EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
ECOMETRY CORPORATION
and
CITRUS MERGER CORP.
and
SYNGISTIX, INC.
and
For the purposes of Section 7.6(b)(i) only:
CORE TECHNOLOGY FUND IV, LLC
Dated as of January 25, 2002
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") made and entered into
as of the 25th day of January, 2002, among Syngistix, Inc., a Delaware
corporation ("Parent"), Citrus Merger Corp., a Florida corporation ("Acquisition
Sub") and Ecometry Corporation, a Florida corporation (the "Company").
WITNESSETH:
WHEREAS, the Board of Directors of the Company, acting upon the
recommendation of the Independent Committee thereof (the "Independent
Committee"), and the Boards of Directors of Parent and Acquisition Sub have
determined that, upon the terms and subject to the conditions set forth herein,
the acquisition of the Company by Parent by means of a merger (the "Merger") of
Acquisition Sub with and into the Company is advisable and in the best interests
of the shareholders of Parent and the Company and accordingly have agreed to
effect the Merger;
WHEREAS, pursuant to the Merger, among other things, all of the issued
and outstanding Common Stock, par value $.01 per share, of the Company ("Company
Common Stock") shall be converted into the right to receive the Merger
Consideration (as hereinafter defined) on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company has declared that this
Agreement is advisable and resolved to recommend that all holders of shares of
Company Common Stock (the "Stockholders") approve this Agreement and the Merger,
and has determined that the Merger is fair to and in the best interests of the
Company and the Stockholders;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger; and
WHEREAS, Core Technology Fund IV, LLC desires to become a party to this
Agreement for the purposes of Section 7.6(b)(i) only.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER; FILING AND EFFECTIVE TIME.
(a) Upon the terms and subject to the conditions of this
Agreement and in accordance with the Florida Business Corporation Act (the
"FBCA"), at the Effective Time (as hereinafter defined), Acquisition Sub shall
be merged with and into the Company. As a result of the Merger, the separate
corporate existence of Acquisition Sub shall cease and the Company shall be the
surviving corporation (the "Surviving Corporation") and shall become a
wholly-owned subsidiary of Parent following the Effective Time. The Surviving
Corporation shall possess all the rights, privileges, immunities, powers and
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franchises of the Company, and the Surviving Corporation shall by operation of
law become liable for all of the debts, liabilities and duties of the Company.
The name of the Surviving Corporation shall continue to be Ecometry Corporation
and the purpose thereof shall be as set forth in the Articles of Incorporation
of the Surviving Corporation.
(b) The parties hereto shall cause the Merger to be
consummated by filing Articles of Merger with the Secretary of State of the
State of Florida, in such form as required by and executed in accordance with
the relevant provisions of the FBCA (the date and time of the filing of the
Articles of Merger with the Secretary of State of the State of Florida (or such
later time as is agreed to by the parties hereto and set forth therein) being
hereinafter referred to as the "Effective Time").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
as soon as practicable, but in any event within two business days, after
satisfaction or waiver of the conditions set forth in Article 6 (the "Closing
Date"), at the offices of Xxxxxx Godward LLP, 000 Xxxxxxxxxxx Xxxxxxxx, Xxxxx
000, Xxxxxxxxxx, XX 00000, unless another date or place is agreed to in writing
by the parties hereto.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in this Agreement and the applicable provisions of the FBCA.
1.4 ARTICLES OF INCORPORATION; BY LAWS.
(a) At the Effective Time, the Articles of Incorporation of
the Surviving Corporation shall be amended and restated in its entirety to be
the same as the Articles of Incorporation of Acquisition Sub as in effect
immediately prior to the Effective Time (except the name of the Surviving
Corporation shall remain Ecometry Corporation) until thereafter further amended
as provided therein and under the FBCA.
(b) At the Effective Time, the By-laws of the Surviving
Corporation shall be amended and restated in their entirety to read the same as
the By-laws of Acquisition Sub as in effect immediately prior to the Effective
Time, until thereafter amended or repealed in accordance with their terms or the
Articles of Incorporation of the Surviving Corporation following the Merger and
as provided under the FBCA; PROVIDED, HOWEVER, that all references in such
By-laws to Acquisition Sub shall be amended to refer to Ecometry Corporation.
1.5 DIRECTORS AND OFFICERS. The directors of Acquisition Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation following the Merger, each to hold office in accordance
with the Articles of Incorporation and By-laws of the Surviving Corporation
following the Merger, and the officers of Acquisition Sub immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
following the Merger, in each case until their respective successors are duly
elected or appointed (as the case may be) and qualified.
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ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF COMPANY
AND ACQUISITION SUB
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Parent, Acquisition
Sub or any holder of any shares of Company Common Stock or any holder of capital
stock of Acquisition Sub, the shares of capital stock of Acquisition Sub and the
Company Common Stock shall be converted or canceled as follows:
(a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and
outstanding share of capital stock of Acquisition Sub shall be converted into
and become one fully paid and non-assessable share of common stock, $.01 par
value per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY SHARES AND SHARES OWNED BY PARENT
OR ACQUISITION SUB. Each share of Company Common Stock that is owned directly by
the Company, its Subsidiary (as hereinafter defined), Parent or Acquisition Sub
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered or deliverable
in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section
2.1(b), each issued and outstanding share of Company Common Stock shall be
converted into the right to receive $2.90 in cash, without interest, subject to
adjustment for any stock split, stock dividend or combination of stock that may
occur from the date hereof and prior to the Effective Time. The aggregate cash
payable upon the conversion of a share of Company Common Stock pursuant to this
Section 2.1(c) is referred to as the "Merger Consideration". As of the Effective
Time, all shares of Company Common Stock shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration upon surrender of such certificate in accordance with
Section 2.4(b), without interest.
2.2 COMPANY OPTIONS. At the Effective Time, each option (a "Company
Option") to purchase shares of Company Common Stock outstanding immediately
prior to the Effective Time shall become immediately vested. Each Company Option
with an exercise price that is less than the amount of the per share Merger
Consideration shall automatically be converted into the right to receive cash in
the amount of the product of (a) the excess of the per share Merger
Consideration over the exercise price of such Company Option, multiplied by (b)
the number of shares of Company Common Stock for which such Company Option is
exercisable. All Company Options with an exercise price that is higher than the
amount of the per share Merger Consideration shall automatically be terminated
as of the Effective Time.
2.3 MEETING OF SHAREHOLDERS. The Board of Directors of the Company
shall, as promptly as practicable following the date of this Agreement and in
consultation with Parent, (i) duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of considering, adopting and
approving this Agreement and the Merger (the "Shareholders Meeting") and (ii)
(A) except to the extent modified in accordance with this Section 2.3, include
in the Proxy Statement (as defined in Section 3.6) the unanimous recommendation
of the Company's Board of Directors acting upon the recommendation of the
Independent Committee that the shareholders of the Company vote in favor of the
adoption of this Agreement and the Merger and (B) use its reasonable best
efforts, including, without limitation, if requested by Parent, hiring a proxy
solicitation firm reasonably acceptable to Parent, to obtain the affirmative
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vote of holders of a majority of the outstanding Company Common Stock (the
"Requisite Shareholder Approval"). Neither the Board of Directors of the Company
nor any director thereof shall withdraw, amend or modify in a manner adverse to
Parent or Acquisition Sub its recommendation referred to in clause (ii) (A) of
the preceding sentence (or announce publicly his, her or its intention to do
so). Notwithstanding the foregoing, prior to the receipt of the Requisite
Shareholder Approval, the Board of Directors of the Company shall be permitted
to withdraw, amend or modify its recommendation (or publicly announce its
intention to do so) of this Agreement and the Merger in a manner adverse to
Parent or Acquisition Sub if: (1) a Superior Acquisition Proposal (as defined in
Section 5.3) shall have been proposed by any Person (as hereinafter defined)
other than Parent or Acquisition Sub and such proposal is pending at the time of
such action; (2) the Board of Directors shall have concluded in good faith,
after consultation with its outside legal counsel, that the Board of Directors
is required to withdraw, amend or modify its recommendation in order to comply
with its fiduciary duties to the shareholders of the Company under applicable
law and (3) the Company shall be in compliance with Section 5.3 hereof.
2.4 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall
select a bank or trust company in the United States, reasonably acceptable to
the Company, to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration upon surrender of certificates representing Company Common
Stock. The Surviving Corporation shall take all steps necessary to provide the
Paying Agent with the cash necessary to pay for the shares of Company Common
Stock converted into the right to receive Merger Consideration (such cash being
hereinafter referred to as the "Exchange Fund") immediately following the
Effective Time. If for any reason (including losses) the Exchange Fund is
inadequate to pay the amounts to which holders of shares of Company Common Stock
shall be entitled under Section 2.1(c), the Surviving Corporation shall promptly
deposit in trust additional cash with the Paying Agent sufficient to make all
payments required, and the Surviving Corporation shall in any event be liable
for payment thereof. The Exchange Fund shall not be used for any purpose except
as expressly provided in this Agreement.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time
(but in no event later than five business days following such date), the
Surviving Corporation shall cause the Paying Agent to mail to each holder of
record of a certificate or certificates (the "Certificates") that immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive Merger Consideration
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such form and
have such other provisions as the Surviving Corporation may reasonably specify),
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent, together with such letter of transmittal, duly
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 of Company Common Stock
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theretofore represented by such Certificate shall have been converted pursuant
to Section 2.1(c), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Common Stock that
is not registered in the transfer records 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.
Until surrendered as contemplated by this Section 2.4(b), each Certificate shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without interest, into which the
shares of Company Common Stock theretofore represented by such Certificate have
been converted pursuant to Section 2.1(c). If any holder of shares of Company
Common Stock shall be unable to surrender such holder's Certificates because
such certificates have been lost, mutilated or destroyed, such holder may
deliver in lieu thereof an affidavit and indemnity bond in form and substance
and with surety reasonably satisfactory to the Paying Agent and the Surviving
Corporation. For purposes of this Agreement, "Person" shall mean any individual,
corporation, firm, enterprise, partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, limited
liability company or other entity of any kind, or any government or political
subdivision or any agency, department or instrumentality thereof.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration paid in accordance with the terms of this Article 2 upon
conversion of any shares of Company Common Stock shall be deemed to have been
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock and after the Effective Time there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, any Certificates formerly representing
shares of Company Common Stock are presented to the Surviving Corporation or the
Paying Agent for any reason, they shall be canceled and exchanged as provided in
this Article 2.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holder of Company Common Stock who has not theretofore
complied with this Article 2 shall thereafter look only to the Surviving
Corporation for payment of its claim for Merger Consideration.
(e) NO LIABILITY. None of Parent, the Surviving Corporation
and the Paying Agent shall be liable to any Person in respect of any cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate has not been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
governmental entity), any such shares, cash, dividends or distributions in
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respect of such Certificate 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.
(f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest
any cash included in the Exchange Fund, as directed by the Surviving
Corporation, on a daily basis. Any interest and other income resulting from such
investments shall be paid to the Surviving Corporation.
(g) WITHHOLDINGS. The Surviving Corporation, Parent and the
Paying Agent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable to any holder of Company Common Stock pursuant
to this Agreement such amounts as may be required to be deducted and withheld
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or under any provision of state, local or foreign
tax law.
