EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
INTERNATIONAL BUSINESS MACHINES CORPORATION
WATERFALL ACQUISITION CORP.
and
MAINSPRING, INC.
Dated as of April 19, 2001
TABLE OF CONTENTS
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger..................................1
SECTION 1.02. Closing.......................................................2
SECTION 1.03. Effect of the Merger..........................................2
SECTION 1.04. Certificate of Incorporation and By-laws......................2
SECTION 1.05. Directors.....................................................2
SECTION 1.06. Officers......................................................3
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock...................................3
SECTION 2.02. Exchange of Certificates......................................4
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of
the Company................................................6
SECTION 3.02. Representations and Warranties of
Parent and Sub............................................31
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business..........................................33
SECTION 4.02. No Solicitation..............................................38
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement;
Stockholders Meeting......................................40
SECTION 5.02. Access to Information; Confidentiality.......................41
SECTION 5.03. Reasonable Best Efforts; Notification........................42
SECTION 5.04. Stock Options................................................44
SECTION 5.05. Indemnification, Exculpation and
Insurance.................................................46
SECTION 5.06. Fees and Expenses............................................47
SECTION 5.07. Employee Matters.............................................47
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SECTION 5.08. Public Announcements.........................................48
SECTION 5.09. Closing Date Balance Sheet...................................48
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation
to Effect the Merger......................................49
SECTION 6.02. Conditions to Obligations of Parent
and Sub...................................................49
SECTION 6.03. Conditions to Obligation of the Company......................50
SECTION 6.04. Frustration of Closing Conditions............................51
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination..................................................51
SECTION 7.02. Effect of Termination........................................52
SECTION 7.03. Amendment....................................................53
SECTION 7.04. Extension; Waiver............................................53
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties................................................53
SECTION 8.02. Notices......................................................54
SECTION 8.03. Definitions..................................................54
SECTION 8.04. Interpretation...............................................55
SECTION 8.05. Counterparts.................................................56
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries.............................................56
SECTION 8.07. Governing Law................................................56
SECTION 8.08. Assignment...................................................56
SECTION 8.09. Enforcement..................................................56
AGREEMENT AND PLAN OF MERGER dated as of April 19,
2001, by and among INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation ("Parent"), WATERFALL
ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and MAINSPRING, INC., a
Delaware corporation (the "Company").
WHEREAS the Board of Directors of each of the Company and Sub
deems it in the best interests of their respective stockholders to
consummate the merger (the "Merger"), on the terms and subject to the
conditions set forth in this Agreement, of Sub with and into the Company in
which the Company would become a wholly owned subsidiary of Parent, and
such Boards of Directors have approved this Agreement and declared its
advisability (and, in the case of the Board of Directors of the Company,
recommended that this Agreement be adopted by the Company's stockholders);
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent
and Sub to enter into this Agreement, Parent and certain stockholders of
the Company are entering into a stockholders agreement (the "Stockholders
Agreement") pursuant to which, among other things, such stockholders have
agreed to vote to adopt this Agreement and to take certain other actions in
furtherance of the Merger and to grant to Parent an option to purchase
their shares of Company Common Stock (as defined in Section 2.01), in each
case upon the terms and subject to the conditions set forth therein; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. Effective Time of the Merger. As soon as
practicable on or after the Closing Date (as defined
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in Section 1.02), the parties shall (i) file a certificate of merger (the
"Certificate of Merger") in such form as is required by, and executed and
acknowledged in accordance with, the relevant provisions of the General
Corporation Law of the State of Delaware (the "DGCL") and (ii) make all
other filings or recordings required under the DGCL to effect the Merger.
The Merger shall become effective at such time as the Certificate of Merger
is duly filed with the Secretary of State of the State of Delaware or at
such subsequent time as Parent and the Company shall agree and be specified
in the Certificate of Merger (the date and time the Merger becomes
effective being the "Effective Time").
SECTION 1.02. Closing. The closing of the Merger (the "Closing")
will take place at 11:00 a.m., New York time, on a date to be specified by
the parties, which shall be not later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI that by
their terms are not to be satisfied or waived at the Closing (the "Closing
Date"), at the offices of Cravath, Swaine & Xxxxx, 000 Xxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, unless another time, date or place is agreed to in
writing by Parent and the Company.
SECTION 1.03. Effect of the Merger. At the Effective Time, Sub
shall be merged with and into the Company, the separate corporate existence
of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation"). The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.04. Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of the Company, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The By-laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.05. Directors. The directors of Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
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SECTION 1.06. Officers. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving
Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may
be.
ARTICLE II
Conversion of Securities
SECTION 2.01. Conversion of Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any shares of Common Stock, par value $0.01 per share, of the Company (the
"Company Common Stock"), or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of common stock of Sub shall be converted into and become one
fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent- Owned Stock.
All shares of Company Common Stock that are owned by the Company,
as treasury stock, Parent or Sub immediately prior to the
Effective Time shall automatically be canceled and retired and
shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Each share of
Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be canceled in
accordance with Section 2.01(b) and the Appraisal Shares (as
defined in Section 2.01(d)) shall be converted into the right to
receive $4.00 in cash, without interest (the "Merger
Consideration"). At the Effective Time all such shares shall no
longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented any such
shares (a "Certificate") shall cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration. The right of any holder of any share of Company
Common Stock to receive the Merger Consideration shall be subject
to and reduced by the
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amount of any withholding that is required under
applicable tax law.
(d) Appraisal Rights. Notwithstanding anything in this
Agreement to the contrary, shares (the "Appraisal Shares") of
Company Common Stock issued and outstanding immediately prior to
the Effective Time that are held by any holder who is entitled to
demand and properly demands appraisal of such shares pursuant to,
and who complies in all respects with, the provisions of Section
262 of the DGCL ("Section 262") shall not be converted into the
right to receive the Merger Consideration as provided in Section
2.01(c), but instead such holder shall be entitled to payment of
the fair value of such shares in accordance with the provisions
of Section 262. At the Effective Time, the Appraisal Shares shall
no longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of Appraisal Shares shall
cease to have any rights with respect thereto, except the right
to receive the fair value of such shares in accordance with the
provisions of Section 262. Notwithstanding the foregoing, if any
such holder shall fail to perfect or otherwise shall waive,
withdraw or lose the right to appraisal under Section 262 or a
court of competent jurisdiction shall determine that such holder
is not entitled to the relief provided by Section 262, then the
right of such holder to be paid the fair value of such holder's
Appraisal Shares under Section 262 shall cease and such Appraisal
Shares shall be deemed to have been converted at the Effective
Time into, and shall have become, the right to receive the Merger
Consideration as provided in Section 2.01(c). The Company shall
serve prompt notice to Parent of any demands for appraisal of any
shares of Company Common Stock, withdrawals of such demands and
any other instruments served pursuant to the DGCL received by the
Company, and Parent shall have the right to participate in and
direct all negotiations and proceedings with respect to such
demands. The Company shall not, without the prior written consent
of Parent, make any payment with respect to, or settle or offer
to settle, any such demands, or agree to do or commit to do any
of the foregoing.
SECTION 2.02. Exchange of Certificates. (a) Paying Agent. Prior
to the Effective Time, Parent shall designate a bank or trust company
reasonably acceptable to the Company to act as agent for the payment of the
Merger Consideration upon surrender of Certificates (the "Paying Agent"),
and, at the Effective Time, Parent shall
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make available, or cause the Surviving Corporation to make available, to
the Paying Agent funds in amounts and at the times necessary for the
payment of the Merger Consideration pursuant to Section 2.01(c) upon
surrender of Certificates, it being understood that any and all interest
earned on funds made available to the Paying Agent pursuant to this
Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
held by such person shall pass, only upon proper delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancelation to the
Paying Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may reasonably be required by
the Paying Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor the amount of cash into which the shares
formerly represented by such Certificate shall have been converted pursuant
to Section 2.01(c), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares that is not
registered in the stock transfer books of the Company, payment may be made
to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax
has been paid or is not applicable. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender of a Certificate in accordance with the terms of
this Article II shall be deemed to have been paid in full satisfaction of
all rights pertaining to the shares of Company Common Stock formerly
represented by such Certificate. At the close of business on the day on
which the Effective Time occurs the stock transfer books of the Company
shall be closed, and there shall be no further registration of transfers on
the stock
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transfer books of the Surviving Corporation of the shares that were
outstanding immediately prior to the Effective Time If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for transfer or any other reason, they shall be canceled and
exchanged as provided in this Article II.
(d) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to
two years after the Effective Time (or immediately prior to such earlier
date on which any Merger Consideration would otherwise escheat to or became
the property of any Governmental Entity (as defined in Section 3.01(d)),
any such Merger Consideration in respect thereof shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(e) Withholding Rights. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as Parent, the Surviving
Corporation or the Paying Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority by Parent, the Surviving Corporation or the
Paying Agent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made by
Parent, the Surviving Corporation or the Paying Agent.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company.
Except as set forth on the disclosure schedule (each section of which
qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein and such other representations and
warranties or covenants to the extent a matter in such section is disclosed
in such a way as to make its relevance to the information called for by
such other representation
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and warranty or covenant readily apparent) delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") or, with respect to actions and matters arising after the date
of this Agreement, as expressly contemplated by this Agreement or the
Company Disclosure Schedule, the Company represents and warrants to Parent
and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company and its subsidiaries (as defined in Section 8.03) (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) has all requisite
corporate, company or partnership power and authority to carry on its
business as now being conducted and (iii) is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than
where the failure to be so organized, existing, qualified or licensed or in
good standing (except in the case of clause (i) above with respect to the
Company) individually or in the aggregate could not reasonably be expected
to have a material adverse effect (as defined in Section 8.03) on the
Company. The Company has delivered to Parent complete and correct copies of
its Certificate of Incorporation and By-laws and the certificates of
incorporation and by-laws (or similar organizational documents) of each of
its subsidiaries, in each case as amended to the date of this Agreement.
The Company has made available to Parent and its representatives true and
complete copies of the minutes (or, in the case of minutes that have not
yet been finalized, drafts thereof) of all meetings of the stockholders,
the Board of Directors and each committee of the Board of Directors of the
Company and each of its subsidiaries held since January 1, 1999 (it being
understood and agreed that the portions of such minutes (or drafts thereof)
that relate to any Takeover Proposal (as defined in Section 4.02(a)) made
prior to the date of this Agreement have been redacted).
(b) Subsidiaries. Section 3.01(b) of the Company Disclosure
Schedule lists each subsidiary of the Company. All the outstanding shares
of capital stock or other equity or voting interests of each such
subsidiary are owned by the Company, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"), and are duly authorized, validly
issued, fully paid and nonassessable. Except for the capital stock or other
equity or voting interests of its subsidiaries, the Company does not own,
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directly or indirectly, any capital stock or other equity or voting
interests in any corporation, partnership, joint venture, association or
other entity.
