to maintain the effectiveness of such registration
statement thereafter for so long as any of such options or other rights remain
outstanding.
5.10 Indemnification.
(a) From and after the Effective Time, Parent will and will
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of Company pursuant to any indemnification agreements between
Company and its directors and officers as of the Effective Time (the
"Indemnified Parties") and any indemnification provisions under Company's
Certificate of Incorporation or Bylaws as in effect on the date hereof. The
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Certificate of Incorporation and By-laws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
Certificate of Incorporation and Bylaws of Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of Company, unless
such modification is required by law. The foregoing parties are expressly made
third party beneficiaries to the provisions of this Section 5.10.
(b) For a period of six years after the Effective Time, Parent
will cause the Surviving Corporation to use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable to the current directors and officers of Company; provided, however,
that in no event will Parent or the Surviving Corporation be required to expend
annual premiums in excess of $200,000 for such coverage (or such coverage as is
available for such annual premium of $200,000).
5.11 Nasdaq Listing. Parent agrees to authorize for listing on Nasdaq
the shares of Parent Common Stock issuable, and those required to be reserved
for issuance, in connection with the Merger, upon official notice of issuance.
5.12 Company Affiliate Agreement. Set forth on the Company Schedules is
a list of those persons who may be deemed to be, in Company's reasonable
judgment, affiliates of Company within the meaning of Rule 145 promulgated under
the Securities Act (each a "Company Affiliate"). Company will provide Parent
with such information and documents as Parent reasonably requests for purposes
of reviewing such list. Company will use its commercially reasonable efforts to
deliver or cause to be delivered to Parent, as promptly as practicable on or
following the date hereof, from each Company Affiliate an executed affiliate
agreement in substantially the form attached hereto as Exhibit C (the "Company
Affiliate Agreement"), each of which will be in full force and effect as of the
Effective Time. Parent will be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Company Affiliate Agreement. The Company will
also use reasonable effort to cause Xxxxx Xxxxx to execute a Company Voting
Agreement.
5.13 Regulatory Filings; Reasonable Efforts. As soon as may be
reasonably practicable, Company and Parent each shall file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") Notification and Report Forms
relating to the transactions contemplated herein as required by the HSR Act, as
well as comparable pre-merger notification forms required by the merger
notification or control laws and regulations of any applicable jurisdiction, as
agreed to by the parties. Company and Parent each shall promptly (a) supply the
other with any information which may be required in order to effectuate such
filings and (b) supply any additional information which reasonably may be
required by the FTC, the DOJ or the competition or merger control authorities of
any other jurisdiction and which the parties may reasonably deem appropriate.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the stockholders of
Company.
(b) Registration Statement Effective; Proxy Statement; Nasdaq
Listing. The SEC shall have declared the Registration Statement effective. No
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC. The shares to be issued in the
Merger and under the Company Stock Plan shall be approved for listing on the
Nasdaq National Market.
(c) No Order; HSR Act. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
(d) Tax Opinions. Parent and Company shall each have received
written opinions from their respective tax counsel (Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, and Piper & Marbury, L.L.P., respectively), in
form and substance reasonably satisfactory to them, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code and that each of Parent, Merger Sub and Company shall be treated as a
party to this Agreement and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either Parent or Company does not
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to such party if counsel to the other party renders such opinion to
such party. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
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6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct in all material respects as of the date of this Agreement
and (ii) shall be true and correct in all material respects on and as of the
Closing Date except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such particular
date), with the same force and effect as if made on and as of the Closing Date.
Solely for the purpose of the application of clause (ii) above, all
representations and warranties of Parent set forth in this Agreement that are
qualified as to materiality (including without limitation by the word "material"
in the phrases "material adverse change" or "material adverse effect") shall be
deemed to be not so qualified. Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by an authorized officer of
Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by an authorized officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect
with respect to Parent shall have occurred since the date of this Agreement.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and warranties of
Company contained in this Agreement (i) shall have been true and correct in all
material respects as of the date of this Agreement and (ii) shall be true and
correct in all material respects on and as of the Closing Date except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall have
been true and correct as of such particular date), with the same force and
effect as if made on and as of the Closing Date, except, with regard to the
foregoing clauses (i) and (ii), in such cases (other than the representations in
Sections 2.2, 2.3, 2.20 and 2.21) where the failure to be so true and correct
would not have a Material Adverse Effect on Company. Solely for the purpose of
the application of clause (ii) above, all representations and warranties of
Company set forth in this Agreement that are qualified as to materiality
(including without limitation by the word "material" in the phrases "material
adverse change" or "material adverse effect") shall be deemed to be not so
qualified. Parent shall have received a certificate with respect to the
foregoing signed on behalf of Company by an authorized officer of Company.
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(b) Agreements and Covenants. Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial Officer
of Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Company shall have occurred since the date of this Agreement.
(d) Noncompetition Agreements. Xxxxxxx X. Xxxxxx shall have entered into a
Noncompetition Agreement substantially in the form attached hereto as Exhibit D
and such agreement shall be in full force and effect.