(h) CHARGES AND EXPENSES. The Surviving Corporation shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the exchange of cash for shares of Company Common Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the disclosure statement delivered by Parent to
the Company concurrently herewith (as such disclosure statement may be
supplemented or amended pursuant to Section 8.5(b)) and identified as the
"Parent Disclosure Statement," Parent represents and warrants to the Company as
follows:
3.1 ORGANIZATION, STANDING, QUALIFICATION. Each of Parent and
Acquisition Sub (i) is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation; (ii) has all
requisite power and authority to own or lease and operate its properties and
assets, and to carry on its business as now conducted and as currently proposed
to be conducted prior to the Effective Time, except where the failure to have
such power and authority would not have a material adverse effect on Parent's or
Acquisition Sub's ability to perform hereunder, and to consummate the
transactions contemplated hereby; (iii) is duly qualified to do business and is
in good standing in the states in which it is required to be so qualified,
except where the failure to be so qualified would not have a material adverse
effect on Parent's or Acquisition Sub's ability to perform hereunder; and (iv)
has obtained all licenses, permits, franchises and other governmental
authorizations necessary to the ownership or operation of its properties or the
conduct of its business, except where the failure to have obtained such
licenses, permits, franchises or authorizations would not have a Parent Material
Adverse Effect. "Parent Material Adverse Effect" means (a) any change or effect
that is, individually or in the aggregate, materially adverse to the business,
operations, assets, liabilities, financial condition or results of operations of
Parent, or (b) a material impairment of the ability of Parent to perform any of
its obligations under this Agreement or to consummate the Merger. Copies of
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Acquisition Sub's Articles of Incorporation and By-laws as in effect on the date
hereof are attached hereto as Exhibits A and B. Except for Acquisition Sub,
Parent has no subsidiaries or any ownership or equity interest in or control of
(direct or indirect) any other Person.
3.2 CAPITALIZATION OF ACQUISITION SUB.
(a) As of the date hereof, the authorized capital stock of
Acquisition Sub consists of 100 shares of common stock, par value $.01 per share
("Acquisition Sub Common Stock"), all of which are issued and outstanding and
owned of record by Parent.
(b) Each outstanding share of Acquisition Sub Common Stock is
(i) duly authorized and validly issued; and (ii) fully paid and nonassessable
and free of preemptive and similar rights.
3.3 CAPITALIZATION OF PARENT.
(a) The total authorized capital stock of Parent consists of
(i) 15,824,051 shares of preferred stock, of which 10,824,051 shares are
designated Series A Stock (the "Parent Preferred Stock"), 7,366,666 of which
designated shares are issued and outstanding as of the date of this Agreement;
and (ii) 40,000,000 shares of common stock, of which (A) 6,179,500 shares are
issued and outstanding on the date of this Agreement, (B) 10,824,051 shares are
reserved for issuance upon conversion of the Parent Preferred Stock, and (C)
1,900,000 shares are reserved for grant or exercise of options under the
Parent's Stock Option and Incentive Plan and any other equity incentive plan for
the benefit of Parent's employees. There are no shares of capital stock of
Parent of any other class authorized, issued or outstanding.
(b) Each outstanding share of Parent's capital stock is (i)
duly authorized and validly issued and (ii) fully paid and nonassessable and
free of (x) any preemptive or similar rights under the Delaware General
Corporation Law and the Certificate of Incorporation and By-laws of Parent and
(y) any other preemptive or similar rights.
(c) Other than outstanding options to purchase Parent's common
stock, there are, and, other than as set forth below, as of the Effective Time
there will be, no outstanding (i) securities convertible into or exchangeable
for any capital stock of Parent, (ii) options, warrants or other rights to
purchase or subscribe to capital stock of Parent or securities convertible into
or exchangeable for capital stock of Parent, or (iii) contracts, commitments,
agreements, understandings, rights (including registration rights),
arrangements, calls or claims of any kind to which Parent is a party or is bound
relating to the issuance of any capital stock of Parent (clauses (i) through
(iv), together with all outstanding capital stock of Parent, collectively, the
"Parent Securities"). The parties hereto understand and acknowledge that Parent
may issue additional shares of its capital stock or securities convertible into
shares of its capital stock between the date of this Agreement and the Effective
Time in connection with securing the necessary financing to consummate the
Merger.
3.4 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS. The execution,
delivery and performance of this Agreement has been duly authorized by all
necessary corporate action on the part of the respective Boards of Directors and
shareholders of Parent and Acquisition Sub and no other corporate proceedings on
the part of Parent or Acquisition Sub are necessary to authorize the execution,
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delivery or performance of this Agreement. Parent and Acquisition Sub have duly
executed and delivered this Agreement and this Agreement is a valid and binding
obligation of Parent and Acquisition Sub, enforceable against Parent and
Acquisition Sub in accordance with its terms.
3.5 NON-CONTRAVENTION. The execution, delivery and performance of this
Agreement by Parent and Acquisition Sub and the consummation by Parent and
Acquisition Sub of the transactions contemplated hereby, will not (i) violate or
conflict with any provision of any law applicable to Parent or Acquisition Sub
or by which any property or asset of Parent or Acquisition Sub is bound, (ii)
require the consent, waiver, approval, license or authorization of or any filing
by Parent or Acquisition Sub with any public authority (other than in connection
with or in compliance with the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the FBCA), (iii) conflict with or
result in any breach of any provision of the Articles of Incorporation or
By-laws of Parent or Acquisition Sub in any respect or (iv) violate, conflict
with, result in a breach of or the acceleration of any obligation under, or
constitute a default (or an event which with notice or the lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Acquisition Sub
pursuant to any provision of any indenture, mortgage, lien, lease, agreement,
contract, instrument, order, judgment, ordinance, regulation or decree to which
Parent or Acquisition Sub is subject or by which Parent or Acquisition Sub or
any of their respective property or assets is bound; except in the case of
clauses (i), (ii) and (iv) above where such violations, conflicts, breaches,
defaults or the failure to give such notice, make such filings, or obtain such
authorizations, consents or approvals, would not, individually or in the
aggregate, have a material adverse effect on Parent's or Acquisition Sub's
ability to perform hereunder.
3.6 DISCLOSURE DOCUMENTS. None of the information supplied in writing,
or to be supplied, in writing by Parent or Acquisition Sub to the Company
specifically for inclusion or incorporation by reference in the proxy statement
(the "Proxy Statement") to be filed by the Company with the Securities and
Exchange Commission (the "Commission") and to be sent to the shareholders of the
Company in connection with the Shareholders Meeting will, at the time it is sent
to the shareholders of the Company or at the time of the Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
3.7 BROKERS. No Person is entitled to any brokerage or finder's fee or
commission in connection with the transactions contemplated by this Agreement as
a result of any action taken by or on behalf of Parent or Acquisition Sub.
3.8 FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company its audited balance
sheet as of December 31, 2000 and its statements of operations, cash flows and
changes in stockholders' equity for the period then ended (the "Audited Parent
Financial Statements"). Except for any exceptions reflected in the Xxxxxx
Xxxxxxxx LLP audit report, the Audited Parent Financial Statements (including
the notes thereto) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Parent as of such
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date and the results of operations of the Parent for such period, are correct
and complete in all material respects and are consistent with the books and
records of the Parent (which books and records are correct and complete).
(b) Parent has delivered to the Company its unaudited balance
sheet as of December 31, 2001 (the "Unaudited Parent Balance Sheet") and its
unaudited statements of income and cash flows for the fiscal year then ended
(together with the Unaudited Parent Balance Sheet, the "Unaudited Parent
Financial Statements"). The Unaudited Parent Balance Sheet fairly presents in
all material respects the financial position of Parent as of its date, and the
other statements included in the Unaudited Parent Financial Statements fairly
present in all material respects the results of operations and cash flows, as
the case may be, of Parent for the periods therein set forth, in each case in
accordance with generally accepted accounting principles except as otherwise
stated therein and except for the omission of footnote disclosures and, to the
extent consistent with generally accepted accounting principles, normally
recurring year-end audit adjustments; PROVIDED that the Unaudited Parent
Financial Statements may include alternative accounting treatment for certain
previously acquired intangible assets and for the capitalization of certain
software assets.
3.9 ABSENCE OF CERTAIN CHANGES. Since December 31, 2001, except as
reflected in the Parent Disclosure Schedule or as contemplated by this Agreement
or the Definitive Financing Agreements (as defined in Section 3.13 below),
Parent has conducted its business in the ordinary course consistent with past
practices and there has not been:
(a) any Parent Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any Parent Securities or any
repurchase, redemption or other acquisition by Parent of any Parent
Securities or any other ownership interests in Parent, except for
repurchases of less than $100,000 of stock by Parent pursuant to
agreements which permit Parent to repurchase such shares upon
termination of services to Parent;
(c) any amendment of any outstanding security of Parent;
(d) any incurrence, assumption or guarantee by Parent of any
indebtedness for borrowed money;
(e) any making of any loan, advance or capital contributions
to or investment in any Person; or
(f) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of Parent
that, individually or in the aggregate, has had or would reasonably be
expected to have a Parent Material Adverse Effect.
3.10 NO UNDISCLOSED MATERIAL LIABILITIES. Except as disclosed in the
Unaudited Parent Financial Statements or set forth in Parent Disclosure
Schedule, to the best of Parent's knowledge, there are no liabilities of Parent
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
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liability, other than liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Unaudited Parent Balance
Sheet, which in the aggregate are not material to Parent.
3.11 LITIGATION. There is no action, suit, investigation or proceeding
(or any basis therefor) pending against, or, to the knowledge of Parent,
threatened against, Parent or any of its properties or the transactions
contemplated hereby before any court or arbitrator or any governmental body,
agency, official or authority that has had or would reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
3.12 COMPLIANCE WITH LAWS; NO DEFAULTS. Parent is not in violation of,
or has since February 23, 2001 violated, any applicable provisions of any laws,
statutes, ordinances or regulations, except for violations that have not had and
would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect. Parent is not in default under, and, to the best
of Parent's knowledge, no condition exists that with notice or lapse of time or
both would constitute a default under, any judgment, order or injunction of any
court, arbitrator or governmental body, agency, official or authority to which
Parent is subject or by which Parent or any of its properties or assets is
bound.
3.13 FINANCING. Attached to the Parent Disclosure Schedule are true and
correct copies of written financing commitments under which Parent will receive
(subject to the conditions set forth therein) sufficient financing in order to
consummate the Merger. Such financing, together with Parent's and the Company's
current capital assets and resources, shall be sufficient to consummate the
Merger and to operate the combined business of Parent and the Surviving
Corporation following the Merger in the ordinary course of business.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Reports (as hereinafter defined) or
in the disclosure statement delivered by the Company to Parent concurrently
herewith (as such disclosure statement may be supplemented or amended pursuant
to Section 8.5(b)) and identified as the "Company Disclosure Statement," the
Company represents and warrants to Parent and Acquisition Sub as follows:
4.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company and its
Subsidiary (as defined in Section 4.3 hereof) (i) is a corporation duly
organized, validly existing and in good standing under the laws in the
jurisdiction of its incorporation; (ii) has all requisite power and authority to
own or lease and operate its properties and assets, and to carry on its business
as now conducted and as currently proposed to be conducted, except where the
failure to have such power and authority would not have a Material Adverse
Effect (as hereinafter defined) on the Company, and to consummate the
transactions contemplated hereby; (iii) is duly qualified or licensed to do
business and is in good standing in all jurisdictions in which it owns or leases
property or in which the conduct of its business requires it to so qualify or be
licensed, except where the failure to so qualify, individually or in the
aggregate, would not have a Material Adverse Effect on the Company; and (iv) has
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obtained all licenses, permits, franchises and other governmental authorizations
necessary for the ownership or operation of its properties or the conduct of its
businesses (all of which are currently valid and in full force and effect),
except where the failure to have obtained such licenses, permits, franchises or
authorizations or the failure to have such licenses, permits, franchises and
other governmental authorizations in full force and effect would not have a
Material Adverse Effect on the Company. For purposes of this Agreement, a
"Material Adverse Effect" when used with respect to the Company and/or its
Subsidiary means (a) any change or effect that is, individually or in the
aggregate, materially adverse to the business, operations, assets, liabilities,
financial condition or results of operations of the Company and its Subsidiary
taken as a whole, or (b) a material impairment of the ability of the Company and
its Subsidiary taken as a whole to perform any of their obligations under this
Agreement or to consummate the Merger. Subject to the foregoing, neither of the
following shall be deemed in itself to constitute, and neither of the following
shall be taken into account in determining whether there has been or will be a
Material Adverse Effect: (a) any adverse change, effect, event, occurrence,
state of facts or development arising from or relating to compliance with the
terms of, or the taking of any action required by, this Agreement, and (b) any
adverse change, effect, event, occurrence, state of facts or development arising
from any action taken by Parent or Acquisition Sub which is inconsistent with
the terms of this Agreement unless such action was taken at the specific
direction of the Company's Board of Directors.