(c) Capital Structure. (i) The authorized capital stock of the
Company consists of 250,000,000 shares of Company Common Stock and
25,000,000 shares of preferred stock, par value $0.01 per share (the
"Company Preferred Stock"). At the close of business on April 17, 2001, (i)
19,542,107 shares of Company Common Stock (excluding treasury shares) were
issued and outstanding, none of which were held by any subsidiary of the
Company, (ii) 4,000 shares of Company Common Stock were held by the Company
in its treasury, (iii) no shares of Company Preferred Stock were issued or
outstanding or were held by the Company in its treasury, (iv) 10,095,219
shares of Company Common Stock were reserved and available for issuance
pursuant to the Amended and Restated 1996 Omnibus Stock Plan, the 2000
Stock Option and Incentive Plan and the 2000 Non-Employee Director Stock
Option Plan (collectively, the "Company Stock Plans"), of which 5,157,110
shares were subject to issued and outstanding options under the Company
Stock Plans and (v) 1,339,342 shares of Company Common Stock were reserved
and available for issuance pursuant to the 2000 Employee Stock Purchase
Plan (the "ESPP") of which no more than 100,000 shares of Company Common
Stock were subject to outstanding purchase rights under the ESPP. The
Company has delivered to Parent a complete and correct list, as of the
close of business on April 17, 2001, of all outstanding stock options or
other rights to purchase Company Common Stock granted under the Company
Stock Plans or otherwise (collectively, the "Stock Options"), the number of
shares of Company Common Stock subject to each such Stock Option, the grant
dates and exercise prices and vesting schedule of each such Stock Option
and the names of the holders thereof. Other than the Stock Options and
rights under the ESPP, there are no outstanding rights of any person to
receive Company Common Stock under the Company Stock Plans or otherwise, or
on a deferred basis or otherwise. As of the close of business on April 17,
2001, there were outstanding Stock Options to purchase 2,236,710 shares of
Company Common Stock with exercise prices on a per share basis lower than
the Merger Consideration, and the weighted average exercise price of such
Stock Options was equal to approximately $1.65. The maximum number of
shares of Company Common Stock that could be purchased with accumulated
payroll deductions under the ESPP as of April 30, 2001 (assuming for such
purpose that the fair market value of a share of Company Common Stock on
such date is equal to the Merger Consideration) is 77,003.
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(ii) Except as set forth above, as of the close of business
on April 17, 2001, no shares of capital stock or other voting
securities of the Company, or options, warrants or other rights
to acquire or receive any such stock or securities were issued,
reserved for issuance or outstanding. Since April 17, 2001, until
the date of this Agreement, (x) there have been no issuances by
the Company of shares of capital stock or other voting securities
of the Company other than issuances of shares of Company Common
Stock pursuant to the exercise of Stock Options or rights under
the ESPP, in each case outstanding on such date as required by
their terms as in effect on the date of this Agreement and (y)
there have been no issuances by the Company of options, warrants
or other rights to acquire shares of capital stock or other
voting securities from the Company, other than for rights that
may have arisen under the ESPP. There are no outstanding stock
appreciation rights or other rights (other than rights that may
have arisen under the ESPP) that are linked to the price of the
Company Common Stock that were not granted in tandem with a
related Stock Option.
(iii) All outstanding shares of capital stock of the Company
are, and all shares that may be issued pursuant to the Company
Stock Plans and the ESPP will be, when issued in accordance with
the terms thereof, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. There are
no bonds, debentures, notes or other indebtedness of the Company
or any of it subsidiaries, and no securities or other instruments
or obligations of the Company or any of its Subsidiaries the
value of which is in any way based upon or derived from any
capital or voting stock of the Company, having the right to vote
(or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the
Company may vote. Except as set forth above and except as
expressly permitted under Section 4.01(a), there are no
securities, options, warrants, calls, rights, contracts,
commitments, agreements, instruments, arrangements,
understandings, obligations or undertakings of any kind to which
the Company or any of its subsidiaries is a party, or by which
the Company or any of its subsidiaries is bound, obligating the
Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of, or securities
convertible into, or exchangeable or exercisable for, shares of
capital
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stock or other voting securities of, the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option,
warrant, call, right, contract, commitment, agreement, instrument,
arrangement, understanding, obligation or undertaking. As of the
date of this Agreement, the Original Shares (as such term is
defined in the Stockholders Agreement) represent more than 50% of
the shares of Company Common Stock outstanding. There are not any
outstanding contractual obligations of the Company or any of its
subsidiaries to (i) repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries
or (ii) vote or dispose of any shares of the capital stock of any
of its subsidiaries. The Company is not a party to any voting
agreements with respect to any shares of the capital stock or
other voting securities of the Company or any of its subsidiaries
and, to the knowledge of the Company (which, for purposes of this
representation and warranty, is limited to the actual knowledge of
the chief executive officer or the chief financial officer of the
Company), as of the date of this Agreement, there are no
irrevocable proxies and no other voting agreements with respect to
any shares of the capital stock or other voting securities of the
Company or any of its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement, subject, in the
case of the Merger, to obtaining the Stockholder Approval (as defined in
Section 3.01(r)), and to comply with the provisions of this Agreement. The
execution and delivery of this Agreement by the Company, the consummation
by the Company of the transactions contemplated by this Agreement and the
Stockholders Agreement and the compliance by the Company with the
provisions of this Agreement have been duly autho rized by all necessary
corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement,
subject, in the case of the Merger, to obtaining the Stockholder Approval.
This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization,
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moratorium or similar laws affecting creditors' rights generally, or by
principles governing the availability of equitable remedies). The Board of
Directors of the Company, at a meeting duly called and held at which all
directors of the Company were present either in person or by telephone,
duly and unanimously adopted resolutions (i) approving and declaring
advisable this Agreement, (ii) declaring that it is in the best interests
of the Company's stockholders that the Company enter into this Agreement
and consummate the Merger on the terms and subject to the conditions set
forth in this Agreement, (iii) declaring that the consideration to be paid
to the Company's stockholders in the Merger is fair to such stockholders,
(iv) directing that this Agreement be submitted to a vote at a meeting of
the Company's stockholders to be held as promptly as practicable following
the date of this Agreement, (v) recommending that such stockholders adopt
this Agreement and (vi) approving the Stockholders Agreement and the
transactions contemplated thereby, which resolutions have not been
subsequently rescinded, modified or withdrawn in any way. The execution and
delivery of this Agreement and the Stockholders Agreement and the
consummation of the transactions contemplated hereby and thereby and
compliance by the Company with the provisions of this Agreement do not and
will not conflict with, or result in any violation or breach of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of, or result in, termination, cancelation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any Lien in or upon any of the properties or assets of the
Company or any of its subsidiaries under, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, any
provision of (i) the Certificate of Incorporation or By-laws of the Company
or the certificate of incorporation or by-laws (or similar organizational
documents) of any of its subsidiaries, (ii) any loan or credit agreement,
bond, debenture, note, mortgage, indenture, lease or other contract,
commitment, agreement, instrument, arrangement, understanding, obligation,
undertaking, permit, concession, franchise or license (each, a "Contract")
to which the Company or any of its subsidiaries is a party or any of their
respective properties or assets is subject or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree, in each case, applicable to the Company or any
of its subsidiaries or their respective properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, violations,
breaches, defaults, rights, losses, Liens or entitlements that individually
or in the aggregate
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could not reasonably be expected to (x) have a material adverse effect on
the Company, (y) impair in any material respect the ability of the Company
to perform its obligations under this Agreement or (z) prevent or
materially impede, interfere with, hinder or delay the consummation of any
of the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
domestic or foreign governmental entity, including any Federal, state or
local government or any court, administrative agency or commission or other
governmental or regulatory authority or agency (each, a "Governmental
Entity"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this
Agreement by the Company, the consummation by the Company of the
transactions contemplated by this Agreement or the compliance by the
Company with the provisions of this Agreement, except for (1) the filing of
a premerger notification and report form by the Company under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act")
or any other applicable competition, merger control, antitrust or similar
law, (2) the filing with the Securities and Exchange Commission (the "SEC")
of a proxy statement relating to the adoption of this Agreement by the
Company's stockholders (as amended or supplemented from time to time, the
"Proxy Statement") and such reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as may be required in connection
with this Agreement, the Stockholders Agreement and the transactions
contemplated hereby and thereby, (3) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the
Company or any of its subsidiaries is qualified to do business, (4) any
filings required under the rules and regulations of The Nasdaq Stock Market
Inc. and (5) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained
or made individually or in the aggregate could not reasonably be expected
to (x) have a material adverse effect on the Company, (y) impair in any
material respect the ability of the Company to perform its obligations
under this Agreement or (z) prevent or materially impede, interfere with,
hinder or delay the consummation of any of the transactions contemplated by
this Agreement.
(e) SEC Documents. The Company has filed with the SEC, and has
heretofore made available to Parent true and complete copies of, all
reports, schedules, forms, statements and other documents required to be
filed with the SEC by the Company since July 26, 2000 (together with all
13
information incorporated therein by reference, the "SEC Documents"). No
subsidiary of the Company is required to file any form, report or other
document with the SEC. As of their respective dates, each of the SEC
Documents complied in all material respects 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
promulgated thereunder applicable to such SEC Documents, and none of the
SEC Documents at the time they were filed contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of the
date of this Agreement, except to the extent that information contained in
any SEC Document filed and publicly available prior to the date of this
Agreement (a "Filed SEC Document") has been revised or superseded by a
later filed Filed SEC Document, none of the SEC Documents contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements (including the related notes) of the
Company included in the SEC Documents complied, when filed, or will comply,
when filed, in each case as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been or will be prepared in
accordance with generally accepted accounting principles ("GAAP") (except,
in the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented or will present in all
material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments and the absence of footnotes). Except
as set forth in the Filed SEC Documents, the Company and its subsidiaries
have no liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that individually or in the aggregate
could reasonably be expected to have a material adverse effect on the
Company.