(e) Affiliate Agreements. Each of the Company Affiliates shall have entered
into the Company Affiliate Agreement and each of such agreements will be in full
force and effect as of the Effective Time.
(f) Opinion of Accountants. Parent shall have received letters from each of
Coopers & Xxxxxxx L.L.P. and Ernst & Young LLP, respectively, dated within two
(2) business days prior to the Effective Time, regarding that firm's concurrence
with Parent's management's and Company's management's conclusions as to the
appropriateness of pooling of interest accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is consummated in
accordance with this Agreement.
(g) Consents. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses or
leases set forth on Schedule 6.3(g).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approvals of the
stockholders of Company or Parent:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have
been consummated by July 31, 1998 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
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(c) by either Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by either Company or Parent if the required approval of
the stockholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Company stockholders duly convened therefor or at any adjournment thereof
(provided that the right to terminate this Agreement under this Section 7.1(d)
shall not be available to Company where the failure to obtain Company
stockholder approval shall have been caused by the action or failure to act of
Company and such action or failure to act constitutes a breach by Company of
this Agreement);
(e) by Parent if (i) the Board of Directors of Company or any
committee thereof shall have withdrawn or modified in a manner adverse to Parent
its approval or recommendation of the Merger or this Agreement, (ii) Company
shall have failed to include in the Proxy Statement/Prospectus the
recommendation of the Board of Directors of Company in favor of approval of the
Merger and this Agreement, (iii) the Board of Directors of Company shall have
failed to reconfirm such recommendation within five business days after a
written request to do so, (iv) the Board of Directors of Company or any
committee thereof shall have recommended any Acquisition Proposal, (v) the Board
of Directors of Company or any committee thereof shall have resolved to do any
of the foregoing or (vi) the Company or any of its officers or directors shall
participate in any discussions or negotiations in breach of Section 5.4;
(f) by Company, upon 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, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through the exercise of its commercially reasonable efforts,
then Company may not terminate this Agreement under this Section 7.1(f) for
thirty days after delivery of written notice from Company to Parent of such
breach, provided Parent continues to exercise commercially reasonable efforts to
cure such breach (it being understood that Company may not terminate this
Agreement pursuant to this paragraph (f) if it shall have materially breached
this Agreement or if such breach by Parent is cured during such thirty day
period); or
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(g) by Parent, upon 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, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company through the exercise of its commercially reasonable efforts,
then Parent may not terminate this Agreement under this Section 7.1(g) for
thirty days after delivery of written notice from Parent to Company of such
breach, provided Company continues to exercise commercially reasonable efforts
to cure such breach (it being understood that Parent may not terminate this
Agreement pursuant to this paragraph (g) if it shall have materially breached
this Agreement or if such breach by Company is cured during such thirty day
period).
7.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8 (miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing (with the
SEC) of the Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto.
(b) Company Payments. In the event that this Agreement is
terminated by Parent pursuant to Section 7.1(d) or (e), Company shall promptly,
but in no event later than two days after the date of such termination, pay
Parent a fee equal to $9,000,000 in immediately available funds (the
"Termination Fee"); provided, however, that such payment shall not be due if (i)
in the case of termination under Section 7.1(d), the failure to obtain the
required stockholder approval is primarily the result of a Material Adverse
Effect on Parent or (ii) in the case of termination under Section 7.1(e) if any
of the specified actions are taken primarily as a result of a Material Adverse
Effect on Parent. Company acknowledges that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if Company fails promptly to pay the amounts due
pursuant to this Section 7.3(b) , and, in order to obtain such payment, Parent
commences a suit which results in a judgment against Company for the amounts set
forth in this Section 7.3(b), Company shall pay to Parent its reasonable costs
and expenses (including attorneys' fees and expenses) in connection with such
suit, together with interest on the amounts set forth in this Section 7.3(b) at
the prime rate of The Chase Manhattan Bank in effect on the date such payment
was required to be made.
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(c) Payment of the fees described in Section 7.3(b)
above shall not be in lieu of damages incurred in the event of breach of this
Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Trusted Information Systems, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
if to Company, to:
(b) Networks Associates, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Piper & Marbury, L.L.P.
0000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxx, Xx., Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
8.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise indicated the
words "include," "includes" and "including" when used herein shall be deemed in
each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be
deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement the term "knowledge" means
with respect to a party hereto, with respect to any matter in question, that any
of the Chief Executive Officer, Chief Financial Officer or Controller of such
party, has actual knowledge of such matter.
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(c) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event or effect
that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of such entity and its
subsidiaries taken as a whole, except for those changes, events and effects that
(i) are directly caused by conditions affecting the United States economy as a
whole or affecting the industry in which such entity competes as a whole, which
conditions do not affect such entity in a disproportionate manner, or (ii) are
related to or result from announcement or pendency of the Merger.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedules and the
Parent Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except as specifically provided in
Section 5.10.
8.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
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8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the Northern District of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. 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.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, COMPANY AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
NETWORKS ASSOCIATES, INC.
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
THOR ACQUISITION CORP.
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Chairman and Chief Executive Officer
TRUSTED INFORMATION SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
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