4.2 CAPITALIZATION.
(a) The total authorized capital stock of the Company consists
of (i) 10,000,000 shares of Preferred Stock, par value $.01 per share, no shares
of which are issued and outstanding as of the date of this Agreement; and (ii)
50,000,000 shares of Company Common Stock, of which 12,422,438 shares (not
including any shares held in treasury) are issued and outstanding on the date of
this Agreement. There are no shares of capital stock of the Company of any other
class authorized, issued or outstanding.
(b) Each outstanding share of Company Common Stock is (i) duly
authorized and validly issued and (ii) fully paid and nonassessable and free of
(x) any preemptive or similar rights under the FBCA and the Articles of
Incorporation and By-laws of the Company and (y) any other preemptive or similar
rights.
(c) Other than Company Options that will be converted into
Merger Consideration or canceled at the Effective Time pursuant to Article 2
hereof, there are, and as of the Effective Time there will be, no outstanding
(i) securities convertible into or exchangeable for any capital stock of the
Company, (ii) options, warrants or other rights to purchase or subscribe to
capital stock of the Company or securities convertible into or exchangeable for
capital stock of the Company, or (iii) contracts, commitments, agreements,
understandings, rights (including registration rights), arrangements, calls or
claims of any kind to which the Company is a party or is bound relating to the
issuance of any capital stock of the Company. Section 4.2 of the Company
Disclosure Statement identifies, as of the date hereof, the option holder, the
number of shares of Company Common Stock subject to each Company Option, the
exercise price and the expiration date of each outstanding Company Option.
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4.3 SUBSIDIARY. The Company owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect directors or others performing
similar functions with respect to such subsidiary) of the Company's Subsidiary
indicated in Section 4.3 of the Company Disclosure Statement (the "Subsidiary")
and the Subsidiary is the only entity in which the Company directly or
indirectly beneficially owns an equity interest. Each of the outstanding shares
of capital stock beneficially owned by the Company of its Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and is owned, directly
or indirectly, by the Company or a wholly-owned Subsidiary free and clear of all
liens, pledges, security interests, claims or other encumbrances.
4.4 CORPORATE DOCUMENTS. True and complete copies of the Articles of
Incorporation and all amendments thereto, the By-laws, as amended and currently
in force, and all corporate minute books and records of the Company and its
Subsidiary since January 1, 1997 have been furnished by the Company to Parent
for inspection to the extent requested in writing by Parent.
4.5 AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of the Board of Directors of
the Company upon the recommendation of the Independent Committee and no other
proceedings on the part of the Company are necessary to authorize the execution,
delivery or performance of this Agreement, except for the Requisite Shareholder
Approval. This Agreement is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4.6 NON-CONTRAVENTION. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) violate or conflict with any provision of any
law applicable to the Company or any Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound, (ii) require the consent,
waiver, approval, license or authorization of or any filing by the Company or
any Subsidiary with any public authority (other than in connection with or in
compliance with the provisions of the Exchange Act, and the FBCA), (iii)
conflict with or result in any breach of any provision of the Articles of
Incorporation or By-laws of the Company or the charter and by-laws of any
Subsidiary in any respect or (iv) violate, conflict with, result in a breach of
or the acceleration of any obligation under, or constitute a default (or an
event which with notice or the lapse of time or both would become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Subsidiary pursuant to, or alter any
Person's rights (including, without limitation, rights with respect to the
Company's source code or other Company Intellectual Property Rights (as defined
below)) under, any provision of any material indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, license, ordinance, permit,
franchise, joint venture agreement, limited liability company agreement,
partnership agreement, regulation or decree to which the Company or any
Subsidiary is subject or by which the Company or any Subsidiary or any of their
property or assets is bound; except in the case of clauses (i), (ii) and (iv)
where such violations, conflicts, breaches, defaults, alterations or the failure
to give such notice, make such filings, or obtain such authorizations, consents
or approvals, would not, individually or in the aggregate, have a Material
Adverse Effect.
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4.7 COMPLIANCE WITH LAWS.
(a) The Company and the Subsidiary hold all permits, licenses,
variances, exemptions, orders and approvals of any governmental entities
necessary for the lawful conduct of their businesses, except where the failure
to hold such permits would not have a Material Adverse Effect.
(b) As of the date of this Agreement, no investigation,
review, inquiry or proceeding by any governmental entity with respect to any of
the Company and/or any Subsidiary is pending or, to the knowledge of the
Company, threatened which, if adversely decided, would be reasonably likely to
have a Material Adverse Effect.
4.8 COMMISSION DOCUMENTS. Since January 1, 1999, the Company has timely
filed with the Commission all reports required to be filed under Section 13, 14
and 15(d) of the Exchange Act (collectively, the "Company Reports"). As of their
respective dates, the Company Reports (a) complied as to form in all material
respects with the applicable requirements of the Exchange Act and the rules and
regulations thereunder; and (b) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No event, condition or circumstance exists which requires
the Company to amend or update any such Company Report. Each of the consolidated
balance sheets of the Company included in or incorporated by reference into the
Company Reports (including the related notes and schedules) fairly present in
all material respects the consolidated financial position of the Company and its
Subsidiary and its former subsidiaries as of its date (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), and each of the consolidated statements of
operations, redeemable preferred stock, stockholders' equity (deficit) and
comprehensive loss and cash flows of the Company included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly present in all material respects the results of operations, redeemable
preferred stock, stockholders' equity (deficit) and comprehensive loss or cash
flows, as the case may be, of the Company and its Subsidiary and its former
subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). The financial statements of the Company,
including the notes thereto, included in or incorporated by reference into the
Company Reports comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, and have been prepared in accordance with GAAP.
Since January 1, 2000, (i) there has been no material change in the Company's
accounting methods or principles except as described in the notes to such
Company financial statements, (ii) the Company has not received any comment
letters or other material correspondence from the Commission or any other
governmental agency regarding its accounting or public disclosure practices,
reports or filings, and (iii) the Company has not had any material disagreements
with its auditors regarding the Company's accounting methods or principles. The
Company has delivered to Parent copies of all material correspondence between it
or its Subsidiary and its former subsidiaries and the Commission and all
management letters and management representation letters between it or its
Subsidiary and its former subsidiaries and the Company's auditors.
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4.9 FINANCIAL STATEMENTS. The Company has delivered to Parent its
unaudited balance sheet as at December 31, 2001 (the "Unaudited Company Balance
Sheet") and its unaudited statements of operations, cash flows and changes in
stockholders' equity for the fiscal year then ended (together with the Unaudited
Company Balance Sheet, the "Unaudited Company Financial Statements"). The
Unaudited Company Balance Sheet fairly presents in all material respects the
consolidated financial position of the Company and its Subsidiary as of its
date, and the other statements included in the Unaudited Company Financial
Statements fairly present in all material respects the results of operations,
cash flows and changes in stockholders' equity, as the case may be, of the
Company for the periods therein set forth, in each case in accordance with GAAP
consistently applied during the periods involved except as otherwise stated
therein and except for the omission of footnote disclosures and, to the extent
consistent with GAAP, normally recurring year-end audit adjustments.
4.10 LITIGATION. There is no suit, claim, action, litigation or
proceeding, in law or in equity, and there are no proceedings or governmental
investigations before any commission or other administrative authority, pending
or, to the Company's knowledge, threatened against the Company or its
Subsidiary, or any of the Company's or its Subsidiary's officers, directors or
affiliates, with respect to or affecting the Company's operations, businesses or
financial condition, or related to the consummation of the transactions
contemplated hereby, which is reasonably likely to have a Material Adverse
Effect. Except as set forth on the Company Disclosure Statement, the Company
believes that it has adequate insurance to cover any liability it could
reasonably be expected to have pursuant to any suit, claim, action, litigation
or proceeding, in law or in equity, pending against it as of the date of this
Agreement that was brought by any current or former shareholder or employee of
the Company.
4.11 TAXES.
(a) As used in this Agreement, (i) the term "Taxes" means (A)
all federal, state, local, foreign and other income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever of a nature similar to taxes, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, (B) any liability of the Company and/or the Subsidiary for the payment
of any amounts of the type described in clause (A) pursuant to Section 1.1502-6
of the Treasury Regulations or any similar state, local or foreign law; and (ii)
the term "Returns" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes, including any schedule
or attachment thereto, and including any amendment thereto, and the term
"Return" means any one of the foregoing Returns.
(b) There have been properly completed and filed on a timely
basis and in correct form all Returns required to be filed by the Company and
the Subsidiary or requests for extensions to file such Tax Returns have been
timely filed and the Company and its Subsidiary are within such period for
extension. As of the time of filing, the foregoing Returns were correct and
complete in all material respects.
14
(c) With respect to all amounts in respect of Taxes imposed
upon the Company and/or the Subsidiary, or for which the Company and/or the
Subsidiary are or could be liable, whether to taxing authorities (as, for
example, under law) or to other Persons (as, for example, under tax allocation
agreements), with respect to all taxable periods or portions of periods ending
on or before December 31, 2001, (i) all applicable tax laws and agreements have
been complied with in all material respects, and (ii) all amounts required to be
paid by the Company and/or a Subsidiary to taxing authorities on or before the
date hereof have been paid and with respect to Taxes not yet due and owing to a
taxing authority, such Taxes have been paid or adequately reserved for on the
Company's financial statements in accordance with GAAP.
(d) There are no audits, audit assessments or similar
proceedings by any taxing authority pending or threatened with respect to Taxes.
No assessment of Tax has been proposed against the Company and/or the Subsidiary
or any of their respective assets or properties. No closing agreement pursuant
to Section 7121 or any similar provision of any state, local or foreign law has
been entered into by or with respect to the Company and/or the Subsidiary. There
are no outstanding agreements, waivers or arrangements extending the statutory
period of limitation applicable to any claim for, or the period of collection or
assessment of, Taxes due from or with respect to the Company and/or the
Subsidiary for any taxable period, and no power of attorney granted by or with
respect to the Company and/or the Subsidiary relating to Taxes is currently in
force.
(e) Neither the Company nor any Subsidiary is a party to or
bound by any Tax allocation, Tax indemnity, Tax sharing or similar contract or
arrangement or any agreement that obligates it to make payment computed by
reference to the Taxes, taxable income or taxable losses of any other Person.
(f) The Company has not made any payments, and is not and will
not become obligated (under any contract entered into on or before the Closing
Date) to make any payments, that will be non-deductible under Section 280G of
the Code (or any corresponding provision of any state, local or foreign income
tax law).
(g) There are no liens (filed or by statute) with respect to
Taxes upon any of the assets or properties of the Company and/or the Subsidiary,
other than with respect to Taxes not yet due.
(h) The Company and/or the Subsidiary have collected all sales
and use Taxes required to be collected and has remitted, or will remit on a
timely basis, such amount to the appropriate governmental entities, or have been
furnished properly completed exemption certificates. The Company and/or the
Subsidiary have duly and timely withheld from employee salaries, wages and other
compensation and paid over to the appropriate taxing authorities all amounts
required to be so withheld and paid over for all periods for which the
applicable statute of limitations has not expired.