(f) Information Supplied. None of the information included or
incorporated by reference in the Proxy Statement will, at the date it is
first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 5.01) or at the time of any
14
amendment or supplement thereof, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent
or Sub specifically for inclusion or incorporation by reference in the
Proxy Statement. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
(g) Absence of Certain Changes or Events. Since the date of the
most recent audited financial statements included in the Filed SEC
Documents, the Company and its subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice, and
there has not been (i) any material adverse effect on the Company or any
state of facts, change, development, effect or occurrence that could
reasonably be expected to result in a material adverse effect on the
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 the Company's or any of its subsidiaries' capital stock, except for
dividends by a wholly owned subsidiary of the Company to its parent, (iii)
any split, combination or reclassification of any of the Company's or any
of its subsidiaries' capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock or other securities of the Company
or any of its subsidiaries, (iv) (w) any granting by the Company or any of
its subsidiaries of any increase in compensation or fringe benefits, except
for normal increases of cash compensation prior to the date of this
Agreement in the ordinary course of business consistent with past practice,
or any payment by the Company or any of its subsidiaries of any bonus,
except for bonuses made prior to the date of this Agreement in the ordinary
course of business consistent with past practice, in each case to any
current or former director, officer, employee or consultant, (x) any
granting by the Company or any of its subsidiaries to any current or former
director, officer, employee or consultant of any increase in severance or
termination pay, (y) any entry by the Company or any of its subsidiaries
into, or any amendment of, (A) any employment, deferred compensation,
severance, termination, indemnification or consulting agreement between the
Company or any of its subsidiaries, on the one hand, and any current or
former director, officer, employee or consultant of the Company or any of
its
15
subsidiaries, on the other hand or (B) any agreement between the Company or
any of its subsidiaries, on the one hand, and any current or former
director, officer, employee or consultant of the Company or any of its
subsidiaries, on the other hand, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving the Company of the nature contemplated by this
Agreement or the Stockholders Agreement (all such agreements under this
clause (y), collectively, "Benefit Agreements"), or (z) any amendment to,
or modification of, any Stock Option, (v) any damage, destruction or loss,
whether or not covered by insurance, that individually or in the aggregate
could reasonably be expected to have a material adverse effect on the
Company, (vi) any change in financial or tax accounting methods, principles
or practices by the Company, except insofar as may have been required by a
change in GAAP or applicable law, (vii) any tax election that individually
or in the aggregate could reasonably be expected to have a material adverse
effect on the Company or any of its tax attributes or any settlement or
compromise of any material income tax liability, (viii) any revaluation by
the Company of any of its material assets or (ix) any licensing or other
agreement with regard to the acquisition or disposition of any material
Intellectual Property (as defined in Section 3.01(p)) or rights thereto.
(h) Litigation. There is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries that individually or in
the aggregate could reasonably be expected to have a material adverse
effect on the Company, nor is there any statute, law, ordinance, rule,
regulation, judgment, order or decree, of any Governmental Entity or
arbitrator outstanding against, or, to the knowledge of the Company,
investigation by any Governmental Entity involving, the Company or any of
its subsidiaries that individually or in the aggregate could reasonably be
expected to have a material adverse effect on the Company.
(i) Contracts. None of the Company or any of its subsidiaries is
a party to or bound by, and none of their properties or assets are bound by
or subject to, any written or oral:
(i) Contract not made in the ordinary course of business
entered into prior to the date of this Agreement;
16
(ii) Contract pursuant to which the Company or any of its
subsidiaries has agreed not to compete with any person or to
engage in any activity or business, or pursuant to which any
benefit is required to be given or lost as a result of so
competing or engaging;
(iii) Contract pursuant to which the Company or any of its
subsidiaries is restricted in any material respect in the
development, marketing or distribution of their respective
products or services;
(iv) Contract with (i) any shareholder of the Company or any
of its subsidiaries, (ii) any affiliate of the Company or any of
its subsidiaries, (iii) any current or former director, officer,
employee or consultant of the Company or any of its subsidiaries
or of any affiliate of the Company or any of its subsidiaries
(other than employment agreements referred to in Section
3.01(k));
(v) license or franchise granted by the Company or any of
its subsidiaries pursuant to which the Company or such subsidiary
has agreed to refrain from granting license or franchise rights
to any other person;
(vi) Contract under which the Company or any of its
subsidiaries has incurred any indebtedness that is currently
owing or given any guarantee in respect of indebtedness;
(vii) Contract creating or granting a Lien (including Liens
upon properties acquired under conditional sales, capital leases
or other title retention or security devices);
(viii) material Contract that requires consent of or notice
to a third party in the event of or with respect to the Merger or
the transactions contemplated by the Stockholders Agreement,
including in order to avoid termination of or loss of material
benefit under any such Contract;
(ix) Contract providing for payments of royalties to third
parties;
(x) Contract granting a third party any license to
Intellectual Property, other than Contracts granting licenses to
end-user customers for their internal use or solely as necessary
for such customers to use the Company's products and services;
17
(xi) Contract providing confidential treatment by the
Company or any of its subsidiaries of third party information,
other than (i) non-disclosure agreements entered into by the
Company in the ordinary course of business or (ii)
confidentiality agreements entered into prior to the date of this
Agreement with respect to Takeover Proposals made prior to the
date of this Agreement;
(xii) Contract granting the other party to such Contract or
a third party "most favored nation" status that, following the
Merger, would in any way apply to Parent or any of its
subsidiaries (other than the Company and its subsidiaries and
their products or services (other than any similar products or
services produced or offered by Parent or its subsidiaries (other
than the Company and its subsidiaries)));
(xiii) Contract that requires any consent (including any
consent to assignment), approval, authorization, qualification or
order of any Governmental Entity or other third party in
connection with this Agreement and the consummation of the
transactions contemplated hereby; or
(xiv) Contract which (i) has aggregate future sums due from
the Company or any of its subsidiaries in excess of $50,000 and
is not terminable by the Company or such subsidiary for a cost of
less than $50,000 or (ii) is entered into prior to the date of
this Agreement and is otherwise material to the business of the
Company and its subsidiaries, taken as a whole, or as presently
conducted or as proposed to be conducted.
Each Contract of the Company and its subsidiaries is in full force and
effect and is a legal, valid and binding agreement of the Company or such
subsidiary and, to the knowledge of the Company or such subsidiary, of each
other party thereto, enforceable against the Company or any of its
subsidiaries, as the case may be, and, to the knowledge of the Company,
against the other party or parties thereto, in each case, in accordance
with its terms, except for such failures to be in full force and effect or
enforceable that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on the Company. Each of the
Company and its subsidiaries has performed or is performing all material
obligations required to be performed by it under its Contracts and is not
(with or without notice or lapse of time or both) in breach or default in
any material respect thereunder, and, to the knowledge of the Company or
such subsidiary, no other party to any of its Contracts is (with
18
or without notice or lapse of time or both) in breach or default in any
material respect thereunder except, in each case, for such breaches that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company. Neither the Company nor any of its
subsidiaries knows of any circumstances that are reasonably likely to occur
that could reasonably be expected to materially adversely affect its
ability to perform its obligations under any material Contract.
(j) Compliance with Laws. The Company and its subsidiaries are,
and since December 31, 1998 have been, in compliance with all statutes,
laws, ordinances, rules, regulations, judgments, orders and decrees of any
Governmental Entity applicable to their businesses or operations, except
for instances of possible noncompliance that individually or in the
aggregate could not reasonably be expected to have a material adverse
effect on the Company, impair in any material respect the ability of the
Company to perform its obligations under this Agreement or prevent or
materially impede, interfere with, hinder or delay the consummation of any
of the transactions contemplated by this Agreement. None of the Company or
any of its subsidiaries has received, since December 31, 1998, a notice or
other written communication alleging a possible violation of any statute,
law, ordinance, rule, regulation, judgment, order or decree of any
Governmental Entity applicable to its businesses or operations, except for
such violations that individually or in the aggregate could not reasonably
be expected to have a material adverse effect on the Company. The Company
and its subsidiaries have in effect all Federal, state and local, domestic
and foreign, governmental consents, approvals, orders, authorizations,
certificates, filings, notices, permits, concessions, franchises, licenses
and rights (collectively "Permits") necessary for them to own, lease or
operate their properties and assets and to carry on their businesses as now
conducted and there has occurred no violation of, or default under, any
such Permit, except for the lack of Permits and for violations of, or
defaults under, Permits, which lack of Permits, violations or defaults
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company. The Merger, in and of itself, could
not reasonably be expected to cause the revocation or cancelation of any
such Permit, which revocation or cancelation could reasonably be expected
to have a material adverse effect on the Company.
(k) Absence of Changes in Benefit Plans; Employment Agreements;
Labor Relations. Except as disclosed in the Filed SEC Documents, since the
date of the most
19
recent audited financial statements included in the Filed SEC Documents,
none of the Company or any of its subsidiaries has terminated, adopted,
amended or agreed to amend in any material respect any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock appreciation, restricted stock, stock option, phantom stock,
performance, retirement, thrift, savings, stock bonus, paid time off,
perquisite, fringe benefit, vacation, severance, disability, death benefit,
hospitalization, medical or other welfare benefit or other material plan,
program, arrangement or understanding (whether or not legally binding)
maintained, contributed to or required to be maintained or contributed to
by the Company or any other person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code (each, a "Commonly Controlled Entity"), in each case
providing benefits to any current or former director, officer, employee or
independent contractor of the Company or any of its subsidiaries
(collectively, "Benefit Plans") or has made any material change in any
actuarial or other assumption used to calculate funding obligations with
respect to any Benefit Plan that is a Pension Plan (as defined in Section
3.01(m)), or any material change in the manner in which contributions to
any such Pension Plan are made or the basis on which such contributions are
determined. Except as disclosed in the Filed SEC Documents, neither the
Company nor any of its subsidiaries is party to any Benefit Agreement.
There are no collective bargaining or other labor union agreements to which
the Company or any of its subsidiaries is a party or by which it is bound.
Since December 31, 1998, neither the Company nor any of its subsidiaries
has encountered any labor union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
(l) Environmental Matters. Except to the extent that the
inaccuracy of any of the following (or the circumstances giving rise to
such inaccuracy) could not reasonably be expected to have a material
adverse effect on the Company, (i) the Company and each of its subsidiaries
are in compliance with all applicable Environmental Laws (as defined
below); and (ii) there are no facts, circumstances or conditions that are
reasonably likely to give rise to any liability of, or form the basis of a
claim against, the Company or any of its Subsidiaries in connection with
any Environmental Law. As used in this Agreement, the term "Environmental
Laws" shall mean any applicable Federal, state or local, domestic or
foreign, statutes, laws, regulations, ordinances, rules, codes, enforceable
20
requirements, agreements, orders, decrees, judgments or injunctions issued,
promulgated or entered into by any Governmental Entity relating to
protection of the environment, natural resources or human health and
safety. As used in this Agreement, the term "Hazardous Substances" shall
mean any explosive or radioactive substances or materials, any toxic or
hazardous substances or materials, including asbestos or
asbestos-containing materials, polychlorinated biphenyls, petroleum and
petroleum products, and any other substances or materials regulated under
any Environmental Law.
(m) ERISA Compliance. (i) Section 3.01(m)(i) of the Company
Disclosure Schedule contains a list of all Benefit Plans, including without
limitation each "employee welfare benefit plan" (as defined in Section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended
"ERISA")) and "employee pension benefit plan" (as defined in Section 3(2)
of ERISA) (a "Pension Plan"). The Company has provided or made available to
Parent true, complete and correct copies of (1) each Benefit Plan (or, in
the case of any unwritten Benefit Plans, descriptions thereof), (2) the two
most recent annual reports on Form 5500 required to be filed with the
Internal Revenue Service (the "IRS") with respect to each Benefit Plan (if
any such report was required), (3) the most recent summary plan description
for each Benefit Plan for which such summary plan description is required,
(4) each trust agreement and group annuity contract relating to any Benefit
Plan and (5) the most recent IRS determination letter for each Benefit Plan
intended to be tax-qualified under Section 401(a) of the Code. Each Benefit
Plan has been administered in accordance with its terms, except where the
failure so to be administered individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company.