4.12 ERISA.
(a) Section 4.12 of the Company Disclosure Statement contains
a list and brief description of all "employee pension benefit plans" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
15
amended ("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA and referred to
herein as a "Welfare Plan") and all other Benefit Plans (defined herein as any
Pension Plan, Welfare Plan and any other plan, fund, program, arrangement or
agreement to provide employees, directors, independent contractors, officers or
agents of the Company or its Subsidiary with medical, health, life, bonus,
incentive, change in control, employment, stock (option, ownership or purchase),
deferred compensation, severance, salary continuation, vacation, sick leave,
fringe, incentive insurance or other benefits), whether or not subject to ERISA
(including any funding mechanism therefor now in effect, whether oral or written
that is currently maintained, or contributed to, or required to be contributed
to, by the Company or its Subsidiary), for the benefit of any current or former
employees, officers, contractors or consultants or directors of the Company or
its Subsidiary. The Company has delivered or made available to Parent true,
complete and correct copies of (i) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual
report on Forms 5500 and 990, if any, filed with the Internal Revenue Service
with respect to each Benefit Plan (if any such report was required), including
any schedules submitted thereto (iii) the most recent summary plan description
for each Benefit Plan for which such summary plan description is required and
(iv) each trust agreement, group annuity contract, and other service contracts
relating to any Benefit Plan. Each Benefit Plan has been established, funded,
maintained and administered in accordance with its terms and is in compliance
with the applicable provisions of ERISA, the Code and all other applicable laws,
except where the failure to comply would not be reasonably expected to result in
a Material Adverse Effect.
(b) Except as disclosed, all Pension Plans have been the
subject of favorable and up-to-date determination or opinion letters from the
Internal Revenue Service, or have time remaining in an applicable remedial
amendment period to file an application therefor, to the effect that such
Pension Plans are qualified and exempt from federal income taxes under Section
401(a) and 501(a), respectively, of the Code, and no such determination or
opinion letter has been revoked nor has any such Pension Plan been amended since
the date of its most recent determination or opinion letter or application
therefor in any respect that would adversely affect its qualification.
(c) Neither the Company nor its Subsidiary has adopted or been
obligated to contribute to any "defined benefit pension plan" as defined in
Section 3(35) of ERISA subject to Title IV of ERISA in the six (6) years
preceding the date hereof nor has the Company or its Subsidiary incurred any
liability under Title IV of ERISA as the result of participation in any such
defined benefit pension plan by any other Person that, together with the Company
at any time during the last six years, is or was treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code.
(d) No Benefit Plan is a "multiemployer plan" and neither the
Company nor its Subsidiary at any time has been required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has either: (i)
resulted or would result in any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) that has not been fully paid; or (ii) engaged in a
transaction that might have resulted in withdrawal liability but for the
application of Section 4204 of ERISA.
16
(e) Except as disclosed, with respect to any Welfare Plan, (i)
no such Welfare Plan is funded through a "welfare benefits fund", as such term
is defined in Section 419(e) of the Code, (ii) no such Welfare Plan is
self-insured, and (iii) each such Welfare Plan that is a "group health plan", as
such term is defined in Section 5000(b)(1) of the Code, complies with the
applicable requirements of Section 4980B(f) of the Code except where the
compliance failure would not be reasonably expected to result in a Material
Adverse Effect.
(f) All contributions or premiums owed by the Company or its
Subsidiary with respect to Benefit Plans under law, contract or otherwise have
been made in full and on a timely basis and the Company and its Subsidiary are
not obligated to contribute with respect to any Benefit Plan that involves a
retroactive contribution, assessment or funding waiver arrangement except where
the failure would not be reasonably expected to result in a Material Adverse
Effect. All administrative costs attributable to Benefit Plans have been paid
when due except where the failure would not be reasonably expected to result in
a Material Adverse Effect.
(g) No Pension Plan or Welfare Plan or, to the knowledge of
the Company, any "fiduciary" or "party-in-interest" (as such terms are
respectively defined by Sections 3(21) and 3(14) of ERISA) thereto has engaged
in a transaction prohibited by Section 406 of ERISA or 4975 of the Code for
which a valid exception is not available except where the transaction would not
be reasonably expected to result in a Material Adverse Effect.
(h) No agreement or Benefit Plan exists that could result in
the payment to any present or former employee, consultant, advisor or director
of the Company or its Subsidiary of any money or other property or accelerate or
provide any other rights or benefits to any present or former employee,
consultant, advisor or director of the Company or its Subsidiary, as a result of
the transactions contemplated by this Agreement, and no such payment or payments
would constitute a parachute payment within the meaning of Section 280G of the
Code.
(i) There are no claims or actions pending or, to the
Company's knowledge, threatened (other than routine claims for benefits) against
any Benefit Plan or its assets, or arising out of such Benefit Plans, except
such claims or actions as would not reasonably be expected to have a Material
Adverse Effect.
(j) No Benefit Plans obligate the Company or its Subsidiary to
make any payment to or with respect to any present or former employee of the
Company or its Subsidiary pursuant to any retiree medical benefit plan or
similar retiree Welfare Plan, except pursuant to Section 4980B of the Code.
4.13 ENVIRONMENTAL MATTERS; OSHA. The Company and the Subsidiary are in
substantial compliance with all Environmental Laws. For the purposes of this
Agreement, "Environmental Laws" means all federal, state and local statutes,
regulations, ordinances, rules, regulations and policies, all court orders and
decrees and arbitration awards, and the common law, which pertain to
environmental matters or contamination of any type whatsoever. The Company and
the Subsidiary are in substantial compliance with the Occupational Health and
Safety Act and the rules and regulations thereunder.
17
4.14 INTERIM CONDUCT OF BUSINESS. Except as otherwise contemplated by
this Agreement, since December 31, 2000, the Company and the Subsidiary have
not:
(a) sold, assigned, leased, exchanged, transferred or
otherwise disposed of any portion of its or its Subsidiary's assets or property
that is material to the Company and the Subsidiary taken as a whole, except for
sales of assets or inventory in the ordinary course of business and sales or
dispositions of obsolete or worthless assets and except for cash applied in the
payment of the Company's or its Subsidiary's liabilities in the usual and
ordinary course of business in accordance with the Company's and/or the
Subsidiary's past practices;
(b) written off any asset which has a net book value which
exceeds $25,000 individually or $100,000 in the aggregate, or suffered any
casualty, damage, destruction or loss, or interruption in use, of any material
asset, property (whether or not covered by insurance), on account of fire,
flood, riot, strike or other hazard or Act of God;
(c) waived any material right arising out of the conduct of,
or with respect to, its business;
(d) made (or committed to make) capital expenditures in an
amount which exceeds $100,000 for any item or $600,000 in the aggregate;
(e) made any change in accounting methods or principles;
(f) borrowed any money other than in the ordinary course of
business pursuant to its existing credit facilities or issued any bonds,
debentures, notes or other corporate securities (other than equity securities);
(g) increased the compensation payable to any employee, except
for normal pay increases in the ordinary course of business consistent with past
practices;
(h) made any payments or distributions to its employees,
officers or directors, except such amounts as constitute currently effective
compensation for services rendered, or reimbursement for reasonable and ordinary
out-of-pocket business expenses;
(i) adopted any new Pension Plan, Welfare Plan, Incentive
Plan, Severance Plan, Bonus Plan or other Benefit Plan, or amended or modified
any existing Pension Plan, Welfare Plan or other Benefit Plan;
(j) issued or sold any of its securities of any class except
for the issuance of Company Common Stock upon the exercise of stock options or
pursuant to the Company's Employee Stock Purchase Plan;
(k) paid, declared or set aside any dividend or other
distribution on its securities of any class, or purchased, exchanged or redeemed
any of its securities of any class;
(l) suffered or been affected by any condition, event or
occurrence that, in combination with any other events or circumstances, has had
or would be reasonably expected to have a Material Adverse Effect;
18
(m) entered into, terminated or materially amended, waived any
rights under, or failed to give any required notice under, any Material Contract
(as defined below) (including any insurance policies) or entered into any
transaction outside the ordinary course of business; or
(n) made or changed any Tax election or method of accounting
with respect to Taxes, or filed any amended Tax return, or settled or
compromised any examination or proceeding with respect to any material Tax
liability.
Notwithstanding the foregoing, the Company shall not be deemed to have
breached the terms of this Section 4.14 by entering into this Agreement or by
consummating the transactions contemplated hereby or by entering into the
Agreement and Plan of Merger dated as of October 25, 2001 by and among SG Merger
Corp., the Company, Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxxx (the "Prior Merger
Agreement") or by entering into the Amendment and Waiver to Agreement and Plan
of Merger, dated as of January 25, 2002, by and among SG Merger Corp., the
Company, Xxxxxxx X. Xxxxx and Xxxxx X. Xxxxxxx (the "Prior Merger Agreement
Amendment").
4.15 NO BROKERS. The Company has not entered into any contract,
arrangement or understanding with any Person which may result in the obligation
of the Company, Parent, Acquisition Sub or the Surviving Corporation to pay any
finder's fee, brokerage or agent's commissions or other like payments in
connection with negotiations leading to this Agreement or the consummation of
the transactions contemplated hereby, except that the Independent Committee has
retained Xxxxx, Xxxxxxxx & Xxxx, Inc. ("AH&H"), as its financial advisor (the
"Financial Advisor"), the arrangements with which have been disclosed in writing
to Parent prior to the date hereof.
4.16 INFORMATION SUPPLIED. The Proxy Statement to be sent to the
shareholders of the Company in connection with the Shareholders Meeting will
not, at the date it is first mailed to the Company's shareholders or at the time
of the Shareholders 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 the light of the circumstances under
which they are made, not misleading. 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. Notwithstanding the foregoing, no
representation is made by the Company in this Section 4.16 with respect to
statements made or incorporated by reference therein based on information
supplied in writing by Parent specifically for inclusion in the Proxy Statement.
4.17 PROPERTIES.
(a) The Company and its Subsidiary have good, valid and, in
the case of their Owned Property (as defined below), marketable fee title to
their real property and interests in real property indicated as being owned by
the Company and its Subsidiary in the financial statements included in the
Company Reports, except for properties sold or otherwise disposed of in the
ordinary course of business (the "Owned Properties"), free and clear of all
mortgages, liens, security interests, easements, covenants, rights-of-way and
other similar restrictions and encumbrances ("Encumbrances"), except where the
failure to have such marketable fee title would not interfere to any material
respect with the conduct of the business of the Company and the Subsidiary as
currently conducted. The leases relating to the Company's leased real property
19
("Company Leases") are in full force and effect, free and clear of all
Encumbrances except where the failure of such leases to be in full force and
effect free and clear of all Encumbrances would not interfere to any significant
extent with the conduct of business of the Company and the Subsidiary as
currently conducted, and, to the best of the Company's knowledge, are not in
default.
(b) No consent or approval is required to be obtained under
any agreement by which the Company or its Subsidiary has obtained a leasehold
interest in any leased property and no right of termination shall arise under
any Company Lease nor does any landlord have the right to increase the rent
payable under any Company Lease or unilaterally amend any other material terms
thereunder, in each case as a result of the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby.
4.18 MATERIAL CONTRACTS.
(a) Neither the Company nor its Subsidiary is, or has received
any written notice or has any knowledge that any other Person is, in material
default or unable to materially perform in any respect under any Material
Contract (as defined below), and, to the Company's knowledge, there has not
occurred any event that with the lapse of time or the giving of notice or both
would constitute such a default or inability to perform. Neither the Company nor
any Subsidiary is a party to any contract, agreement, commitment, arrangement,
lease, license, policy or other instrument that is required to be disclosed as
an exhibit to the Company Reports in accordance with the rules and regulations
of the Commission that has not been so disclosed.
(b) Section 4.18 of the Company Disclosure Statement contains
(i) a complete and accurate list of each customer of the Company party to a
Material Contract, and (ii) identifies and provides a description of any
material goods and/or services the Company or its Subsidiary remains committed
to deliver under each Material Contract. Each Material Contract is valid and in
full force and effect, and is enforceable in accordance with its terms.
(c) Neither the Company nor its Subsidiary (i) is
renegotiating any amount paid or payable to the Company or its Subsidiary under
any Material Contract or any other material term or provision of any Material
Contract, (ii) has any knowledge that any customer has the right to renegotiate
any amount paid or payable to the Company or its Subsidiary under any Material
Contract or any other material term or provision of any Material Contract, (iii)
has received any written notice, or has any knowledge, that any customer that is
a party to any Material Contract is seeking a refund or credit with respect to
any amount previously paid to the Company or intends to cease dealing with the
Company or its Subsidiary, or (iv) has received any written notice, or has any
knowledge, that any customer that is a party to any Material Contract intends to
reduce the amount of maintenance fees, if any, payable by such customer under
such Material Contract below historical levels.
(d) As used herein, "Material Contract" shall mean any
contract or agreement (written, oral, implied or otherwise) to which the Company
or its Subsidiary is a party or by which the Company's or its Subsidiary's
assets is bound, pursuant to which (i) the Company or its Subsidiary received
revenue from any Person in excess of $200,000 in the twelve month period ending
December 31, 2001, or (ii) the Company or its Subsidiary reasonably expects to
20
receive revenue from any Person in excess of $200,000 in the fiscal year ending
December 31, 2002.
4.19 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Company
Reports and except with respect to the transactions contemplated hereby, there
has been no transaction, agreement, arrangement or understanding, or any related
series thereof, between the Company and/or the Subsidiary and the Company's
affiliates (other than a wholly-owned Subsidiary).
4.20 BOARD RECOMMENDATION. The Board of Directors of the Company, at a
meeting duly called and held on January 25, 2002, acting upon the recommendation
of the Independent Committee, has by unanimous vote, (i) determined that this
Agreement is advisable and is fair to and in the best interests of the
Shareholders of the Company, and (ii) resolved to recommend that the holders of
the shares of Company Common Stock adopt this Agreement and approve the Merger
Agreement. The aforementioned determination, recommendation and approval of the
Company's Board of Directors are in full force and effect and have not been
amended, revoked or revised in any respect. Each member of the Board of
Directors that owns any Company Common Stock has entered into a Voting Agreement
with Parent pursuant to which such member has agreed to vote such member's
shares to approve the Merger Agreement.
4.21 INTELLECTUAL PROPERTY.
(a) The Company and/or the Subsidiary own, or are licensed or
otherwise possess legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights and any applications therefor,
technology, know-how, computer software programs or applications, and tangible
or intangible proprietary information or material that are used in the business
of the Company and/or the Subsidiary as currently conducted, except as would not
reasonably be expected to have a Material Adverse Effect.
(b) The Company and/or the Subsidiary are not in material
violation of any material licenses, sublicenses and other agreements as to which
the Company and/or the Subsidiary are a party and pursuant to which the Company
and/or the Subsidiary are authorized to use any third-party patents, trademarks,
service marks and copyrights ("Third-Party Intellectual Property Rights").
Except as disclosed in the Company Reports or in the Company Disclosure
Statement, as of the date of this Agreement no claims with respect to the
patents, registered and unregistered trademarks and service marks, registered
copyrights, trade names and any applications therefor owned by the Company or
the Subsidiary (the "Company Intellectual Property Rights"), any trade secret
material to the Company, any software code or other intellectual property used
by the Company, or Third-Party Intellectual Property Rights to the extent
arising out of any use, reproduction or distribution of such Third-Party
Intellectual Property Rights by or through the Company or the Subsidiary, are
currently pending (or, to the knowledge of the Company, are overtly threatened
by any Person) against the Company and/or the Subsidiary.
(c) To the Company's knowledge, all patents, registered
trademarks, service marks and copyrights held by the Company or the Subsidiary
are valid and subsisting. Except as disclosed in the Company Reports or in the
Company Disclosure Statement, to the Company's knowledge, there is no material
unauthorized use, infringement or misappropriation of any Company Intellectual
21
Property Rights by any third party, including any employee or former employee of
the Company and/or Subsidiary.
(d) Each current employee of the Company or its Subsidiary,
and each former employee of the Company or its Subsidiary whose employment
relationship with the Company or its Subsidiary was terminated on or after
January 1, 2000, who is or was involved in, or who has contributed to, or who
has knowledge of, the creation or development of any material Company
Intellectual Property Rights has executed and delivered to the Company or, as
applicable, the Subsidiary an agreement that is substantially identical to the
form of Confidentiality Agreement previously delivered by the Company to Parent.
Each Confidentiality Agreement that is in force shall remain in full force and
effect following the completion of the Merger in accordance with its terms and
shall be enforceable in full by the Surviving Corporation. Neither the Company
nor its Subsidiary has granted any current or former employee, officer,
director, stockholder, consultant or independent contractor any right or
interest in or with respect to any Company Intellectual Property Rights. To the
best of the Company's knowledge, no current or former employee, officer,
director, stockholder, consultant or independent contractor has breached in any
material respect the terms of any confidentiality, noncompetition, or
proprietary rights agreement, between such current or former employee, officer,
director, stockholder, consultant or independent contractor and any other
Person. Each non-competition agreement filed as an exhibit to the Company
Reports is in full force and effect and shall remain in full force and effect
following the completion of the Merger in accordance with its terms and shall be
enforceable in full by the Surviving Corporation.
4.22 EMPLOYEE AND LABOR MATTERS.
(a) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus, golden parachute,
severance or other payment or obligation to any current or former employee or
director of the Company or its Subsidiary (whether or not under any Benefit
Plan), or materially increase the benefits payable or provided under any Benefit
Plan, or result in any acceleration of the time of payment or vesting of any
such benefits.
(b) Section 4.22 of the Company Disclosure Statement contains
a list of all salaried employees of the Company and each Subsidiary as of
December 31, 2001, and correctly reflects, in all material respects, (i) their
salaries, (ii) their dates of employment and their positions, and (iii) a
description of other types of compensation generally payable to employees.
Neither the Company nor its Subsidiary is a party to any collective bargaining
contract or other contract or agreement with a labor union involving any of its
employees. All of the employees of the Company and each Subsidiary are "at will"
employees.
(c) The Company has fully accrued on its Unaudited Company
Balance Sheet all accrued vacation, salary and other sums due employees as of
December 31, 2001.
4.23 INSURANCE. The Company has listed on Section 4.23 of the Company
Disclosure Statement and delivered to Parent a copy of all material insurance
policies and all material self insurance programs and arrangements relating to
the business, assets, employees, directors and operations of the Company and the
Subsidiary. Each of such insurance policies is in full force and effect. Since
January 1, 1998, neither the Company nor its Subsidiary has received any notice
22
or other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy prior to its scheduled expiration or
renewal, (b) refusal of any coverage or rejection of any material claim under
any insurance policy, or (c) material adjustment in the amount of the premiums
payable with respect to any insurance policy prior to its scheduled expiration
or renewal. There is no pending workers' compensation or other claim under or
based upon any insurance policy of the Company or its Subsidiary. Other than
pursuant to actions taken by Parent or the Surviving Corporation, no insurance
coverage is or will be in any way altered by the execution of this Agreement,
the consummation of the Merger or the consummation of any of the other
transactions contemplated herein.
4.24 RECEIVABLES.
(a) Section 4.24 of the Company Disclosure Schedule provides
an accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company and its Subsidiary as of
December 31, 2001.
(b) Except as set forth on Section 4.24 of the Company
Disclosure Schedule, to the best of the Company's knowledge, all existing
accounts receivable of the Company and its Subsidiary (including those accounts
receivable reflected on the Unaudited Company Balance Sheet that have not yet
been collected and those accounts receivable that have arisen since September
30, 2001 and have not yet been collected) represent valid obligations of
customers of the Company and its Subsidiary arising from bona fide transactions
entered into in the ordinary course of business.
4.25 WARRANTY CLAIMS. Since January 1, 2000, no customer or
representative of any customer has asserted in writing or, to the knowledge of
the Company's President or Vice President of Customer Service, threatened to
assert any material claim against the Company or its Subsidiary under or based
upon any express or implied warranty provided by or on behalf of the Company or
its Subsidiary.
4.26 CERTAIN BUSINESS PRACTICES. To the knowledge of the Company, the
Company has not: (i) used any material funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to customers or to political
activity; or (ii) made any material unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or materially violated any provision of the Foreign Corrupt Practices
Act of 1977.
4.27 NO DISCUSSIONS. Neither the Company nor its Subsidiary, nor any
representative of the Company or its Subsidiary, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
4.28 VOTE REQUIRED. The affirmative vote of the holders of a majority
of the shares of Company Common Stock outstanding on the record date for the
Company Shareholders Meeting is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement, the
Merger and the other transactions contemplated by this Agreement.
23
4.29 ANTI-TAKEOVER LAWS NOT APPLICABLE. The Board of Directors of the
Company has taken or will take all action necessary to render Section 607.0901
of the FBCA inapplicable to the Merger.
4.30 TERMINATION OF EMPLOYEE STOCK PURCHASE PLAN. The Company has
terminated its Employee Stock Purchase Plan ("ESPP"), which is of no further
force and effect, and has not implemented any similar plan in lieu thereof.
Neither the Company, nor any agent or affiliate of the Company is holding any
cash on behalf of, or for the benefit of, any employees of the Company in
connection with the ESPP. The expiration date for the final offering period
thereunder was November 9, 2001, and no new offering period has been commenced
thereunder.
4.31 NO UNDISCLOSED MATERIAL LIABILITIES. Except as disclosed in the
Unaudited Company Financial Statements or set forth in Company Disclosure
Schedule, to the best of the Company's knowledge, there are no liabilities of
the Company or its Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than liabilities incurred in the
ordinary course of business consistent with past practice since the date of the
Unaudited Company Balance Sheet, which in the aggregate are not material to the
Company or its Subsidiary.
4.32 OFFICERS CERTIFICATE. The Company has delivered to Parent a
certificate signed by each of the President, the Chairman, the Chief Technology
Officer, and the Chief Financial Officer of the Company, dated as of the date of
this Agreement, certifying that, to the best of his or her knowledge after due
inquiry, the representations and warranties of the Company contained in this
Agreement are true and correct as of the date hereof (in each case, disregarding
any qualification contained therein with respect to materiality and Material
Adverse Effect) with only such exceptions as would not in the aggregate have a
Material Adverse Effect on the Company.