The Company and its subsidiaries and all the Benefit Plans are in
compliance with all applicable provisions of ERISA, the Code, and all other
applicable laws, whether Federal, state or local, domestic or foreign,
except for instances of possible noncompliance that individually or in the
aggregate could not reasonably be expected to have a material adverse
effect on the Company. All Pension Plans intended to be tax-qualified have
been the subject of determination letters from the IRS to the effect that
such Pension Plans are qualified and exempt from United States Federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code;
no such determination letter has been revoked (or, to the knowledge of the
Company, has revocation been threatened) nor has any event occurred since
the date of the most recent determination letter or application therefor
relating to any such Pension
21
Plan that would adversely affect the qualification of such Pension Plan or
materially increase the costs relating thereto or require security under
Section 307 of ERISA.
(ii) Neither the Company nor any Commonly Controlled Entity
has maintained, contributed to or been obligated to maintain or
contribute to, or has any actual or contingent liability under,
any Benefit Plan that is subject to Title IV of ERISA.
(iii) With respect to any Benefit Plan that is an employee
welfare benefit plan (each, a "Welfare Plan"), there are no
understandings, agreements or undertakings, written or oral, that
would prevent any such plan (including any such plan covering
retirees or other former employees) from being amended or
terminated without material liability to the Company or any of
its subsidiaries on or at any time after the Effective Time. No
Welfare Plan provides benefits after termination of employment
except where the cost thereof is borne entirely by the former
employee (or his eligible dependents or beneficiaries) or as
required by Section 4980B(f) of the Code. The Company and its
subsidiaries comply in all material respects with the applicable
requirements of Section 4980B(f) of the Code with respect to each
Benefit Plan that is a group health plan, as such term is defined
in Section 5000(b)(1) of the Code.
(iv) No current or former director, officer, employee or
independent contractor of the Company or any of its subsidiaries
will be entitled to any additional compensation or benefits or
any acceleration of the time of payment or vesting of any
compensation or benefits under any Benefit Plan or Benefit
Agreement as a result of the transactions contemplated by this
Agreement or the Stockholders Agreement or any benefits under any
Benefit Plan or Benefit Agreement the value of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement or the Stockholders Agreement.
(v) All reports, returns and similar documents with respect
to all Benefit Plans required to be filed with any Governmental
Entity or distributed to any Benefit Plan participant have been
duly and timely filed or distributed, except for failures to file
or distribute that individually or in the aggregate have not had
and could not reasonably be expected to have a material adverse
effect on the Company. The Company has received no notice of, and
to the knowledge of the
22
Company, there are no pending investigations by any Governmental
Entity with respect to, or pending termination proceedings or
other claims (except claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings against or
involving any Benefit Plan or asserting any rights or claims to
benefits under, any Benefit Plan that could give rise to any
material liability, and, to the knowledge of the Company, there
are not any facts that individually or in the aggregate have had
or could reasonably be expected to have a material adverse effect
on the Company.
(vi) All contributions, premiums and benefit payments under
or in connection with the Benefit Plans that are required to have
been made by the Company or any of its subsidiaries as of the
date of this Agreement in accordance with the terms of the
Benefit Plans have been timely made or have been reflected on the
most recent consolidated balance sheet filed or incorporated by
reference into the Filed Company SEC Documents. No Pension Plan
has an "accumulated funding deficiency" (as such term is defined
in Section 302 of ERISA or Section 412 of the Code), whether or
not waived.
(vii) With respect to each Benefit Plan, (A) there has not
occurred any prohibited transaction in which the Company, any of
its subsidiaries or any of their employees has engaged that could
subject the Company, its subsidiaries or any of their employees,
or, to the knowledge of the Company, a trustee, administrator or
other fiduciary of any trust created under any Benefit Plan, to
the tax or penalty on prohibited transactions imposed by Section
4975 of the Code or the sanctions imposed under Title I of ERISA,
other than such taxes, penalties or sanctions that individually
or in the aggregate could not reasonably be expected to result in
a material liability and (B) neither the Company nor, to the
knowledge of the Company, any trustee, administrator or other
fiduciary of any Benefit Plan nor any agent of any of the
foregoing has engaged in any transaction or acted in a manner
that could, or failed to act so as to, subject the Company or, to
the knowledge of the Company, any trustee, administrator or other
fiduciary to any material liability for breach of fiduciary duty
under ERISA or any other applicable law. No Benefit Plan or
related trust has been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of
ERISA) for which the 30- day reporting requirement has not been
waived with
23
respect to any Benefit Plan during the last five years, and no
notice of a reportable event will be required to be filed in
connection with the transactions contemplated hereby.
(viii) The Company and its subsidiaries do not have any
material liability or obligations, including under or on account
of a Benefit Plan or Benefit Agreement, arising out of the hiring
of persons to provide services to the Company or any of its
subsidiaries and treating such persons as consultants or
independent contractors and not as employees of the Company or
its subsidiaries.
(n) Taxes. (i) Each of the Company and its subsidiaries and each
Company Affiliated Group (as defined in clause (x) below) has timely filed
all Federal, state and local, domestic and foreign, income and franchise
tax returns and reports and all other tax returns and reports required to
be filed by it and all such returns and reports are complete and correct,
except for such failures to file or to be complete and correct that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company. Each of the Company and its
subsidiaries and each Company Affiliated Group has timely paid all taxes
due with respect to the taxable periods covered by such returns and reports
and all other material taxes, except where the failures so to pay
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company, and the most recent financial
statements contained in the Filed SEC Documents reflect an adequate reserve
for all taxes payable by the Company and its subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
(ii) No Federal, state or local, domestic or foreign, income
or franchise tax return or report or any other material tax
return or report of the Company or any of its subsidiaries or any
Company Affiliated Group is currently under audit or examination
by any taxing authority, and no written or, to the knowledge of
the Company, unwritten notice of such an audit or examination has
been received by the Company or any of its subsidiaries, except
for such audits or examinations that individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on the Company. There is no deficiency, refund
litigation, proposed adjustment or matter in controversy with
respect to any taxes due and owing by the Company, any of its
subsidiaries or any Company
24
Affiliated Group, other than those that individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on the Company. Each deficiency resulting from any
audit or examination or any concluded litigation relating to taxes
by any taxing authority has been timely paid, except where the
failures so to pay individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the
Company. No issues relating to taxes were raised by the relevant
taxing authority during any presently pending audit or
examination, and no issues relating to taxes were raised by the
relevant taxing authority in any completed audit or examination
that could reasonably be expected to recur in a later taxable
period, in each case other than those that individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on the Company. All assessments for taxes due and
owing by the Company, any of its subsidiaries or any Company
Affiliated Group with respect to completed and settled audits or
examinations or concluded litigation have been paid. No Federal or
state or other material local, domestic or foreign tax return or
report of the Company or any of its subsidiaries or any Company
Affiliated Group has ever been under audit or examination by any
taxing authority. The relevant statute of limitations is closed
with respect to the Federal tax returns of the Company and its
subsidiaries for all years through December 31, 1995.
(iii) There is no currently effective agreement or other
document extending, or having the effect of extending, the period
of assessment or collection of any material taxes, and no power
of attorney with respect to any taxes has been executed or filed
with any taxing authority.
(iv) No Liens for taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for
statutory Liens for taxes not yet due and any other Liens that
individually or in the aggregate could not reasonably be expected
to have a material adverse effect on the Company.
(v) None of the Company or any of its subsidiaries is a
party to or bound by any tax sharing agreement, tax indemnity
obligation or similar agreement, arrangement or practice with
respect to taxes (including any advance pricing agreement,
closing agreement or other agreement relating to taxes with any
taxing authority).
25
(vi) None of the Company or any of its subsidiaries will be
required to include in a taxable period ending after the
Effective Time taxable income attributable to income that accrued
in a prior taxable period but was not recognized in any prior
taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the
long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of
state or local tax law, domestic or foreign, or for any other
reason, except where the inclusions of such income in a taxable
period ending after the Effective Time individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on the Company.
(vii) Section 3.01(n)(vii) of the Company Disclosure
Schedule sets forth for each employee of the Company who holds
the title of vice president or above the compensation from the
Company or any of its subsidiaries includible in such employee's
gross income for each of the 1996 through the 2000 calendar
years.
(viii) The Company and its subsidiaries have complied with
all applicable statutes, laws, ordinances, rules and regulations
relating to the payment and withholding of taxes (including
withholding of taxes pursuant to Sections 1441, 1442, 3121 and
3402 of the Code or similar provisions under any Federal, state
or local, domestic or foreign, laws) and have, within the time
and the manner prescribed by law, withheld from and paid over to
the proper governmental authorities all amounts required to be so
withheld and paid over under applicable laws, except where the
failures so to comply, withhold and pay over individually or in
the aggregate could not reasonably be expected to have a material
adverse effect on the Company.
(ix) Neither the Company nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years
prior to the date of this Agreement or (ii) in a distribution
that could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
26
(x) As used in this Agreement, "taxes" shall include all
Federal, state and local, domestic and foreign, income,
franchise, property, sales, excise, employment, payroll, social
security, value-added, ad valorem, transfer, withholding and
other taxes, including taxes based on or measured by gross
receipts, profits, sales, use or occupation, tariffs, levies,
impositions, assessments or governmental charges of any nature
whatsoever, including any interest penalties or additions with
respect thereto, and any obligations under any agreements or
arrangements with any other person with respect to such amounts.
As used in this Agreement, "Company Affiliated Group" shall mean
each affiliated, combined, consolidated or unitary group of which
the Company or any of its subsidiaries is or has been a member.
(o) Title to Properties. (i) The Company and each of its
subsidiaries has good and marketable title to, or valid leasehold interests
in, all of its material properties and assets except for such as are no
longer used or useful in the conduct of its businesses or as have been
disposed of in the ordinary course of business and except for defects in
title, easements, restrictive covenants and similar encumbrances that
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company. All such material assets and
properties, other than assets and properties in which the Company or any of
its subsidiaries has a leasehold interest, are free and clear of all Liens,
except for Liens that individually or in the aggregate could not reasonably
be expected to have a material adverse effect on the Company.
(ii) Each of the Company and its subsidiaries has complied
in all material respects with the terms of all material leases to
which it is a party and under which it is in occupancy, and all
such leases are in full force and effect, except for such
instances of noncompliance or failures to be in full force and
effect that individually or in the aggregate could not reasonably
be expected to have a material adverse effect on the Company. The
Company and its subsidiaries enjoy peaceful and undisturbed
possession under all such material leases, except for failures to
do so that individually or in the aggregate could not reasonably
be expected to have a material adverse effect on the Company.
(p) Intellectual Property. (i) Section 3.01(p) of the Company
Disclosure Schedule lists all patents, patent applications, trademarks,
tradenames, service marks and
27
registered copyrights and applications therefor, if any, owned by or
licensed to the Company or any of its subsidiaries as of the date of this
Agreement. Attached to Section 3.01(p) of the Company Disclosure Schedule
are true and correct copies of all standard forms of license agreements
relating to Intellectual Property (as defined below in clause (iii)) of the
Company or any of its subsidiaries as of the date of this Agreement, and
the Company has provided to Parent true and correct copies of all license
agreements relating to Intellectual Property to which the Company or any of
its subsidiaries is a party that deviate from such standard forms in any
material respect.