ARTICLE 5
COVENANTS
5.1 INTERIM OPERATIONS.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, unless Parent has consented in writing thereto (which consent
shall not be unreasonably withheld or delayed), the Company and its Subsidiary
shall:
(i) conduct its business and operations according to
its usual, regular and ordinary course consistent with past practice;
(ii) use commercially reasonable efforts to preserve
intact its business organization and goodwill, keep available the services of
its officers and employees and maintain satisfactory relationships with those
Persons having business relationships with it;
24
(iii) not amend its charter or by-laws or comparable
governing instruments or any material term of any outstanding securities of, or
other ownership interests in, the Company or its Subsidiary;
(iv) promptly notify Parent of any material event
affecting the Company and/or its Subsidiary, any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), the breach of any representation
or warranty contained herein or the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be or become untrue or
inaccurate, any failure of the Company or its Subsidiary to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder or any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement;
(v) promptly deliver to Parent true and complete
copies of any report, statement or schedule filed with the Commission subsequent
to the date of this Agreement;
(vi) not (A) except pursuant to the exercise of
options existing on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock or other security, effect any stock split,
or reclassify, combine, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, its capital stock or otherwise change its capitalization
as it exists on the date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire any
shares of its capital stock; (C) increase any compensation or fringe benefits or
enter into or amend any employment agreement with any of its present or future
officers, directors or employees, except for normal increases in salaries or
wages of employees of the Company and/or its Subsidiary who are not directors or
officers of the Company in the ordinary course of business and consistent with
past practice; (D) grant any severance or termination package to any employee or
consultant not currently required to be paid under existing severance plans to,
or enter into any employment, consulting or severance agreement or arrangement
with, any present or former director, officer or other employee of the Company
and/or any Subsidiary; (E) adopt any new employee benefit plan (including any
stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which are less
favorable to participants in such plans or to effect the conversion or
cancellation of Company Options in accordance with Section 2.2 hereof or to
amend such plans as required by law; or (F) establish, adopt, enter into or
amend or terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any present or former
directors, officers or employees or the Company and/or any Subsidiary, except if
required by law;
(vii) not (A) declare, set aside, make or pay any
dividend or make any other distribution or payment payable in cash, stock,
property or otherwise with respect to any shares of its capital stock or other
ownership interests; or (B) directly or indirectly, redeem, purchase or
otherwise acquire any shares of its capital stock, or make any commitment for
any such action;
25
(viii) not enter into any material agreement or
transaction, or agree to enter into any material agreement or transaction,
outside the ordinary course of business, including, without limitation, any
transaction involving any merger, consolidation, joint venture, license
agreement, partial or complete liquidation or dissolution, reorganization,
recapitalization, restructuring, or a purchase, sale, lease or other acquisition
or disposition of any assets or capital stock;
(ix) not incur any indebtedness for borrowed money or
assume, endorse, guarantee or otherwise become responsible for any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of others, in any such case other than in the
ordinary course of its business;
(x) not make any loans, advances or capital
contributions to, or investments in, any other Person other than in the ordinary
course of business;
(xi) not make or commit to make any capital
expenditures or lease commitments in excess of $25,000 individually or $100,000
in the aggregate, except for purchases of equipment for resale in the ordinary
course of business;
(xii) not voluntarily elect to alter materially the
manner of keeping its books, accounts or records, or change in any manner the
accounting practices or principles therein reflected except as required by GAAP;
(xiii) not issue, deliver, sell, lease, sell and
leaseback, pledge, dispose of or encumber, or authorize or commit to the
issuance, delivery, sale, lease, sale/leaseback, pledge, disposition or
Encumbrance of material properties or assets of the Company or any Subsidiary,
except liens for taxes not currently due and except (A) sales of assets or
inventory in the ordinary course of business consistent with past practice and
(B) sales or dispositions of obsolete or worthless assets;
(xiv) use its commercially reasonable efforts to
maintain insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are currently in effect;
(xv) not (A) make or change any Tax election or
method of accounting with respect to Taxes, (B) file any amended Tax Return or
(C) settle or compromise any examination or proceeding with respect to any
material Tax liability, in each case other than in the ordinary course of
business;
(xvi) not pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or satisfaction of
liabilities or obligations in the ordinary course of business consistent with
past practice, or waive, release, grant or transfer any rights of significant
value;
(xvii) not settle or compromise any litigation for
amounts in excess of an aggregate of $100,000 (whether or not commenced prior to
the date of this Agreement), other than settlements involving amounts payable by
the Company and/or the Subsidiary that are not in excess of (x) amounts fully
recoverable from insurers of the Company and/or the Subsidiary or (y) amounts
26
applied against self-insured retention amounts or deductibles (provided such
settlements do not involve any material non-monetary obligations on the part of
the Company and/or its Subsidiary);
(xviii) not change the composition, fill any
vacancies or increase the size of the Company's Board of Directors;
(xix) not hire (a) any employee at the level of
Director or above or with an annual base salary in excess of $50,000 or (b) more
than five employees in the aggregate;
(xx) not enter into or become bound by any new
contract or agreement that would constitute a Material Contract or amend,
terminate, waive, release or assign any right under any existing Material
Contract or enter into, amend, terminate, waive, release or assign any other
contract or agreement if such amendment, termination, waiver, release or
assignment would cause the Company to become liable for an amount in excess of
$50,000 that it was not previously liable for or to give up an existing right to
receive an amount in excess of $50,000; or
(xxi) not amend or modify in any material respect or
terminate any existing intellectual property license, execute any new
intellectual property license, sell, license or otherwise dispose of, in whole
or in part, any Company Intellectual Property Rights, and/or subject any Company
Intellectual Property Rights to any Encumbrance other than licenses in the
ordinary course of business.
5.2 PREPARATION OF PROXY STATEMENT; SHAREHOLDERS MEETING.
(a) The Company shall, as soon as practicable following the
date of this Agreement, prepare and file with the Commission the Proxy Statement
in preliminary form (provided that Parent and its counsel shall be given
reasonable opportunity to review and comment on the Proxy Statement prior to its
filing with the Commission), and the Company shall use its best efforts to
respond as promptly as practicable to any comments of the Commission with
respect thereto. The Company shall notify Parent promptly of the receipt of any
comments from the Commission or its staff and of any request by the Commission
or its staff for amendments or supplements to the Proxy Statement or for
additional information and shall supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the
Commission or its staff, on the other hand, with respect to the Proxy Statement.
If at any time prior to receipt of the Requisite Shareholder Approval there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company shall promptly prepare and mail to its
shareholders such an amendment or supplement. The Company shall use reasonable
efforts to cause the Proxy Statement to be mailed to the Company's shareholders
as promptly as practicable after filing with the Commission. Subject to the
fiduciary duties under applicable law of the Company's Board of Directors, (i)
the Proxy Statement shall contain the recommendation of the Company's Board of
Directors, acting upon the recommendation of the Independent Committee, that the
shareholders of the Company vote to adopt and approve this Agreement and the
Merger and (ii) if requested to do so by Parent at any time prior to the
Shareholders Meeting and subject to compliance with their fiduciary duties under
27
applicable law, if there shall have been publicly announced an alternative
Acquisition Proposal (as hereinafter defined), the Company's Board of Directors,
acting upon the recommendation of the Independent Committee, shall within a
reasonable period of time following such request (and prior to the Shareholders
Meeting) publicly reaffirm such recommendation and shall publicly announce that
it is not recommending that the shareholders of the Company accept an
alternative Acquisition Proposal, provided that such reaffirmation or
announcement does not require significant delay in the timing of the
Shareholders Meeting.
(b) The Company shall, as soon as practicable following the
date of execution of this Agreement, duly call, give notice of, convene and hold
a Shareholders Meeting for the purpose of seeking the shareholder approval of
this Agreement and the Merger. Subject to compliance with their fiduciary duties
under applicable law, the Company's Board of Directors, acting upon the
recommendation of the Independent Committee, shall recommend to its shareholders
that they adopt and approve this Agreement and the Merger. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
the first sentence of this Section 5.2(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal.
(c) Parent shall cause any and all shares of Company Common
Stock beneficially owned by Parent or Acquisition Sub to be voted in favor of
the adoption and approval of this Agreement and the Merger.
5.3 ACQUISITION PROPOSALS. Notwithstanding anything contained in this
Agreement to the contrary:
(a) From the date hereof until the Effective Time, or, if
earlier, until the termination of this Agreement, the Company shall not directly
or indirectly, and shall not authorize or permit any of its officers, directors,
advisors, representatives or other agents directly or indirectly to, (i)
solicit, initiate, encourage or induce the making or submission of any
Acquisition Proposal (as hereinafter defined), (ii) furnish any information
regarding the Company, or afford access to the properties, books or records of
the Company, to any Person (other than Parent or any designees of Parent) in
connection with or in response to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person (other than Parent or any designees
of Parent) with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any contract contemplating or otherwise relating to any
Acquisition Proposal; PROVIDED, HOWEVER, that prior to the adoption and approval
of this Agreement by the Requisite Shareholder Approval, neither the Company nor
any of its agents or representatives shall be prohibited by this Section 5.3
from furnishing information regarding the Company to, or entering into
discussions or negotiations with, or accepting or recommending an Acquisition
Proposal from, or entering into definitive agreements relating to an alternative
Acquisition Proposal with, any Person in response to an Acquisition Proposal
that is submitted by such Person (and not withdrawn) that the Company's Board of
Directors believes is reasonably likely to lead to a Superior Acquisition
Proposal if (A) neither the Company nor any representative of any of the Company
or its Subsidiary shall have violated any of the restrictions set forth in this
Section 5.3, (B) the Board of Directors of the Company concludes in good faith,
after consulting with its outside legal counsel, that the failure to take such
action would constitute a breach of its fiduciary obligations to the Company's
stockholders under applicable law, (C) the Board of Directors of the Company
concludes in good faith, after consulting with its financial advisor, that such
Acquisition Proposal is or reasonably likely to lead to a Superior Proposal, and
(D) prior to or contemporaneously with furnishing any such information to such
Person, the Company furnishes such information to Parent (to the extent such
information has not been previously furnished by the Company to Parent). The
Company will immediately cease and cause to be terminated any existing
discussions or negotiations with any Person relating to any Acquisition
Proposals. For purposes of this Agreement, an "Acquisition Proposal" means any
inquiry, proposal or offer (other than as contained in this Agreement) from any
Person (a) relating to any direct or indirect acquisition or purchase of (x) a
business that constitutes 15% or more of the net revenues, net income or the
assets of the Company or its Subsidiary, or (y) 15% or more of any class of
28
equity securities of the Company or its Subsidiary, (b) relating to any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 15% or more of any class of equity securities of the Company
or its Subsidiary, or (c) relating to any merger, consolidation, business
combination, acquisition, recapitalization, liquidation, dissolution or similar
transaction involving the Company or its Subsidiary, in each case, other than
the transactions contemplated by this Agreement. For purposes of this Agreement,
a "Superior Acquisition Proposal" means any unsolicited, bona fide written offer
by a third party to purchase or otherwise acquire (by merger, purchase of
outstanding Company Common Stock or otherwise) more than 50% of the outstanding
Company Common Stock or all or substantially all of the assets of the Company
which (i) the Company's Board of Directors, acting upon the recommendation of
the Independent Committee and the advice of its financial advisor, determines in
good faith is reasonably likely to be consummated, taking into account the
Person making the proposal and all legal, financial, regulatory and other
aspects of the Acquisition Proposal, and (ii) the Company's Board of Directors
or the Independent Committee acting on its behalf believes in good faith (after
consultation with and based upon the advice of its outside financial advisors)
would, if consummated, provide greater value to the Company's shareholders than
the transaction contemplated by this Agreement.
(b) Except as expressly permitted by this Section 5.3, the
Company's Board of Directors shall not (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Acquisition
Sub, the approval or recommendation by the Company's Board of Directors of this
Agreement, the Merger and the transactions contemplated hereby, (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal, or (iii) cause the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "Company Acquisition Agreement") related to any Acquisition Proposal, other
than any such agreement entered into concurrently with a termination pursuant to
the next sentence. Notwithstanding the foregoing, if at any time the Company's
Board of Directors determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to act in a manner consistent
with its fiduciary duties to the Company's shareholders under applicable law,
subject to compliance with this Section 5.3, the Company's Board of Directors
may, in response to a Superior Acquisition Proposal, enter into a Company
Acquisition Agreement with respect to such Superior Acquisition Proposal and, at
the time of execution of a binding agreement with respect thereto, terminate
this Agreement in accordance with Section 7.3(a) hereof.
(c) In addition to the obligations of the Company as set forth
in paragraphs (a) and (b) of this Section 5.3, Company shall notify Parent
orally within one business day (and in writing within two business days) of any
Acquisition Proposal in response to which the Company has furnished confidential
information to the proponent thereof or has commenced negotiations with the
proponent thereof, which notice shall include the identity of the Person making
29
the Acquisition Proposal and, if the Superior Acquisition Proposal would provide
for a per-share consideration for the Company Common Stock of less than $3.20,
the materials terms thereof. In addition, in the event (and in each event) that
the Company intends to enter into a Company Acquisition Agreement relating to a
Superior Acquisition Proposal, the Company shall, not less than one 24-hour
period containing eight regular business hours, prior to entering into such
Company Acquisition Agreement advise Parent in writing of such intention and the
identity of the Person or Persons who have made and/or are sponsoring, directly
or indirectly, such Superior Acquisition Proposal and, if the Superior
Acquisition Proposal would provide for a per-share consideration for the Company
Common Stock of less than $3.20, the materials terms thereof.
5.4 INSPECTION OF RECORDS. From the date hereof to the Effective Time,
the Company shall and shall cause its Subsidiary, and its respective directors,
employees, auditors, counsel, financial advisors and other agents, to (a) allow
all designated officers, attorneys, accountants and other representatives of
Parent reasonable access at all reasonable times to its officers, agents,
employees, offices, records, files, correspondence, audits and properties, as
well as to all information relating to its commitments, contracts, titles and
financial position, or otherwise pertaining to the business and affairs of the
Company and its Subsidiary; (b) furnish to Parent and its aforementioned
representatives such financial, operating and other data and other information
as such Persons may reasonably request; and (c) instruct its employees, counsel,
auditors and financial advisors and other agents to cooperate reasonably with
Parent and its investigation of the business of the Company and its Subsidiary;
provided that any information and documents received by Parent or its
representatives (whether furnished before or after the date of this Agreement)
shall be held in accordance with the Confidentiality Agreement, dated as of
November 26, 2001, between Parent and the Company (the "Confidentiality
Agreement"), which shall remain in full force and effect until the Effective
Time pursuant to the terms thereof, notwithstanding the execution and delivery
of this Agreement or the termination hereof. From the date hereof to the
Effective Time, Parent shall (a) furnish to the Company, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably request in
order to verify that the representations and warranties of Parent contained in
Section 3 hereof are true and correct as of the Closing Date to the extent
required by Section 6.2(c), and (b) instruct its officers, counsel and financial
advisors to cooperate reasonably with the Company in connection therewith.
Notwithstanding the foregoing, the Company and Parent may withhold documents and
information to the extent required to comply with the terms of a confidentiality
agreement with a third party in effect on the date of this Agreement.
5.5 PUBLICITY. Neither party hereto shall make any press release or
public announcement with respect to this Agreement, the Merger or the
transactions contemplated hereby without the prior written consent of the other
party hereto (which consent shall not be unreasonably withheld); PROVIDED,
HOWEVER, that each party hereto may make any disclosure or announcement which
such party, in the opinion of its outside legal counsel, is obligated to make
pursuant to applicable law or regulation of any national securities exchange, in
which case, the party desiring to make the disclosure shall consult with the
other party hereto prior to making such disclosure or announcement.
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5.6 FURTHER ACTION; REASONABLE BEST EFFORTS.
(a) Each of the Company, Parent and Acquisition Sub shall: (i)
promptly make and effect all registrations, filings and submissions required to
be made or effected by it pursuant to the Exchange Act and other applicable
legal requirements with respect to the Merger; and (ii) use reasonable efforts
to cause to be taken, on a timely basis, all other actions and to execute and
deliver such further documents, certificates, notices and instruments necessary
or appropriate or as may reasonably be requested by Parent for the purpose of
consummating, evidencing, reflecting and/or effectuating the transactions
contemplated by, and to carry out the intent and purposes of, this Agreement, or
to assist Parent in conducting the business of the Surviving Corporation
following the Closing. Without limiting the generality of the foregoing, each of
the parties agrees to use its reasonable best efforts to (A) promptly provide
all information requested by any governmental entity in connection with the
Merger or any of the other transactions contemplated by this Agreement, and (B)
promptly take, and cause its affiliates to take, all actions and steps necessary
to obtain any antitrust clearance or similar clearance required to be obtained
from the Federal Trade Commission, the Department of Justice, any state attorney
general, any foreign competition authority or any other governmental entity in
connection with the transactions contemplated by this Agreement.
(b) Without limiting the generality of the foregoing, upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
its reasonable best efforts to take, or cause to be taken, all action, and to do
or cause to be done, and to assist and cooperate with the parties in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement, including but not limited to (i) cooperation in the preparation and
filing of the Proxy Statement, (ii) determining whether any filings are required
to be made or consents, approvals, waivers, licenses, permits or authorizations
are required to be obtained (or, which if not obtained, would result in an event
of default, termination or acceleration of any agreement) under any applicable
law or regulation or from any governmental entities or third parties, including
parties to leases, loan agreements or other debt instruments, in connection with
the transactions contemplated by this Agreement, including the Merger, and (iii)
promptly making any such filings, furnishing information required in connection
therewith and timely seeking to obtain any such consents, approvals, permits or
authorizations.
(c) The Company shall use its commercially reasonable best
efforts to obtain all consents, approvals, agreements, extensions or other
waivers of rights necessary to ensure that all Leases and other Material
Contracts remain in full force and effect for the benefit of the Surviving
Corporation after the Effective Time on substantially the same terms and
conditions as in effect on the date hereof (without any increase in amounts
payable thereunder).
(d) The Company shall use its good faith efforts to obtain
from each holder of a Company Option a written acknowledgment and acceptance
that, at the Effective Time, his, her or its Company Options shall be treated as
set forth in Section 2.2 hereof.
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5.7 INDEMNIFICATION; D&O INSURANCE, ETC.
(a) Parent shall, to the fullest extent permitted by law,
cause the Surviving Corporation (from and after the Closing Date) to honor all
the Company's obligations to indemnify, defend and hold harmless (including any
obligations to advance funds for expenses) the current and former directors and
officers of the Company and its Subsidiary against all losses, claims, damages
or liabilities arising out of acts or omissions by any such directors and
officers occurring prior to the Closing Date to the maximum extent that such
obligations of the Company exist on the date of this Agreement pursuant to the
Company's Articles of Incorporation, By-laws, the FBCA, or the individual
indemnity agreements set forth in Schedule 5.7 attached hereto, and such
obligations shall survive the Merger and shall continue in full force and effect
in accordance with the terms of the Company's Articles of Incorporation,
By-laws, the FBCA and such individual indemnity agreements from the Closing Date
until the expiration of the applicable statute of limitations with respect to
any claims against such directors or officers arising out of such acts or
omissions. In the event a current or former director or officer of the Company
or its Subsidiary is entitled to indemnification under this Section 5.7, such
director or officer shall be entitled to reimbursement from the Company (from
and after the Closing Date) or the Surviving Corporation (from and after the
Closing Date) for reasonable attorney fees and expenses incurred by such
director or officer in pursuing such indemnification, including payment of such
fees and expenses by the Surviving Corporation or the Company, as applicable, in
advance of the final disposition of such action upon receipt of an undertaking
by such current or former director or officer to repay such payment if it shall
be adjudicated that such current or former director or officer was not entitled
to such payment.
(b) The Company will maintain, through the Effective Time, the
Company's existing directors' and officers' insurance in full force and effect
without reduction of coverage. Prior to the Effective Time Parent shall purchase
tail insurance providing coverage for a period of six years after the Effective
Time on the same terms as the current policies of directors' and officers'
liability insurance and indemnification maintained by the Company (provided that
Parent may substitute therefor policies with reputable and financially sound
carriers, which policies provide coverage of the types, in the amounts and
containing terms and conditions which are no less advantageous to the
beneficiaries thereof than those maintained by the Company) with respect to
claims arising from or related to facts or events which occurred at or before
the Effective Time.
(c) The Articles of Incorporation of the Surviving Corporation
shall contain the provisions that are set forth in Article VI of the Company's
Articles of Incorporation, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
or at any time prior to the Effective Time were directors, officers, employees
or other agents of the Company.
(d) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all of substantially all of its properties and assets
32
to any Person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation assume, as a matter
of law or otherwise, the obligations set forth in this Section 5.7.
5.8 DISPOSITION OF LITIGATION. The Company and Parent shall participate
jointly in the defense of any shareholder litigation against the Company, Parent
or Acquisition Sub, as applicable, and their respective affiliates, and the
directors, officers, employees, representatives and agents of the foregoing,
relating to the transactions contemplated by this Agreement.
5.9 EMPLOYEE STOCK PURCHASE PLAN. The Company shall not commence any
new offering period under the ESPP, grant or change any rights under the ESPP,
or accept or take any cash from or on behalf of any employee in connection with
the ESPP.
ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions (unless waived by each of the parties hereto in accordance with the
provisions of Section 7.8 hereof):
(a) No preliminary or permanent injunction or other order,
decree, statute, rule or regulation shall have been entered and remain in effect
by any federal or state court or federal, state, local or other governmental
entity which prevents the consummation of the Merger or materially changes the
terms or conditions of this Agreement.
(b) All material consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental commission,
board or other regulatory body required in connection with the execution,
delivery and performance of this Agreement shall have been obtained or made,
except for the filing of the Articles of Merger and any documents required to be
filed after the Effective Time.
(c) The consummation of the Merger shall not violate
applicable law.
6.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions (unless
waived by the Company in accordance with the provisions of Section 7.8 hereof):
(a) This Agreement and the Merger shall have been adopted and
approved by Requisite Shareholder Approval.
(b) Parent and Acquisition Sub shall have performed, in all
material respects, all of their respective obligations contained herein that are
required to be performed by Parent or Acquisition Sub at or prior to the Closing
Date, and the Company shall have received a certificate of an Executive Officer
of Parent, dated the Closing Date, certifying to such effect.
33
(c) The representations and warranties of Parent contained in
this Agreement (disregarding any qualification contained therein with respect to
materiality and material adverse effect) shall be true and correct as of the
Closing Date (except those representations and warranties that address matters
as of a particular date, which shall remain true and correct as of such date)
with only such exceptions as would not in the aggregate have a material adverse
effect on Parent's or Acquisition Sub's ability to perform its obligations
hereunder. The Company shall have received a certificate of an Executive Officer
of Parent, dated the Closing Date, certifying to such effect to the best of his
or her knowledge after due inquiry.
(d) The Company shall have received from Parent certified
copies of the resolutions of its and Acquisition Sub's respective Boards of
Directors and, to the extent required, shareholders approving and adopting, on
or before the date of this Agreement, this Agreement, the Definitive Financing
Documents, the Merger and the transactions contemplated hereby.
(e) From the date of this Agreement through the Effective
Time, there shall not have occurred any event that has had, or would be
reasonably likely to have, a material adverse effect on Parent's or Acquisition
Sub's ability to perform hereunder.
(f) Parent and Acquisition Sub shall have executed and
delivered such other documents and taken such other actions as the Company shall
have reasonably requested.
(g) The financing contemplated by the Financing Commitments
(as such Financing Commitments may be amended, modified or replaced with the
consent of the Company, such consent not to be unreasonably withheld,
conditioned or delayed; PROVIDED, HOWEVER, that no consent shall be required to
the extent any such amendment, modification or replacement consists of equity
financing with no mandatory redemption sooner than three years from the issue
date) shall have closed or shall close simultaneously with the Effective Time.
6.3 CONDITIONS TO THE OBLIGATION OF PARENT AND ACQUISITION SUB TO
EFFECT THE MERGER. The obligations of Parent and Acquisition Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions (unless waived by Parent in accordance with the
provisions of Section 7.8 hereof):
(a) This Agreement and the Merger shall have been adopted and
approved by Requisite Shareholder Approval.
(b) There shall not be pending or threatened by any
governmental entity any suit, action or proceeding (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from Parent or
Acquisition Sub or any of its affiliates any damages that are material to any
such party, (ii) seeking to prohibit or limit the ownership or operation by the
Company or its Subsidiary of any material portion of the business or assets of
the Company or its Subsidiary or (iii) seeking to impose limitations on the
ability of Parent or Acquisition Sub or any shareholder of Parent or Acquisition
Sub to acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock, including, without limitation, the right to vote the
Company Common Stock on all matters properly presented to the shareholders of
the Company.
34
(c) There shall not be pending or threatened by any
non-governmental Person any suit, action or proceeding of the type described in
clauses (i) through (iii) of Section 6.3(b) that Parent shall reasonably
believe, based on the advice of reputable counsel, is reasonably likely to be
successful in obtaining injunctive relief or monetary damages that would have a
Material Adverse Effect on the Company.
(d) The Company shall have performed, in all material
respects, all of its obligations contained herein that are required to be
performed by the Company at or prior to the Closing Date, and Parent shall have
received a certificate of an executive officer of the Company, dated the Closing
Date, certifying to such effect.
(e) The representations and warranties of the Company
contained in this Agreement (disregarding any qualification contained therein
with respect to materiality and Material Adverse Effect) shall be true and
correct as of the Closing Date (except those representations and warranties that
address matters as of a particular date, which shall remain true and correct as
of such date) with only such exceptions as would not in the aggregate have a
Material Adverse Effect on the Company. Parent shall have received a certificate
of an executive officer of the Company, dated the Closing Date, certifying to
such effect to the best of his or her knowledge after due inquiry.
(f) Parent shall have received from the Company certified
copies of the resolutions of the Company's Board of Directors and shareholders
approving and adopting this Agreement and the Merger and the transactions
contemplated hereby.