(ii) Except to the extent that the inaccuracy of any of the
following (or the circumstances giving rise to such inaccuracy)
could not reasonably be expected to have a material adverse
effect on the Company:
(A) the Company and each of its subsidiaries owns, or
is licensed or otherwise has the right to use (in each case,
free and clear of any Liens), all Intellectual Property used
in or necessary to carry on its business as now being
conducted;
(B) none of the Company or any of its subsidiaries is
infringing on or otherwise violating the rights of any
person with regard to any Intellectual Property owned by,
licensed to or otherwise used by the Company or any of its
subsidiaries (provided, however, that with respect to the
foregoing as it relates to infringement by the Company of
validly issued patents of third parties, such representation
is limited to the knowledge of the Company);
(C) there is no suit, claim, action, investigation or
proceeding pending or, to the knowledge of the Company,
threatened with respect to, and the Company has not been
notified of, any possible infringement by the Company or any
of its subsidiaries on or other violation of the rights of
any person with regard to any Intellectual Property owned
by, licensed to or otherwise used by the Company or any of
its subsidiaries;
(D) to the knowledge of the Company, no person is
infringing on or otherwise violating any right of the
Company or any of its subsidiaries with respect to any
Intellectual Property owned by, licensed to and/or otherwise
used by the Company or any of its subsidiaries;
28
(E) to the knowledge of the Company, none of the former
or current members of management or key personnel of the
Company or any of its subsidiaries, including all former and
current employees, agents, consultants and contractors who
have contributed to or participated in the conception and
development of the Intellectual Property of the Company or
any of its subsidiaries, have a valid claim against the
Company or any of its subsidiaries in connection with the
involvement of such persons in the conception and
development of any such Intellectual Property, and no such
claim has been asserted or threatened;
(F) the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to any right, license or
encumbrance relating to, Intellectual Property owned by the
Company or any of its subsidiaries or with respect to which
the Company or any of its subsidiaries now has or has had
any agreement with any third party, or any right of
termination, cancelation or acceleration of any material
Intellectual Property right or obligation set forth in any
agreement to which the Company or any of its subsidiaries is
a party, or the loss or encumbrance of any Intellectual
Property or benefit related thereto, or result in the
creation of any Lien in or upon any Intellectual Property or
right, other than under certain contracts and agreements,
the material ones of which are set forth on Section 3.01(p)
of the Company Disclosure Schedule, that provide for their
termination upon a change of control of the Company;
(G) except in the ordinary course of business
consistent with past practice, no licenses or rights have
been granted to distribute the source code of, or to use the
source code to create Derivative Works (as defined below)
of, any product currently marketed by, commercially
available from or under development by the Company or any of
its subsidiaries for which the Company possesses the source
code; and
29
(H) the Company and each of its subsidiaries has taken
commercially reasonable and necessary steps to protect their
Intellectual Property and their rights thereunder, and to
the knowledge of the Company no such rights to Intellectual
Property have been lost or are in jeopardy of being lost
through failure to act by the Company or any of its
subsidiaries.
As used in this Agreement, "Derivative Work" shall mean
a work that is based upon one or more preexisting works,
such as a revision, enhancement, modification, abridgement,
condensation, expansion or any other form in which such
preexisting works may be recast, transformed or adapted, and
which, if prepared without authorization of the owner of the
copyright in such preexisting work, would constitute a
copyright infringement. As used in this Agreement, a
Derivative Work shall also include any compilation that
incorporates such a preexisting work as well as translation
from one human language to another and from one type of code
to another.
(iii) As used in this Agreement, "Intellectual Property"
shall mean trademarks (registered or unregistered), service
marks, brand names, certification marks, trade dress, assumed
names, trade names and other indications of origin, the goodwill
associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or
renewal of any such registration or application; inventions,
discoveries and ideas, whether patented, patentable or not in any
jurisdiction; computer programs and software (including source
code, object code and data), know-how and any other technology;
trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any
person; writings and other works, whether copyrighted,
copyrightable or not in any jurisdiction; registration or
applications for registration of copyrights in any jurisdiction,
and any renewals or extensions thereof; any similar intellectual
property or proprietary rights similar to any of the foregoing;
licenses, immunities, covenants not to xxx and the like relating
to any of the foregoing; and any claims or causes of action
arising out of or related to any infringement, misuse or
misappropriation of any of the foregoing.
30
(q) State Takeover Statutes. The approval of the Merger and the
Stockholders Agreement and the transactions contemplated thereby by the
Board of Directors of the Company referred to in Section 3.01(d)
constitutes approval of the Merger and the Stockholders Agreement and the
transactions contemplated thereby for purposes of Section 203 of the DGCL
and represents the only action necessary to ensure that Section 203 of the
DGCL does not and will not apply to the execution and delivery of this
Agreement or the Stockholders Agreement or the consummation of the Merger
or the other transactions contemplated hereby or thereby. No other state
takeover or similar statute or regulation is applicable to this Agreement,
the Merger or the other transactions contemplated by this Agreement.
(r) Voting Requirements. The affirmative vote at the Stockholders
Meeting or any adjournment or postponement thereof of the holders of a
majority of the outstanding shares of Company Common Stock in favor of
adopting this Agreement (the "Stockholder Approval") is the only vote of
the holders of any class or series of the Company's capital stock necessary
to approve or adopt this Agreement, the Stockholders Agreement or the
consummation of the transactions contemplated hereby and thereby.
(s) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than Xxxxxx Xxxxxxx & Co.
Incorporated, the fees and expenses of which will be paid by the Company,
is entitled to any broker's, finder's, financial advisor's or other similar
fee or commission, or the reimbursement of expenses, in connection with the
transactions contemplated by this Agreement or the Stockholders Agreement
based upon arrangements made by or on behalf of the Company. The Company
has delivered to Parent true and complete copies of all agreements under
which any such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the persons to whom such fees
are payable. The fees and expenses of any accountant, broker, financial
advisor, consultant, legal counsel or other person retained by the Company
in connection with this Agreement or the transactions contemplated hereby
incurred or to be incurred by the Company in connection with this Agreement
and the transactions contemplated by this Agreement will not exceed the
fees and expenses set forth and identified by category of advisor in
Section 3.01(s) of the Company Disclosure Schedule.
(t) Opinion of Financial Advisor. The Company has received the
written opinion of Xxxxxx Xxxxxxx & Co. Incorporated, in customary form to
the effect that, as of
31
the date of this Agreement, the consideration to be received in the Merger
by the Company's stockholders is fair to the Company's stockholders from a
financial point of view, a copy of which opinion has been delivered to
Parent.
SECTION 3.02. Representations and Warranties of Parent and Sub.
Parent and Sub represent and warrant to the Company as follows:
(a) Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has all
requisite corporate power and authority to carry on its business
as now being conducted.
(b) Authority; Noncontravention. Parent and Sub have the
requisite corporate power and authority to execute and deliver
this Agreement, to consummate the transactions contemplated by
this Agreement and to comply with the provisions of this
Agreement. The execution and delivery of this Agreement by Parent
and Sub, the consummation by Parent and Sub of the transactions
contemplated by this Agreement and the compliance by Parent and
Sub with the provisions of this Agreement have been duly
authorized by all necessary corporate action on the part of
Parent and Sub and no other corporate proceedings on the part of
Parent or Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Parent and Sub,
as applicable, and, assuming the due authorization, execution and
delivery by the Company, constitutes a valid and binding
obligation of Parent and Sub, as applicable, enforceable against
Parent and Sub, as applicable, in accordance with its terms
(except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies). The execution
and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement and compliance by
Parent and Sub with the provisions of this Agreement do not and
will not conflict with, or result in any violation or breach of,
or default (with or without notice or lapse of time, or both)
under, or give rise to a right of, or result in, termination,
cancelation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien in
or upon any of
32
the properties or assets of Parent or Sub under, or give rise to
any increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (i) the Certificate of
Incorporation or By-laws of Parent or Sub, (ii) any Contract to
which Parent or Sub is party or any of their respective properties
or assets is subject or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any (A)
statute, law, ordinance, rule or regulation or (B) judgment, order
or decree, in each case, applicable to Parent or Sub or any of
their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, breaches,
defaults, rights, losses, Liens or entitlements that individually
or in the aggregate could not reasonably be expected to impair in
any material respect the ability of each of Parent and Sub to
perform its obligations under this Agreement or prevent or
materially impede, interfere with, hinder or delay the
consummation of any of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to Parent or Sub in connection with
the execution and delivery of this Agreement by Parent and Sub,
the consummation by Parent and Sub of the transactions
contemplated by this Agreement or the compliance by Parent or Sub
with the provisions of this Agreement, except for (1) the filing
of a premerger notification and report form under the HSR Act or
any other applicable competition, merger control, antitrust or
similar law, (2) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which
the Company or any of its subsidiaries is qualified to do business
and (3) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be
obtained or made individually or in the aggregate could not
reasonably be expected to impair in any material respect the
ability of each of Parent and Sub to perform its obligations under
this Agreement or prevent or materially impede, interfere with,
hinder or delay the consummation of any of the transactions
contemplated by this Agreement.
(c) Information Supplied. None of the information supplied
or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will (except to
the
33
extent revised or superseded by amendments or supplements
contemplated hereby), at the date the Proxy Statement is first
mailed to the Company's stockholders or at the time of
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
misleading.
(d) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this
Agreement, and has engaged in no business other than in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective
Time, except as expressly set forth in Section 4.01(a) of the Company
Disclosure Schedule, as consented to in writing by Parent or as
specifically contemplated by this Agreement, the Company shall, and shall
cause its subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice and use their reasonable best
efforts to comply with all applicable laws, rules and regulations and, to
the extent consistent therewith, use their reasonable best efforts to
preserve their assets and technology and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the
Effective Time, except as expressly set forth in Section 4.01(a) of the
Company Disclosure Schedule, as consented to in writing by Parent or as
specifically contemplated by this Agreement, the Company shall not, and
shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in
respect of, any of its capital stock except for dividends by a
direct or indirect wholly owned subsidiary of the Company to its
parent, (y) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution
34
for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock or any other
securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or exchangeable for, or any options,
warrants, calls or rights to acquire, any such shares, voting
securities or convertible securities (other than (A) the issuance
of shares of Company Common Stock upon the exercise of Stock
Options or rights under the ESPP outstanding on the date of this
Agreement and in accordance with their present terms and (B) the
granting of rights that may arise under the ESPP, as the ESPP is
in effect on the date of this Agreement);
(iii) amend its certificates of incorporation or by-laws (or
similar organizational documents);
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by purchasing all of or a substantial equity
interest in, or by any other manner, any business or any
corporation, partnership, limited liability company, joint
venture, association or other entity or division thereof or (y)
any assets other than inventory, components, raw materials or
other immaterial assets in the ordinary course of business
consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties
or assets (including any shares of capital stock, voting
securities or other rights, instruments or securities), except
sales of inventory or used equipment and licenses of Intellectual
Property to end-user customers for their internal use or solely
as necessary for such customers to use the Company's products and
services, in each case in the ordinary course of business
consistent with past practice;
(vi) (x) repurchase, prepay or incur any indebtedness or
guarantee any indebtedness of another person or issue or sell any
debt securities or options, warrants, calls or other rights to
acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any
35
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or
(y) make any loans, advances or capital contributions to, or
investments in, any other person, other than the Company or any
direct or indirect wholly owned subsidiary of the Company;
(vii) make any new capital expenditure or expenditures, or
incur any obligations or liabilities in connection therewith,
which, individually is in excess of $25,000 or, in the aggregate,
are in excess of $100,000;
(viii) (x) pay, discharge, settle or satisfy any claims
(including claims of stockholders), liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice or
as required by their terms as in effect on the date of this
Agreement, of claims, liabilities or obligations reflected or
reserved against in the most recent audited financial statements
(or the notes thereto) of the Company included in the Filed SEC
Documents (for amounts not in excess of such reserves) or
incurred since the date of such financial statements in the
ordinary course of business consistent with past practice, (y)
waive, release, grant or transfer any right of material value or
(z) waive any material benefits of, or agree to modify in any
adverse respect, or fail to enforce, any confidentiality,
standstill or similar agreement to which the Company or any of
its subsidiaries is a party;
(ix) modify, amend or terminate any material Contract to
which the Company or such subsidiary is a party, including any
arrangements involving material Intellectual Property, or waive,
release or assign any material rights or claims thereunder in a
manner that is materially adverse to the Company with respect to
the particular Contract in question;
(x) enter into any Contract material to the Company and its
subsidiaries, taken as a whole, not otherwise prohibited by any
other provision of this Agreement, including any arrangements
involving material Intellectual Property, except for contracts
relating to the sale of products or services by the Company
entered into in the ordinary course of business consistent with
past practice (it being understood and agreed that no Contract
(I) pursuant to which the
36
Company agrees (A) to accept information of any person on a
confidential or trade secret basis without a "residuals" clause in
substantially the form of Parent's standard form of "residuals"
clause (which has previously been provided by Parent to the
Company), (B) not to compete with any person or not to engage in
any activities that would substantially limit the Company's
ability to compete or engage in competitive activities, (C) not to
solicit or attempt to hire, or to hire, any individual or (II)
that has a term greater than six months, shall be permitted under
this exception);
(xi) except as required to comply with applicable law or any
Contract, Benefit Plan or Benefit Agreement existing on the date
of this Agreement, (A) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any current or former
director, officer, employee or consultant of the Company or any
of its subsidiaries, (B) pay to any current or former director,
officer, employee or consultant of the Company or any of its
subsidiaries any benefit not provided for under any Contract,
Benefit Plan or Benefit Agreement other than the payment of cash
compensation in the ordinary course of business consistent with
past practice, (C) grant any awards under any Benefit Plan
(including the grant of stock options, stock appreciation rights,
stock based or stock related awards, performance units or
restricted stock or the removal of existing restrictions in any
Contract, Benefit Plan or Benefit Agreement or awards made
thereunder), (D) take any action to fund or in any other way
secure the payment of compensation or benefits under any
Contract, Benefit Plan or Benefit Agreement or (E) take any
action to accelerate the vesting or payment of any compensation
or benefit under any Contract, Benefit Plan or Benefit Agreement;
(xii) form any subsidiary of the Company;
(xiii) enter into any Contract if consummation of the
transactions contemplated hereby or compliance by the Company
with the provisions of this Agreement will violate or conflict
with, or result in any violation or breach of, or default (with
or without notice or lapse of time, or both) under, or give rise
to a right of, or result in, termination, cancelation or
acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien in or upon any of
the properties or assets of the Company or Parent or any of their
respective subsidiaries under, or give
37
rise to any increased, additional, accelerated or
guaranteed rights or entitlements under, any provision
of such Contract;
(xiv) enter into any Contract containing any restriction on
the ability of the Company or any of its subsidiaries to assign
its rights, interests or obligations thereunder, unless such
restriction expressly excludes any assignment to Parent or any of
its subsidiaries in connection with or following the consummation
of the Merger and the other transactions contemplated by this
Agreement;
(xv) take any action (or omit to take any action) if such
action (or omission) would or could reasonably be expected to
result in (A) any representation and warranty of the Company set
forth in this Agreement that is qualified as to materiality
becoming untrue, (B) any such representation and warranty that is
not so qualified becoming untrue in any material respect or (C)
any condition to the Merger set forth in Article VI not being
satisfied; or
(xvi) authorize any of, or commit, resolve or agree to take
any of, the foregoing actions.
(b) Certain Tax Matters. During the period from the date of this
Agreement to the Effective Time, (i) the Company and each of its
subsidiaries shall timely file all Federal, state and local, domestic and
foreign, income and franchise tax returns and reports and all other
material tax returns and reports ("Post-Signing Returns") required to be
filed by each such entity (after taking into account any extensions) and
all Post-Signing Returns shall be complete and correct; (ii) the Company
and each of its subsidiaries will timely pay all taxes shown as due on such
Post-Signing Returns that are so filed; (iii) the Company will accrue a
reserve in its books and records and financial statements in accordance
with past practice for all taxes payable by the Company or any of its
subsidiaries for which no Post-Signing Return is due prior to the Effective
Time; (iv) the Company and each of its subsidiaries will promptly notify
Parent of any suit, claim, action, investigation, proceeding or audit
(collectively, "Actions") pending against or with respect to the Company or
any of its subsidiaries in respect of any tax where there is a reasonable
possibility of a determination or decision that could reasonably be
expected to have a material adverse effect on the Company's or any of its
subsidiaries' tax liabilities or tax attributes and will not settle or
compromise any such Action without Parent's consent; and (v) none of the
Company or any of its
38
subsidiaries will make or change any material tax election without Parent's
consent, which consent shall not be unreasonably withheld.
(c) Advice of Changes; Filings. The Company and each of its
subsidiaries shall (i) confer on a regular and frequent basis with Parent
to report on operational matters and other matters requested by Parent and
(ii) promptly advise Parent orally and in writing of any change or event
that could reasonably be expected to have a material adverse effect on the
Company. The Company and Parent shall each promptly provide the other
copies of all filings made by such party with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby,
other than the portions of such filings that include confidential
information not directly related to the transactions contemplated by this
Agreement.
(d) Other Actions. Neither the Company nor its Board of Directors
shall take any action that would, or that could reasonably be expected to,
prevent or materially impede, interfere with, hinder or delay the
consummation of any of the transactions contemplated by this Agreement or
the Stockholders Agreement (including pursuant to the option to purchase
Subject Shares granted under Section 3 thereof) or deprive Parent of any
material right or benefit to which it is entitled under the Stockholders
Agreement. The covenants and agreements of the Company relating to the
Stockholders Agreement contained in this Section 4.01(d) shall survive
termination of this Agreement.
SECTION 4.02. No Solicitation. (a) The Company shall not, nor
shall it permit any of its subsidiaries to, or authorize any director,
officer or employee of the Company or any of its subsidiaries or any
investment banker, attorney, accountant or other advisor or representative
of the Company or any of its subsidiaries to, directly or indirectly, (i)
solicit, initiate or encourage, or take any other action knowingly to
facilitate, any Takeover Proposal (as defined below) or any inquiries or
the making of any proposal that constitutes or could reasonably be expected
to lead to a Takeover Proposal or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way
with, any Takeover Proposal; provided, however, that the Company may, if
the Board of Directors of the Company determines in good faith that the
failure to do so would be reasonably likely to result in a breach of its
fiduciary duties under applicable law and subject to compliance with
Section 4.02(c), participate in discussions regarding such Takeover
39
Proposal and furnish information with respect to the Company and its
subsidiaries to the person making such Takeover Proposal (and its
representatives) pursuant to a customary confidentiality agreement. Without
limiting the foregoing, it is understood that any violation in any material
respect of the restrictions set forth in the preceding sentence by any
director, officer or employee of the Company or any of its subsidiaries or
any investment banker, attorney, accountant or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to
be a breach of this Section 4.02(a) by the Company.
The term "Takeover Proposal" means any inquiry, proposal or offer
from any person relating to, or that is reasonably likely to lead to, any
direct or indirect acquisition, in one transaction or a series of
transactions, including any merger, consolidation, tender offer, exchange
offer, stock acquisition, asset acquisition, binding share exchange,
business combination, recapitalization, liquidation, dissolution, joint
venture or similar transaction, of (A) assets or businesses that constitute
or represent 15% or more of the total revenue, operating income, EBITDA or
assets of the Company and its subsidiaries, taken as a whole, or (B) 15% or
more of the outstanding shares of Company Common Stock or capital stock of,
or other equity or voting interests in, any of the Company's subsidiaries
directly or indirectly holding, individually or taken together, the assets
or businesses referred to in clause (A) above, in each case other than the
transactions contemplated by this Agreement or the Stockholders Agreement.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw (or modify in a manner adverse to
Parent or Sub) or propose publicly to withdraw (or modify in a manner
adverse to Parent or Sub) the recommendation or declaration of advisability
by such Board of Directors or any such committee of this Agreement or the
Merger, or resolve or agree to take any such action, unless the Board of
Directors or a committee thereof determines in good faith, after consulting
with legal counsel, that the failure to take such action would be
reasonably likely to result in a breach of its fiduciary duties under
applicable law, (ii) adopt or approve, or propose publicly to adopt or
approve, any Takeover Proposal, or resolve or agree to take any such action
or (iii) cause or permit the Company to enter into any letter of intent,
memorandum of understanding, agreement in principle, acquisition agreement,
merger agreement, option agreement, joint venture agreement, partnership
agreement or other agreement constituting or related to, or which is
intended
40
to or is reasonably likely to lead to, any Takeover Proposal (other than a
confidentiality agreement referred to in Section 4.02(a)) or resolve or
agree to take any such action.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.02, the Company promptly shall
advise Parent in writing of any request for information that the Company
reasonably believes could lead to or contemplates a Takeover Proposal or of
any Takeover Proposal, or any inquiry the Company reasonably believes could
lead to any Takeover Proposal, the terms and conditions of such request,
Takeover Proposal or inquiry (including any subsequent material amendment
or modification to such terms and conditions) and the identity of the
person making any such request, Takeover Proposal or inquiry. The Company
shall keep Parent informed in all material respects of the status and
details (including material amendments or proposed amendments) of any such
request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 4.02 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or (ii) making any disclosure to the Company's stockholders
if, in the good faith judgment of the Board of Directors of the Company,
after consultation with outside counsel, failure so to disclose would be
inconsistent with applicable law; provided, however, that in no event shall
the Company or its Board of Directors or any committee thereof take, agree
or resolve to take any action prohibited by Section 4.02(b).