(g) Parent shall have received evidence, in form and substance
reasonably satisfactory to it, that all material licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental entities
required in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the Merger) and from those third parties
listed on Section 6.3(g) of the Company Disclosure Statement without the payment
or imposition of any material costs or additional obligations.
(h) From the date of this Agreement through the Effective
Time, there shall not have occurred any event that has had, or would be
reasonably likely to have, a Material Adverse Effect on the Company.
(i) Each director of the Company shall have resigned from the
Company's Board of Directors in writing, effective as of the Effective Time, and
each Executive Officer listed on Section 6.3(i) of the Company Disclosure
Statement hereto shall have resigned as an officer (but not as an employee) of
the Company in writing, effective as of the Effective Time.
(j) The Company shall have not less than an aggregate of $32
million in cash, cash equivalents and marketable securities immediately prior to
the Closing Date less (x) the amount of any reasonably documented transaction
fees and expenses incurred by the Company in connection with the transactions
contemplated by this Agreement and the Prior Merger Agreement and actually paid
between the date hereof and the Closing Date (of which Parent shall receive
notice a reasonable time prior to any such payment) and (y) the amount of any
termination fees or amounts to be credited against any termination fees payable
35
under the Prior Merger Agreement actually paid prior to the Closing Date
pursuant to the Prior Merger Agreement Amendment, or such lesser amount as to
which Parent may consent that results from one-time charges or expenses, the
payment of which has been approved in writing by Parent.
(k) The Company shall have executed and delivered such other
documents and taken such other actions as Parent shall have reasonably
requested.
ARTICLE 7
TERMINATION
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the Requisite Shareholder Approval, by the mutual consent of Parent and
the Company.
7.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned by the Company by action of the
Company's Board of Directors upon the recommendation of the Independent
Committee or by Parent by action of its Board of Directors if:
(a) the Merger shall not have been consummated by May 31,
2002; PROVIDED, HOWEVER, that the right to terminate this Agreement under this
clause will not be available to any party whose breach of any representation,
warranty or covenant hereunder has been a material cause of, or resulted in, the
failure of the Merger to occur on or before such date;
(b) the Requisite Shareholder Approval shall not have been
obtained at the Shareholders Meeting (as such meeting may be adjourned or
delayed); or
(c) a court of competent jurisdiction or a governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action either (i) permanently restraining,
enjoining or otherwise prohibiting the consummation of the Merger or any of the
transactions contemplated by this Agreement or (ii) otherwise altering the terms
of any of the foregoing in any significant respect, and such order, decree,
ruling or other action is or shall have become final and nonappealable.
7.3 TERMINATION BY THE COMPANY.
(a) This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time by the Company, prior to the
receipt of the Requisite Shareholder Approval if, (i) pursuant to and in
compliance with Section 5.3 hereof, the Board of Directors of the Company acting
upon the recommendation of the Independent Committee withdraws, modifies or
amends in a manner adverse to Parent or Acquisition Sub its approval or
recommendation of this Agreement or any of the transactions contemplated hereby
(or publicly announces its intention to do so), or (ii) the Company's Board of
Directors acting upon the recommendation of the Independent Committee approves a
Superior Acquisition Proposal; PROVIDED, HOWEVER, that the Company shall have
complied with Section 5.3 in all respects; AND, PROVIDED FURTHER, that this
36
Agreement may not be terminated pursuant to this Section 7.3(a) unless
concurrently with such termination, the Company pays to Parent the fee payable
pursuant to Section 7.6(a)(i).
(b) This Agreement may be terminated and the Merger may be
abandoned by the Company at any time after the receipt of the Requisite
Shareholder Approval and prior to the Effective Time, if (i) the condition to
the obligation of the Company to effect the Merger set forth in Section 6.2(g)
hereof shall not have been fulfilled at or prior to the Closing Date, and (ii)
each of the conditions to the obligation of Parent and Acquisition Sub to effect
the Merger set forth in Section 6.3 hereof shall have been fulfilled at or prior
to the Closing Date.
7.4 TERMINATION BY PARENT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by Parent if the
Company or its Board of Directors shall have (i) withdrawn, modified or amended
in any respect adverse to Parent or Acquisition Sub its approval or
recommendation of this Agreement or any of the transactions contemplated herein,
(ii) approved, recommended or entered into a Company Acquisition Agreement with
respect to, or consummated, any Superior Acquisition Proposal, (iii) resolved to
do any of the foregoing, or (iv) in response to the commencement of any tender
offer or exchange offer for 15% or more of the outstanding shares of Company
Common Stock, not recommended rejection of such tender offer or exchange offer.
7.5 TERMINATION UPON BREACH OF REPRESENTATION, WARRANTY OR COVENANT.
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time (i) by the Company, if Parent breaches any of its
representations, warranties, covenants or agreements contained in this Agreement
and such breach is reasonably likely to have a material adverse effect on
Parent's or Acquisition Sub's ability to perform hereunder and, with respect to
any such breach that is reasonably capable of being remedied, the breach is not
remedied within 20 days after the Company has furnished Parent with written
notice of such breach, or (ii) by Parent if the Company breaches any of its
representations, warranties, covenants or agreements contained in this Agreement
and such breach has had or is reasonably likely to have a Material Adverse
Effect on the Company and, with respect to any such breach that is reasonably
capable of being remedied, the breach is not remedied within 20 days after
Parent has furnished the Company with written notice of such breach.
7.6 TERMINATION FEE.
(a) (i) In the event that this Agreement is terminated by the
Company pursuant to Section 7.3(a) or by Parent pursuant to Section 7.4, the
Company shall pay to Parent by wire transfer of immediately available funds to
an account designated by Parent on the next business day following such
termination (or, in the case of a termination pursuant to Section 7.3(a), prior
to the effectiveness of such termination) a nonrefundable fee in an amount equal
to $1,800,000.
(ii) In the event that this Agreement is terminated by the
Company or Parent pursuant to Section 7.2(b), then (unless Parent is then
entitled to receive a fee pursuant to Section 7.6(a)(i)) the Company shall pay
to Parent by wire transfer of immediately available funds to an account
designated by Parent on the next business day following such termination, a
nonrefundable fee in an amount equal to $400,000 as a liquidated amount for
37
reimbursement of Parent's fees and expenses (including all attorneys' fees,
accountants' fees and filing fees) that have been paid or that may become
payable by Parent in connection with the preparation and negotiation of this
Agreement and otherwise in connection with the Merger.
(iii) Except as set forth in Section 7.7 or in the case of
fraud or willful misconduct, the payment of any fee payable pursuant to this
Section 7.6(a) shall serve as full liquidated damages hereunder, and Parent
hereby waives all claims against the Company and its Subsidiary hereunder in
respect of the circumstances requiring such payment.
(b) (i) In the event that this Agreement is terminated by the
Company pursuant to Section 7.3(b), then Parent shall pay to the Company by wire
transfer of immediately available funds to an account designated by the Company
on the next business day following such termination, a nonrefundable fee in an
amount equal to $400,000 as a liquidated amount for reimbursement of the
Company's fees and expenses (including all attorneys' fees, accountants' fees
and filing fees) that have been paid or that may become payable by the Company
in connection with the preparation and negotiation of this Agreement and
otherwise in connection with the Merger. Such amount, if not paid by Parent
within three business days after written demand from the Company, shall be paid
by Core Technology Fund IV, LLC, within three business days after its receipt of
written demand and notice from the Company that Parent has failed to make such
payment.
(ii) Except as set forth in Section 7.7 or in the case of
fraud or willful misconduct, the payment of the amount payable pursuant to this
Section 7.6(b) shall serve as full liquidated damages hereunder, and the Company
hereby waives all claims against Parent, Acquisition Sub, or any other Person
hereunder in respect of the circumstances requiring such payment.
(c) Each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby; provided that all
expenses of Parent shall be paid by the Surviving Corporation at or following
the Effective Time.
7.7 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article 7,
this Agreement shall become void and have no effect other than Sections 5.4,
5.8, 7.6 and this 7.7, which provisions shall survive such termination and all
obligations of the parties hereto shall terminate, except pursuant to such
enumerated provisions without any liability or obligation on the part of Parent,
Acquisition Sub or the Company; PROVIDED, HOWEVER, that the termination of this
Agreement prior to the Effective Time shall not relieve any party from any
liability for any breach of any representation, warranty or covenant contained
in this Agreement.
7.8 EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (c) waive compliance
38
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Except
as provided in Section 7.7 hereof, the representations and warranties in this
Agreement and in any instrument delivered pursuant hereto shall expire at the
Effective Time or upon the termination of this Agreement pursuant to Article 7,
as the case may be. All agreements in this Agreement to be fully performed prior
to the Effective Time shall terminate at the Effective Time and all other
agreements shall survive the Effective Time.
8.2 NOTICES. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given five (5) business days after being deposited in the United
States mail, postage prepaid, registered or certified mail. Notices delivered by
hand, by facsimile, or by nationally recognized private carrier shall be deemed
given on the day following receipt; PROVIDED, HOWEVER, that a notice delivered
by facsimile shall only be effective if such notice is also delivered by hand,
or deposited in the United States mail, postage prepaid, registered or certified
mail, on or before two (2) business days after its delivery by facsimile. All
notices shall be addressed as follows:
If to Parent or Acquisition Sub: If to the Company:
Syngistix, Inc. Members of the Independent Committee
0000 Xxxxxx Xxxxxx, Xxxxx 000 of the Board of Directors
Xxxxxxxxx, XX 00000 0000 Xxxxx Xxxxxxxx Xxxxxx
Facsimile: (000) 000-0000 Xxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx Facsimile: (000) 000-0000
With copies to: With copies to:
Xxxxxx Godward LLP Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxx Xxxxxxxx, Xxxxx 000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000 000 Xxxx Xxxxxx
Facsimile: (000) 000-0000 Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq. Attn: Xxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as any party shall specify by written notice so given.
8.3 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Parent may assign all or any
of its or Acquisition Sub's rights and obligations hereunder to any affiliate of
39
Parent. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
8.4 ENTIRE AGREEMENT. This Agreement, the Disclosure Statements of the
Company and Parent, the Exhibits and the Confidentiality Agreement hereto
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5 AMENDMENT.
(a) This Agreement may be amended by the parties hereto by
action taken by their respective Boards of Directors at any time before or after
approval of matters presented in connection with the Merger by the shareholders
of the Company, but after any such shareholder approval, no amendment shall be
made which by law requires the further approval of shareholders without
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) With the consent of the other party, either party to this
Agreement may at any time and from time to time prior to the mailing of the
Proxy Statement, by written notice to the other party, supplement or amend such
party's Disclosure Statement to disclose any breach occurring after the date
hereof of any representation or warranty of such party that is not reasonably
capable of being remedied prior to the Effective Time and will, if not remedied,
result in the condition set forth in Section 6.2(c) (in the case of Parent) or
in Section 6.3(d) (in the case of the Company) not being satisfied at the
Effective Time.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
8.7 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
8.8 HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.
8.9 WAIVERS. All waivers must be in writing. Except as provided in this
Agreement, no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision hereunder
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provision hereunder.
40
8.10 INCORPORATION OF EXHIBITS. The Disclosure Statements of the
Company and Parent attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
8.11 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.12 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
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 hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
ECOMETRY CORPORATION
By: /s/ XXXXXX X. XXXXXXXX
----------------------------------------------
Title: V.P. FINANCE
-------------------------------------------
SYNGISTIX, INC.
By: /s/ XXXXXX X. XXXXXXXX
----------------------------------------------
Title: PRESIDENT & CEO
-------------------------------------------
CITRUS MERGER CORP
By: /s/ XXXXXX X. XXXXXXXX
----------------------------------------------
Title: PRESIDENT & CEO
-------------------------------------------
FOR THE PURPOSES OF SECTION 7.6(b)(i) ONLY:
CORE TECHNOLOGY FUND IV, LLC
By: /s/ XXXX X. XXXXXX
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Title: MANAGING DIRECTOR
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42
EXHIBIT A
Articles of Incorporation of Acquisition Sub