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement; Stockholders
Meeting. (a) As promptly as practicable following the date of this
Agreement, the Company shall prepare and file with the SEC the Proxy
Statement and the Company shall use its reasonable best efforts to respond
as promptly as practicable to any comments of the SEC with respect thereto
and to cause the Proxy Statement to be mailed to the Company's stockholders
as promptly as practicable following the date of this Agreement. The
Company shall promptly notify Parent upon the receipt of any comments from
the SEC or its staff or any request from the SEC or its staff for
amendments or supplements to the Proxy
41
Statement and shall provide Parent with copies of all correspondence
between the Company and its representatives, on the one hand, and the SEC
and its staff, on the other hand. Notwithstanding anything to the contrary
stated above, prior to filing or mailing the Proxy Statement (or any
amendment or supplement thereto) or responding to any comments of the SEC
with respect thereto, the Company shall (i) provide Parent an opportunity
to review, comment on and approve such document or response, (ii) include
in such document or response all comments reasonably proposed by Parent and
(iii) not file or mail such document or respond to the SEC prior to
receiving Parent's approval, which approval shall not be unreasonably
withheld or delayed.
(b) The Company shall, as promptly as practicable following the
date of this Agreement, establish a record date (which will be as promptly
as practicable following the date of this Agreement) for, duly call, give
notice of, convene and hold a meeting of its stockholders (the
"Stockholders Meeting") for the purpose of obtaining the Stockholder
Approval, regardless of whether the Board of Directors of the Company
determines at any time that this Agreement is no longer advisable and
recommends that the stockholders of the Company reject it. The Company
shall cause the Stockholders Meeting to be held as promptly as practicable
after the date of this Agreement. Subject to Section 4.02(b)(i), the
Company shall, through its Board of Directors, recommend to its
stockholders that they adopt this Agreement, and shall include such
recommendation in the Proxy Statement. Without limiting the generality of
the foregoing, the Company agrees that its obligations pursuant to this
Section 5.01(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company or any other person of
any Takeover Proposal.
SECTION 5.02. Access to Information; Confiden tiality. The
Company shall, and shall cause each of its subsidiaries to, afford to
Parent, and to Parent's officers, employees, investment bankers, attorneys,
accountants and other advisors and representatives, reasonable access
during normal business hours during the period prior to the Effective Time
or the termination of this Agreement to all their respective properties,
books, contracts, commitments, directors, officers, attorneys, accountants,
auditors (and, to the extent within the Company's control, former
auditors), other advisors and representatives and records and, during such
period, the Company shall, and shall cause each of its subsidiaries to,
make available to Parent (a) a copy of each report, schedule, form,
statement and other document filed or received by it during such period
pursuant
42
to the requirements of Federal, state or local, domestic or foreign, laws
and (b) all other information concerning its business, properties and
personnel as Parent may reasonably request (including the work papers of
PricewaterhouseCoopers LLP). Except as required by law, Parent will hold,
and will direct its officers, employees, investment bankers, attorneys,
accountants and other advisors and representatives to hold, any and all
information received from the Company, directly or indirectly, in
confidence in accordance with the Confidentiality Agreement.
SECTION 5.03. Reasonable Best Efforts; Notification. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of
the parties agrees to use its reasonable best efforts to take, or cause to
be taken, all actions, that are necessary, proper or advisable to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement and the Stockholders Agreement, including
using its reasonable best 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), (iii) the
taking of all reasonable steps as may be necessary to avoid any suit,
claim, action, investigation or proceeding by an Governmental Entity and
(iv) the obtaining of all necessary consents, approvals or waivers from
third parties. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to this Agreement,
the Stockholders Agreement, the Merger or any of the other transactions
contemplated hereby or thereby, use their reasonable best efforts to ensure
that the Merger and the other transactions contemplated hereby or thereby
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 this Agreement, the Stockholders Agreement, the Merger and
the other transactions contemplated hereby or thereby. Notwithstanding the
foregoing or any other provision of this Agreement to the contrary, in no
event shall any party hereto be obligated to (A) agree to, or proffer to,
divest or hold separate, or enter into any licensing or similar arrangement
with respect to, any assets (whether tangible or intangible) or any portion
of any business of Parent, the Company or any of their respective
subsidiaries or (B)
43
litigate any suit, claim, action, investigation or proceeding, whether
judicial or administrative, (1) challenging or seeking to restrain or
prohibit the consummation of the Merger; (2) seeking to prohibit or limit
in any material respect the ownership or operation by the Company, Parent
or any of their respective affiliates of a material portion of the business
or assets of the Company and its subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, or to require any such person to
dispose of or hold separate any material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Merger; or (3) seeking
to prohibit Parent or any of its affiliates from effectively controlling in
any material respect a substantial portion of the business or operations of
the Company or its subsidiaries. The Company and Parent will provide such
assistance, information and cooperation to each other as is reasonably
required to obtain any such nonactions, waivers, consents, approvals,
orders and authorizations and, in connection therewith, will notify the
other person promptly following the receipt of any comments from any
Governmental Entity for amendments, supplements or additional information
in respect of any registration, declaration or filing with such
Governmental Entity and will supply the other person with copies of all
correspondence between such person or any of its representatives, on the
one hand, and any Governmental Entity, on the other hand.
(b) The Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.02(a)
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 the Company of any
representation or warranty made by it or Sub contained in this Agreement
becoming untrue or inaccurate such that the condition set forth in Section
6.03(a) 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.
(d) Without limiting the generality of the foregoing, the Company
shall give Parent the opportunity to participate in the defense of any
litigation against the Company and/or its directors relating to the
transactions
44
contemplated by this Agreement at the sole expense of Parent.
SECTION 5.04. Stock Options. (a) As soon as practicable following
the date of this Agreement, the Board of Directors of the Company (or, if
appropriate, any committee administering the Company Stock Plans) shall
adopt such resolutions or take such other actions (if any) as may be
required to effect the following:
(i) ______ adjust the terms of all outstanding Stock Options
(other than Non-Employee Options (as defined below)), whether vested
or unvested, as necessary to provide that, at the Effective Time, each
such Stock Option outstanding immediately prior to the Effective Time
shall be converted into an option to acquire, on the same terms and
conditions as were applicable under such Stock Option, the number of
shares of Parent common stock, par value $0.20 per share ("Parent
Common Stock") (rounded down to the nearest whole share), determined
by multiplying the number of shares of Company Common Stock subject to
such Stock Option by a fraction (the "Option Exchange Ratio"), the
numerator of which is the Merger Consideration and the denominator of
which is the average closing price of Parent Common Stock on the New
York Stock Exchange Composite Transactions Tape on the ten trading
days immediately preceding the date on which the Effective Time
occurs, at an exercise price per share of Parent Common Stock equal to
(A) the per share exercise price for the shares of Company Common
Stock otherwise purchasable pursuant to such Stock Option divided by
(B) the Option Exchange Ratio (each, as so adjusted, an "Adjusted
Option"), provided that such exercise price shall be rounded up to the
nearest whole cent;
(ii) adjust the terms of all outstanding Stock Options held by
individuals other than current or former employees of the Company
("Non-Employee Options"), whether vested or unvested, as necessary to
provide that at the Effective Time, each Non-Employee Option
outstanding immediately prior to the Effective Time shall be canceled
and converted into the right to receive an amount of cash equal to the
excess, if any, of (A) the product of (1) the number of shares of
Company Common Stock subject to such Non-Employee Option and (2) the
Merger Consideration, over (B) the product of (1) the number of shares
of Company Common Stock subject to such Non-Employee Option and (2)
the per share exercise price of such Non-Employee Option; and
45
(iii) make such other changes to the Company Stock Plans as
Parent and the Company may agree are appropriate to give effect to the
Merger.
(b) ______ The adjustments provided herein with respect to any
Stock Options that are "incentive stock options" as defined in Section 422
of the Code shall be and are intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
(c) ______ At the Effective Time, by virtue of the Merger and
without the need of any further corporate action, Parent shall assume the
Company Stock Plans, with the result that all obligations of the Company
under the Company Stock Plans, including with respect to Stock Options
outstanding at the Effective Time, shall be obligations of Parent following
the Effective Time.
(d) As soon as practicable after the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or
another appropriate form) registering a number of shares of Parent Common
Stock equal to the number of shares subject to the Adjusted Options. Such
registration statement shall be kept effective (and the current status of
the prospectus or prospectuses required thereby shall be maintained) as
long as any Adjusted Options may remain outstanding.
(e) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Stock Options (other than Non-Employee Options)
appropriate notices setting forth such holders' rights pursuant to the
respective Company Stock Plans and the agreements evidencing the grants of
such Stock Options and that such Stock Options and agreements shall be
assumed by Parent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.04 after
giving effect to the Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted
Option in whole or in part in accordance with its terms by delivering a
properly executed notice of exercise to Parent, together with the
consideration therefor and the Federal withholding tax information, if any,
required in accordance with the related Company Stock Plan.
(g) Except as otherwise contemplated by this Section 5.04 and
except to the extent required under the respective terms of the Stock
Options or Company Stock Plans, all restrictions or limitations on transfer
and vesting with respect to Stock Options awarded under the
46
Company Stock Plans or any other plan, program or arrangement of the
Company, to the extent that such restrictions or limitations shall not have
already lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by Parent as
set forth above.
SECTION 5.05. _____ Indemnification, Exculpation and Insurance.
(a) Parent and Sub agree that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the
Effective Time (and rights for advancement of expenses) now existing in
favor of the current or former directors or officers of the Company and its
subsidiaries as provided in their respective certificates of incorporation
or by-laws (or comparable organizational documents) and any indemnification
or other agreements of the Company as in effect on the date of this
Agreement shall be assumed by the Surviving Corporation in the Merger,
without further action, at the Effective Time and shall survive the Merger
and shall continue in full force and effect in accordance with their terms,
and Parent shall ensure that the Surviving Corporation complies with and
honors the foregoing obligations.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all its properties and assets to any person, or if Parent otherwise
dissolves the Surviving Corporation, then, and in each such case, Parent
shall cause proper provision to be made so that the successors and assigns
of the Surviving Corporation assume the obligations set forth in this
Section 5.05.
(c) For six years after the Effective Time, Parent shall maintain
in effect the Company's current directors' and officers' liability
insurance covering each person currently covered by the Company's
directors' and officers' liability insurance policy for acts or omissions
occurring prior to the Effective Time on terms with respect to such
coverage and amounts no less favorable than those of such policy in effect
on the date of this Agreement; provided that Parent may substitute therefor
policies of a reputable insurance company the material terms of which,
including coverage and amount, are no less favorable to such directors and
officers than the insurance coverage otherwise required under this Section
5.05(c); provided, however, that in no event shall Parent be required to
pay aggregate premiums for insurance under this Section 5.05(c) in excess
47
of 200% of the amount of the aggregate premiums paid by the Company in 2001
on an annualized basis for such purpose (which 2001 annualized premiums are
hereby represented and warranted by the Company to be $333,580) (the
"Maximum Premium"), provided that Parent shall nevertheless be obligated to
provide such coverage as may be obtained for such 200% amount. If the
existing or substituted directors' and officers' liability insurance
expires or is terminated or canceled during such six-year period, Parent
will obtain as much directors' and officers' liability insurance as can be
obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium.
(d) The provisions of this Section 5.05 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to,
and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise.
SECTION 5.06. Fees and Expenses. All fees and expenses incurred
in connection with this Agreement, the Stockholder Agreement, the Merger
and the other transactions contemplated hereby and thereby shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
SECTION 5.07. Employee Matters. (a) Following the Effective Time,
the Surviving Corporation shall honor, or cause to be honored, all
obligations of the Company and its subsidiaries under Benefit Agreements
and Benefit Plans in accordance with the terms thereof. Nothing herein
shall be construed to prohibit the Surviving Corporation from amending or
terminating such Benefit Agreements and Benefit Plans in accordance with
the terms thereof and with applicable law or from terminating the
employment of any employee of the Company or its subsidiaries at any time
following the Effective Time.
(b) The Company shall amend the ESPP on the date of this
Agreement to provide that (i) participants may not increase their payroll
deductions or purchase elections from those in effect on the date of this
Agreement, (ii) no offering periods shall be commenced after the date of
this Agreement, (iii) each participant's outstanding right to purchase
shares of Company Common Stock under the ESPP shall terminate immediately
prior to the Effective Time in exchange for a cash payment in an amount
equal to the excess, if any, of (A) the product of (1) the number of shares
of Company Common Stock that could have been
48
purchased with such participant's accumulated payroll deductions
immediately prior to the Effective Time (the "Applicable ESPP Shares") at
the applicable option price determined in accordance with the terms of the
ESPP (the "Applicable ESPP Price") and (2) the Merger Consideration, over
(B) the product of the number of Applicable ESPP Shares and the Applicable
ESPP Price and (iv) the ESPP shall terminate at the Effective Time.
SECTION 5.08. Public Announcements. Parent and Sub, on the one
hand, and the Company, on the other hand, will, to the extent reasonably
practicable, consult with each other before issuing, and give each other a
reasonable opportunity to review and comment upon, any press release or
other public statements with respect to this Agreement, the Stockholders
Agreement, the Merger and the other transactions contemplated hereby and
thereby, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities
quotation system. The parties agree that the initial press releases to be
issued by Parent and the Company with respect to the transactions
contemplated by this Agreement and the Stockholders Agreement shall be in a
form agreed to by the parties.
SECTION 5.09. Closing Date Balance Sheet. The Company shall
prepare and deliver to Parent prior to Closing (i) an unaudited
consolidated balance sheet of the Company as of the last business day of
the most recently completed full month ending immediately preceding the
Closing Date (or, if the Closing Date is before the 15th day of the month,
as of the last business day of the month immediately preceding the most
recently completed full month ending immediately preceding the Closing
Date), which balance sheet shall be prepared in accordance with GAAP
(except as permitted by Form 10-Q of the SEC) and on a basis consistent
with the unaudited balance sheets of the Company included in the SEC
Documents and shall fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the date thereof, and (ii) the Company's best estimate
(using actual data through at least the end of the third business day
immediately preceding the Closing Date) of closing account information for
all line items that would appear on a consolidated balance sheet of the
Company other than deferred revenue and line items relating to
stockholders' equity (deficit) as of the business day immediately preceding
the Closing Date. The Company shall provide to
49
Parent any information and back-up materials (including bank account
information) reasonably requested by Parent with respect thereto.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have
been obtained.
(b) Antitrust. Any waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) No Injunctions or Legal Restraints. No temporary restraining
order, preliminary or permanent injunction or other order or decree
issued by any court of competent jurisdiction or other legal restraint
or prohibition (collectively, "Legal Restraints") which has the effect
of preventing the consummation of the Merger shall be in effect.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of the Company contained herein that are not so qualified
shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date with the same
effect as though made as of the Closing Date except that the accuracy
of representations and warranties that by their terms speak as of a
specified date will be determined as of such date. Parent shall have
received a certificate signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company to such
effect.
50
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date,
and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial officer
of the Company to such effect.
(c) ______ No Litigation. There shall not be pending any suit,
action or proceeding brought by any Governmental Entity or any other
third party (in the case of any such other third party, excluding
suits, actions and proceedings based on state law fiduciary duty
claims) (i) challenging or seeking to restrain or prohibit the
consummation of the Merger; or (ii) seeking to prohibit or limit in
any material respect the ownership or operation by the Company, Parent
or any of their respective affiliates of a material portion of the
business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, or to require
any such person to dispose of or hold separate any material portion of
the business or assets of the Company and its subsidiaries, taken as a
whole, or Parent and its subsidiaries, taken as a whole, as a result
of the Merger; or (iii) seeking to impose material limitations on the
ability of Parent or any of its affiliates to acquire or hold, or
exercise full rights of ownership of, any shares of Company Common
Stock, including the right to vote the Company Common Stock on all
matters properly presented to the stockholders of the Company; or (iv)
seeking to prohibit Parent or any of its affiliates from effectively
controlling in any material respect a substantial portion of the
business or operations of the Company or its subsidiaries.
(d) Legal Restraint. No Legal Restraint that could reasonably be
expected to result, directly or indirectly, in any of the effects
referred to in clauses (i) through (iv) of paragraph (c) of this
Section 6.02 shall be in effect.
SECTION 6.03. Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger
51
is further subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained herein that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Parent contained herein that are not so qualified shall
be true and correct in all material respects, in each case as of the
date of this Agreement and as of the Closing Date with the same effect
as though made as of the Closing Date except that the accuracy of
representations and warranties that by their terms speak as of a
specified date will be determined as of such date. The Company shall
have received a certificate signed on behalf of Parent by an
authorized signatory of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate signed
on behalf of Parent by an authorized signatory of Parent to such
effect.
SECTION 6.04. Frustration of Closing Conditions. None of the
Company, Parent or Sub may rely on the failure of any condition set forth
in Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable best efforts
to consummate the Merger and the other transactions contem plated by this
Agreement and the Stockholders Agreement, as required by and subject to
Section 5.03.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated, and
the Merger contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after the Stockholder Approval has been
obtained:
(a) by mutual written consent of Parent, Sub and the Company;
52
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by
September 1, 2001 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.01(b)(i)
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;
(ii) if any Legal Restraint having the effect set forth in
Section 6.01(c) shall be in effect and shall have become final
and nonappealable; or
(iii) if the Stockholder Approval shall not have been
obtained at the Stockholders Meeting duly convened therefor or at
any adjournment or postponement thereof or by written consent;
(c) by Parent (i) if the Company shall have breached in any
material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure
to perform (A) would give rise to the failure of a condition set forth
in Section 6.02(a) or 6.02(b), and (B) has not been or is incapable of
being cured by the Company within 30 calendar days after its receipt
of written notice thereof from Parent; or (ii) if any Legal Restraint
having any of the effects referred to in clauses (i) through (iv) of
Section 6.02(c) shall be in effect and shall have become final and
nonappealable; or
(d) by the Company, if Parent shall have breached in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of a condition set forth in
Section 6.03(a) or 6.03(b), and (ii) has not been or is incapable of
being cured by Parent within 30 calendar days after its receipt of
written notice thereof from the Company.
SECTION 7.02. Effect of Termination. In the event of termination
of this Agreement by either the Company or Parent as provided in Section
7.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Sub or the
Company, other than the provisions of Section 3.01(s),
53
4.01(d) the last sentence of Section 5.02, Section 5.06, this Section 7.02
and Article VIII and except to the extent that such termination results
from a wilful breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
parties hereto at any time, whether before or after the Stockholder
Approval has been obtained; provided, however, that after the Stockholder
Approval has been obtained, there shall be made no amendment that by law
requires further approval by stockholders of the parties without the
further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto or (c) waive compliance with any of
the agreements or conditions contained herein; provided, however, that
after the Stockholder Approval has been obtained, there shall be made no
waiver that by law requires further approval by stockholders of the parties
without the further approval of such stockholders. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The
failure or delay by any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such
rights nor shall any single or partial exercise by any party to this
Agreement of any of its rights under this Agreement preclude any other or
further exercise of such rights or any other rights under this Agreement.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective
Time.
54
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof
of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
if to Parent or Sub, to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
with copies to:
International Business Machines Corporation
Xxx Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
and
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to the Company, to:
Mainspring, Inc.
Xxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: President and
Chief Executive Officer
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
55
SECTION 8.03. Definitions. As used in this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person;
(b) as it relates to the Company, "knowledge" means, with respect
to any matter in question, that any officer of the Company has actual
knowledge of such matter;
(c) "material adverse effect" on or with respect to the Company
means any state of facts, change, development, effect or occurrence
that is, or could reasonably be expected to be, materially adverse to
the business, assets, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole,
other than any state of facts, change, development, effect or
occurrence principally attributable to (i) the economy in general or
the strategic consulting market in general and not specifically
relating to the Company or any of its subsidiaries, (ii) any
litigation against the Company arising out of the transactions
contemplated by this Agreement or (iii) (x) any cancelation or
modification of client engagements or (y) any decline or delay in
demand for the products and services offered by the Company, in each
of cases (x) and (y) resulting from the announcement or existence of
this Agreement;
(d) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(e) a "subsidiary" of any person means another person of which
more than 50% of any class of capital stock, voting securities or
other equity interests are owned or controlled, directly or
indirectly, by such first person.
SECTION 8.04. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. When ever the words "include",
"includes" or "including" are used
56
in this Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
The term "or" is not exclusive. The word "extent" in the phrase "to the
extent" shall mean the degree to which a subject or other thing extends,
and such phrase shall not mean simply "if". The definitions contained in
this Agreement are applicable to the singular as well as the plural forms
of such terms. Any agreement or instrument defined or referred to herein or
in any agreement or instrument that is referred to herein means such
agreement or instrument as from time to time amended, modified or
supplemented. References to a person are also to its permitted successors
and assigns.
SECTION 8.05. 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 parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries.
This Agreement (a) constitutes the entire agreement, and supersedes all
prior agreements and under standings, both written and oral, among the
parties with respect to the subject matter of this Agreement and (b) except
for the provisions of Section 5.05, is not intended to confer upon any
person other than the parties hereto any rights or remedies.
SECTION 8.07. 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 laws thereof.
SECTION 8.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or
in part, by operation of law or otherwise by any of the parties without the
prior written consent of the other parties, except that Sub may assign, in
its sole discretion, any of or all its rights, interests and obligations
under this Agreement to Parent or to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable
by, the parties and their respective successors and assigns.
57
SECTION 8.09. Enforcement. The parties 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 an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of
Delaware or in any Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out
of this Agreement or the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and
(c) agrees that it will not bring any action relating to this Agreement or
the transactions contemplated by this Agreement in any court other than a
court of the United States located in the State of Delaware or a Delaware
state court.
58
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
INTERNATIONAL BUSINESS
MACHINES CORPORATION,
by
______________________________
Name:
Title:
WATERFALL ACQUISITION CORP.,
by
______________________________
Name:
Title:
MAINSPRING, INC.,
by
______________________________
Name:
Title:
