Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
FORTIS, INC.
CORE MERGER SUB, INC.
AND
CORE, INC.
DATED AS OF MARCH 29, 2001
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger.............................................................................1
Section 1.2 Effective Time.........................................................................1
Section 1.3 Effects of the Merger..................................................................2
Section 1.4 Articles of Organization and By-Laws...................................................2
Section 1.5 Directors..............................................................................2
Section 1.6 Officers...............................................................................2
Section 1.7 Conversion of Shares...................................................................2
Section 1.8 No Shares Held by the Company..........................................................3
Section 1.9 Conversion of Purchaser's Common Stock.................................................3
Section 1.10 Stock Options..........................................................................3
Section 1.11 Warrants...............................................................................4
Section 1.12 Fleet Credit Agreement.................................................................4
Section 1.13 Company Actions........................................................................4
Section 1.14 Stockholders' Meeting..................................................................4
Section 1.15 Closing................................................................................5
ARTICLE II
DISSENTING SHARES; EXCHANGE OF SHARES
Section 2.1 Dissenting Shares......................................................................6
Section 2.2 Exchange of Shares.....................................................................6
Section 2.3 Exchange of In the Money Options.......................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization...........................................................................9
Section 3.2 Capitalization.........................................................................9
Section 3.3 Authority.............................................................................10
Section 3.4 No Default; Effect of Agreement.......................................................11
Section 3.5 Financial Statements; SEC Reports.....................................................11
Section 3.6 Absence of Certain Changes or Events..................................................12
Section 3.7 Compliance with Law; Litigation.......................................................12
Section 3.8 Governmental Authorizations and Regulations...........................................12
Section 3.9 Brokers...............................................................................13
Section 3.10 Employee Agreements and Benefits......................................................13
Section 3.11 Fairness Opinion......................................................................15
Section 3.12 Material Contracts....................................................................16
Section 3.13 Title to Properties; Encumbrances.....................................................16
Section 3.14 Intellectual Property.................................................................17
Section 3.15 Tax Matters...........................................................................18
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Section 3.16 Takeover Statutes.....................................................................20
Section 3.17 Rights Agreement......................................................................21
Section 3.18 Absence of Undisclosed Liabilities....................................................21
Section 3.19 Labor Relations.......................................................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 4.1 Organization..........................................................................22
Section 4.2 Authority.............................................................................22
Section 4.3 Effect of Agreement...................................................................23
Section 4.4 Financing.............................................................................23
Section 4.5 Brokers...............................................................................23
ARTICLE V
COVENANTS
Section 5.1 No Solicitation.......................................................................23
Section 5.2 Appraisal Rights......................................................................25
Section 5.3 Conduct of Business of the Company....................................................25
Section 5.4 Access and Information................................................................28
Section 5.5 Certain Filings, Consents and Arrangements............................................29
Section 5.6 State Takeover Statutes...............................................................29
Section 5.7 Compliance with Antitrust Laws........................................................29
Section 5.8 Press Releases........................................................................30
Section 5.9 Indemnification; Insurance............................................................30
Section 5.10 Notification of Certain Matters.......................................................31
Section 5.11 Fees and Expenses.....................................................................32
Section 5.12 Actions Regarding the Rights..........................................................32
Section 5.13 Shareholder Litigation................................................................32
Section 5.14 Treatment of Certain Employee Benefit Plans...........................................32
Section 5.15 Resignation of Directors..............................................................33
Section 5.16 Updating Disclosure Schedule..........................................................33
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to the Obligations of Parent, Purchaser and the Company....................33
Section 6.2 Conditions to the Obligations of Parent and Purchaser.................................34
Section 6.3 Condition to the Company's Obligation.................................................35
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Termination...........................................................................36
Section 7.2 Effect of Termination.................................................................37
Section 7.3 Non-Survival of Representations, Warranties and Agreements............................38
Section 7.4 Waiver and Amendment..................................................................38
Section 7.5 Entire Agreement......................................................................38
Section 7.6 Applicable Law........................................................................38
Section 7.7 Headings..............................................................................38
Section 7.8 Notices...............................................................................38
Section 7.9 Counterparts..........................................................................39
Section 7.10 Parties in Interest; Assignment.......................................................40
Section 7.11 Specific Performance..................................................................40
Section 7.12 Certain Undertakings of Parent........................................................40
Section 7.13 Interpretation........................................................................40
Section 7.14 Severability..........................................................................41
Section 7.15 Payments in U.S. Dollars..............................................................41
Appendix I Index of Defined Terms
Exhibit A Voting Agreement
Exhibit B Opinion of Rich, May, Xxxxxxxx & Xxxxxxxx, P.C.
Exhibit C Opinion of Xxxxxx & Bird, LLP
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 29, 2001 (this
"Agreement"), among FORTIS, INC., a Nevada corporation ("PARENT"), CORE MERGER
SUB, INC., a Massachusetts corporation and a wholly owned subsidiary of Parent
("PURCHASER"), and CORE, INC., a Massachusetts corporation (the "COMPANY").
Appendix I to this Agreement sets forth an index of the defined terms used
herein.
RECITALS
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser
deem it advisable and in the best interests of their respective stockholders
that Parent acquire the Company pursuant to the terms and conditions set forth
in this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and certain stockholders of the Company have entered into a
Voting Agreement, dated as of the date of this Agreement and attached hereto as
EXHIBIT A (the "Voting Agreement"), pursuant to which such stockholders have
agreed, among other things, to vote their shares of the Company's Common Stock,
$0.10 par value per share ("COMMON STOCK") of the Company in favor of the
Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Purchaser and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the applicable provisions of the Business
Corporation Law of the Commonwealth of Massachusetts (the "Massachusetts BCL"),
at the Effective Time (as defined in Section 1.2 below) Purchaser shall be
merged (the "MERGER") with and into the Company. Following the Merger the
Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and the separate corporate existence of Purchaser shall cease. The
nature of the business or purposes to be conducted or promoted by the Surviving
Corporation is to provide integrated disability management services, employee
absence management services, health care related review and consulting services
and any other business, operation or activity for which corporations may be
organized under the Massachusetts BCL.
SECTION 1.2 EFFECTIVE TIME. The Merger shall become effective by the
filing with the Secretary of State of Massachusetts of articles of merger in
accordance with the relevant provisions of the Massachusetts BCL in a form
reasonably acceptable to Parent and the Company (the "ARTICLES OF MERGER"). The
time at which the Merger becomes effective, which shall be the time that the
Secretary of State of Massachusetts accepts for
record the Articles of Merger, is referred to as the "EFFECTIVE TIME."
SECTION 1.3 EFFECTS OF THE MERGER. The Company will continue to be
governed by the laws of the Commonwealth of Massachusetts, and the separate
corporate existence of the Company and all of its rights, privileges, powers and
franchises of a public as well as of a private nature, and being subject to all
of the restrictions, disabilities and duties as a corporation organized under
the Massachusetts BCL, will continue unaffected by the Merger. The Merger will
have the effects specified in the Massachusetts BCL. As of the Effective Time
the Company shall be a wholly-owned subsidiary of Parent.
SECTION 1.4 ARTICLES OF ORGANIZATION AND BY-LAWS.
(a) The Articles of Organization and By-laws of the Company as in
effect at the Effective Time (as amended to eliminate the Company's Preferred
Stock, no par value ("PREFERRED STOCK"), as described in subsection (b) below
and including any other amendments to the Articles of Organization as are
effected by the Articles of Merger) shall be the Articles of Organization and
By-laws of the Surviving Corporation, until amended in accordance with
applicable Law (as defined below). For purposes of this Agreement, (i) "LAW" or
"LAWS" means any valid constitutional provision, statute, ordinance or other law
(including common law), rule, regulation, decree, injunction, judgment, order,
ruling, assessment or writ of any Governmental Entity (as defined below), as any
of these may be in effect from time to time, and (ii) "GOVERNMENTAL ENTITY"
means any government or any agency, bureau, board, commission, court,
department, official, political subdivision, tribunal or other instrumentality
of any government, whether federal, state or local, domestic or foreign.
(b) At the Effective Time, the Articles of Organization shall be
amended to eliminate the Preferred Stock.
SECTION 1.5 DIRECTORS. The directors of Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation and will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Articles of Organization and
By-laws of the Surviving Corporation, or as otherwise provided by Law.
SECTION 1.6 OFFICERS. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Articles of Organization and
By-laws of the Surviving Corporation, or as otherwise provided by Law.
SECTION 1.7 CONVERSION OF SHARES. At the Effective Time, each share of
Common Stock (each a "SHARE" and collectively the "SHARES"), issued and
outstanding immediately prior to the Effective Time (including any associated
Rights, but excluding any Dissenting Shares (as defined in Section 2.1 hereof)
shall, by virtue of the Merger and without any action on the part of the Parent,
Purchaser or the Company (other than
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actions contemplated by this Agreement) or on the part of the holder of such
Share, cease to be outstanding and be converted into and exchanged for the
right to receive four dollars and nintey-two cents ($4.92) in cash (the
"MERGER PRICE"), payable to the holder of such Share, without interest
thereon, upon the surrender of the certificate formerly representing such
Share.
SECTION 1.8 NO SHARES HELD BY THE COMPANY. No Shares are or will at the
Effective Time be held by the Company or any of its Subsidiaries, as treasury
stock or otherwise.
SECTION 1.9 CONVERSION OF PURCHASER'S COMMON STOCK. Each share of
common stock, $0.01 par value per share, of Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
exchangeable for ninety thousand eight hundred ninety and sixty-four
one-hundredths (90,890.64) shares of common stock of the Surviving
Corporation.
SECTION 1.10 STOCK OPTIONS. The Company shall not grant any options,
warrants, conversion rights, redemption rights or other rights of any type to
purchase or acquire Shares, stock appreciation rights, restricted stock,
restricted stock units or any other real or phantom stock or stock equivalents
on or after the date of this Agreement. Options to acquire Shares which are
outstanding as of the Effective Time, as identified in Section 3.2(a) of the
Disclosure Schedule (individually an "OPTION" and collectively "OPTIONS"), shall
be treated as follows:
(a) Each validly issued and outstanding Option as of the Effective
Time which has an exercise price ("EXERCISE PRICE") less than the Merger Price
(an "IN THE MONEY OPTION") shall be canceled in exchange for a cash payment
equal to (i) the excess of the Merger Price over the Exercise Price of such In
the Money Option times (ii) the number of Shares subject to such In the Money
Option (the "OPTION SETTLEMENT PAYMENT"). At the Effective Time, each such In
the Money Option shall no longer represent the right to purchase Shares, but in
lieu thereof shall represent only the nontransferable right to receive the
Option Settlement Payment referred to above.
(b) Each Option (other than a Warrant) which has an Exercise Price
equal to or in excess of the Merger Price (an "UNDER WATER OPTION") shall,
immediately upon the Effective Time be adjusted and converted (provided that no
adjustment shall be made to the Exercise Price of any Under Water Option) so
that the holder of such Under Water Option shall be entitled to receive, upon
exercise of such Under Water Option and payment of the applicable Exercise
Price, in lieu of each Share otherwise issuable thereunder, a cash payment equal
to the Merger Price. At the Effective Time, each such Under Water Option shall
no longer represent the right to purchase Shares, but in lieu thereof shall
represent only the nontransferable right to receive, upon exercise and payment
of the Exercise Price for such Under Water Option, the Merger Price.
(c) The Company's Board of Directors (the "BOARD" or "BOARD OF
DIRECTORS"), or the appropriate committee thereof, shall provide for the full
and immediate vesting of all then-outstanding Options at the Effective Time.
Except as provided in the
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immediately preceding sentence and except as necessary to effect the provisions
of Section 1.10(b), on or after the date of this Agreement, the Board of
Directors shall not make any changes to the terms and conditions of any
outstanding Options.
SECTION 1.11 WARRANTS. Each of the Company and Parent shall take all
reasonable actions necessary to provide that, at the Effective Time, the warrant
to purchase 156,322 shares of Common Stock dated August 31, 1998 and the warrant
to purchase 187,000 shares of Common Stock dated April 27, 1999, each held by
Fleet National Bank (individually a "Warrant" and collectively the "Warrants"),
shall each be adjusted and converted (provided that no adjustment shall be made
to the Exercise Price of either Warrant) so that the holder of such Warrant
shall be entitled to receive, upon exercise of such Warrant and payment of the
applicable Exercise Price, in lieu of each Share otherwise issuable thereunder,
a cash payment equal to the Merger Price. At the Effective Time, each such
Warrant shall no longer represent the right to purchase Shares, but in lieu
thereof shall represent only the nontransferable right to receive, upon exercise
and payment of the Exercise Price for such Warrant, the Merger Price.
SECTION 1.12 FLEET CREDIT AGREEMENT. At the Effective Time, Parent will
either (a) enter into an agreement with Fleet National Bank ("FLEET") to
guarantee the repayment by the Surviving Corporation of all amounts outstanding
under the Amended and Restated Credit Agreement between Fleet and the Company
dated February 28, 2000, as amended on June 30, 2000 and September 30, 2000 (the
"CREDIT AGREEMENT") or (b) cause the Surviving Corporation to repay all amounts
outstanding under the Credit Agreement.
SECTION 1.13 COMPANY ACTIONS. The Company represents that the Board of
Directors at a meeting duly called and held has unanimously (i) approved the
Merger, as provided in Section 78 of the Massachusetts BCL, (ii) determined that
the Merger is fair to and in the best interests of the stockholders of the
Company and (iii) resolved to recommend approval and adoption of this Agreement
and the Merger by the stockholders of the Company. The Company further
represents that Xxxxxxx, Xxxxxxx & Co. (the "FINANCIAL ADVISOR") has delivered
to the Board its opinion to the effect that, as of the date of this Agreement,
the cash consideration to be received by the holders of Shares (other than
Parent and its affiliates) in the Merger is fair to such holders from a
financial point of view (the "FAIRNESS OPINION").
SECTION 1.14 STOCKHOLDERS' MEETING.
(a) The Company, acting through the Board, shall, in accordance with
applicable Law, its Articles of Organization and its By-laws, duly call, give
notice of, convene and hold a special meeting of its stockholders as soon as
practicable following the execution of this Agreement for the purpose of
considering and taking action upon this Agreement (the "STOCKHOLDERS' MEETING").
It is agreed that, except as required by fiduciary obligations under applicable
Law, the Company and its Board shall not cancel, adjourn or postpone the
Stockholders' Meeting without the prior written consent of Parent, provided that
the Company may, in its sole discretion, adjourn or postpone the
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Stockholders' Meeting if the Board determines that additional time is necessary
or desirable to solicit and collect additional proxies from stockholders with
respect to the Merger. Subject to the exercise of its fiduciary obligations in
accordance with the provisions of Section 5.1, the Company's Board shall
recommend approval of this Agreement and the Merger, shall not withdraw or
modify such recommendation, and shall take all lawful action to solicit such
approval. Without limiting the generality of the foregoing: (i) in the event
that the Company's Board withdraws or modifies its recommendation, but this
Agreement has not been terminated pursuant to Section 7.1(c)(i) or 7.1(d)(i),
the Company shall cause the Stockholders' Meeting to be convened and vote taken
with respect to the Merger, and the Board shall communicate to the Company's
stockholders its basis for such withdrawal or modification and (ii) in the event
that this Agreement has been terminated pursuant to Section 7.1(c)(i) or
7.1(d)(i), the Company shall not be obligated to cause the Stockholders' Meeting
to be convened and vote taken with respect to the Merger.
(b) In connection with the Stockholders' Meeting, the Company shall,
subject to fiduciary obligations under applicable Law. (i) as soon as
practicable after the execution of this Agreement, prepare and deliver to Parent
a draft of a proxy statement relating to the Stockholders' Meeting containing
the recommendation referred to in clause (iii) of Section 1.13 (the "PROXY
STATEMENT"), cooperate with Parent to make such changes thereto as may be
reasonably requested by Parent, file the Proxy Statement with the Securities and
Exchange Commission ("SEC"), provide Parent and its counsel copies of any
written comments the Company or its counsel may receive from the SEC with
respect to the Proxy Statement and a summary of any such comments received
orally promptly after the receipt thereof, permit Parent and its counsel to
comment upon the Company's responses to such SEC comments (provided that Parent
and its counsel must do so on a timely basis), and respond promptly to any such
comments and use its reasonable efforts to cause the Proxy Statement to be
cleared by the SEC and mailed to the Company's stockholders, and (ii) use its
reasonable efforts to obtain the necessary approvals of this Agreement and the
Merger by its stockholders.
(c) Parent shall, and shall cause Purchaser to, in accordance with
applicable Law:
(i) provide the Company with the information concerning Parent and
Purchaser required to be included in the Proxy Statement and promptly correct
any such information if and to the extent that any such information shall have
become false or misleading in any material respect; and
(ii) vote, or cause to be voted, all Shares owned by it or its
Subsidiaries in favor of approval and adoption of this Agreement and the
transactions contemplated hereby.
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SECTION 1.15 CLOSING. The consummation of the transactions contemplated
hereby (the "Closing") will be held at 9:00 a.m. Eastern time at the offices of
Rich, May, Xxxxxxxx & Xxxxxxxx, P.C., 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000 (or such other place as the parties may agree) on the date that is three
(3) business days after the business day on which the last of the conditions set
forth in Section 6.1 is satisfied or duly waived, or at such other time as the
parties may agree. Immediately following the Closing, the parties will cause the
Articles of Merger to be filed with the Secretary of State of the Commonwealth
of Massachusetts.
ARTICLE II
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 2.1 DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who have
perfected any dissenters' rights provided under the Massachusetts BCL, if
applicable (the "DISSENTING Shares"), shall not be converted into or be
exchangeable for the right to receive the consideration provided in Section 1.7
of this Agreement, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost such holder's right to appraisal and
payment under the Massachusetts BCL. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
Shares shall thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the consideration
provided for in Section 1.7 of this Agreement, without any interest thereon.
SECTION 2.2 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company to act as exchange agent in the Merger (the "EXCHANGE AGENT").
Immediately prior to the Effective Time, Parent will take all steps necessary to
enable and cause the Purchaser to deposit with the Exchange Agent the funds
necessary to make the payments contemplated by Section 1.7 on a timely basis.
(b) (i) Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each record holder, as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented Shares (the "CERTIFICATES")
a form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of the Certificates for payment therefor, in each
case customary for transactions such as the Merger.
(ii) Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal duly executed, and any other required documents,
the holder of such Certificate shall be entitled to receive in exchange therefor
the consideration set forth in Section 1.7 hereof (less any required withholding
taxes) for the Shares represented by
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such Certificate, and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a Person other than the Person in
whose name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that 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 the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 2.2, each Certificate (other than Certificates
representing Shares held by Parent or any wholly owned Subsidiary of Parent and
Dissenting Shares) shall represent for all purposes only the right to receive
the consideration set forth in Section 1.7 hereof (less any required withholding
taxes) for the Shares represented by such Certificate, without any interest
thereon.
(iii) If any Certificate shall have been lost, stolen, mislaid or
destroyed, upon receipt of (A) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (B) such
bond, security or indemnity as Parent and the Exchange Agent may reasonably
require and (C) any other documents necessary to evidence and effect the bona
fide exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the Shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted.
(c) After the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no transfers on the stock transfer
books of the Surviving Corporation of Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
the consideration provided in Section 1.7 hereof (less any required withholding
taxes) for the Shares represented by such Certificates in accordance with the
procedures set forth in this Article II.
(d) Any portion of the funds deposited with the Exchange Agent
pursuant to Section 2.2(a) that remains unclaimed by the stockholders of the
Company for one year after the Effective Time (including any interest received
on such funds) shall be paid to Parent upon demand. Any stockholders of the
Company who have not theretofore complied with Section 2.2(b) shall thereafter
look only to the Surviving Corporation or the Parent (subject to abandoned
property, escheat or other similar Laws) for payment of their claim for the
Merger Consideration, without any interest thereon, but shall have no greater
rights against the Surviving Corporation or Parent than may be accorded to
general creditors of the Surviving Corporation or Parent under applicable Law.
SECTION 2.3 EXCHANGE OF IN THE MONEY OPTIONS. Promptly after the
Effective Time, the Surviving Corporation shall deliver to each record holder of
an In the Money Option a letter advising the holder that each In the Money
Option held by such holder has been cancelled as of the Effective Time in
exchange for the Option Settlement Payment and including instructions as to how
such holder may receive the Option Settlement Payment promptly after the
Effective Time.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Parent and Purchaser in a schedule
delivered to them upon the execution of this Agreement (the "DISCLOSURE
SCHEDULE") with respect to matters specifically set forth in this Article III,
the Company represents and warrants to each of Parent and Purchaser as follows.
For purposes of this Agreement:
"MATERIAL ADVERSE EFFECT" means (A) any change, effect, matter, event,
occurrence or circumstance that has or would reasonably be expected to have a
material adverse effect on (i) the business, assets or properties (including
intangible assets or properties), liabilities, results of operations or
financial condition of the Company and its Subsidiaries taken as a whole or (ii)
the ability of the Company to perform its obligations under this Agreement,
other than any such changes, effects, matters, events, occurrences or
circumstances (x) specifically referred to in the Disclosure Schedule or (y)
generally affecting the United States economy, (B) the receipt, after the date
of this Agreement, by the Company's Disability Reinsurance Management Services,
Inc. ("DRMS") Subsidiary, of a written notice or notices that one or more of its
customers or clients (other than any client or customer set forth under
"Excluded Contracts" on Schedule 3.12) intends, prior to December 31, 2002, to
terminate (including termination as the result of non-renewal of a Contract upon
its expiration in accordance with its terms) its Contract with DRMS, such that
the aggregate gross revenues under all such terminated Contracts had, prior to
termination, been reasonably projected by the Company to exceed three million
dollars ($3,000,000) during the twelve (12) month period after the respective
effective dates of their termination, or (C) the receipt, after the date of this
Agreement, by the Company or any Subsidiary other than DRMS, of a written notice
or notices that one or more of its customers or clients (other than any client
or customer set forth under "Excluded Contracts" on Schedule 3.12) intends,
prior to December 31, 2002, to terminate (including termination as the result of
non-renewal of a Contract upon its expiration in accordance with its terms) its
Contract with the Company or such Subsidiary, such that the aggregate gross
revenues under all such terminated Contracts had, prior to termination, been
reasonably projected by the Company to exceed three million dollars ($3,000,000)
during the twelve (12) month period after the respective effective dates of
their termination.
"SUBSIDIARY" means, as to any Person (as defined below), any entity:
(i) in the case of a corporation, of which at least twenty percent (20%) of the
outstanding shares of voting stock is at the time directly or indirectly owned
or controlled by such Person and/or one or more of its Subsidiaries or (ii) in
the case of a limited liability company, partnership or joint venture, in which
such Person or a Subsidiary of such Person is a managing member, general partner
or joint venturer or of which at least twenty percent (20%) of the partnership
or other ownership interests are at the time owned by such Person and/or one or
more of its Subsidiaries.
"PERSON" means any individual, corporation, company, voluntary
association, limited liability company, partnership, joint venture, trust,
unincorporated organization or
8
other entity.
"KNOWLEDGE" with respect to the Company or its Subsidiaries (including
references to the Company or its Subsidiaries being aware of a particular
matter) shall mean those facts that are known or should reasonably have been
known by the Chairman & Chief Executive Officer, President & Chief Operating
Officer, Executive Vice Presidents, Chief Financial Officer, Chief Accounting
Officer and in-house counsel of the Company; the General Manager of Peer Review
Analysis; and the President of SSDC Corp, in each case after such inquiry as is
reasonable in connection with the Merger and with the performance of his or her
duties and responsibilities as an officer of the Company or any Subsidiary.
SECTION 3.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. Section 3.1 of the Disclosure Schedule lists all Subsidiaries of
the Company. Each Subsidiary of the Company is duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or
organization, which is set forth in Section 3.1 of the Disclosure Schedule,
except where the failure to be so organized, existing and in good standing could
not reasonably be expected to have a Material Adverse Effect. The Company and
its Subsidiaries have all necessary corporate power and authority to own, lease
and operate their respective properties and assets and to carry on their
respective businesses as now conducted and are duly qualified to do business as
foreign corporations in all jurisdictions in which the character of their
properties or the nature of their business requires qualification, except where
the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect. Section 3.1 of the Disclosure Schedule lists the
current directors and executive officers of the Company and each of the
Company's Subsidiaries. True, correct and complete copies of the Articles of
Organization, By-laws and minute books of the Company as in effect on the date
hereof have been delivered or made available to Parent. True, correct and
complete copies of the charter, by-laws and other similar governing documents,
minute books and stock ledger of each of the Company's Subsidiaries as in effect
on the date hereof have been delivered or made available to Parent.
SECTION 3.2 CAPITALIZATION.
(a) On the date hereof, the authorized capital stock of the Company
consists solely of (i) 30,000,000 shares of Common Stock and (ii) 500,000 shares
of Preferred Stock. As of the date hereof, (A) 9,089,064 shares of Common
Stock were issued and outstanding, all of which shares are duly authorized and
validly issued, fully paid and nonassessable and not subject to preemptive
rights and none are held in treasury, (B) 2,198,486 shares of Common Stock
would be issuable upon exercise of outstanding Options (both vested and
unvested), (C) 343,322 shares of Common Stock would be issuable upon exercise of
the Warrants, and (D) no shares of Preferred Stock were outstanding and none are
held in treasury. Section 3.2(a) of the Disclosure Schedule sets forth a true,
correct and complete list of the Options and Warrants outstanding as of the date
of this Agreement, including for each Option and Warrant the name of the holder,
9
the Exercise Price, the number of shares issuable upon exercise, the grant date,
the applicable vesting or exercise date and the expiration date. Except for the
Options, the Warrants and the Rights (as defined in Section 3.17(a)) and as set
forth above in this Section 3.2(a), there are no shares of capital stock of the
Company issued or outstanding or any subscriptions, options, warrants, calls,
rights, convertible securities or other agreements obligating the Company to
issue, transfer, redeem, convert, encumber or sell any of its securities or any
right convertible into any of its securities. None of the outstanding shares of
capital stock of the Company has been issued in violation of any preemptive
rights of the current or past stockholders of the Company, and none of such
shares has been issued in violation of any applicable securities or other Laws,
in each case as in effect at the time of such issuance. There is no outstanding
or continuing obligation of the Company or any of its Subsidiaries to issue any
capital stock or pay any amount of cash or other assets under the Capital Stock
Purchase Agreement by and among the Company, Disability Reinsurance Management
Services, Inc., and Xxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxx, Xxxxx
X. Xxxxxxxx and Xxxxx X. Xxxx, dated August 31, 1998.
(b) For each of the Company's Subsidiaries, Section 3.2(b) of the
Disclosure Schedule sets forth the type and number of shares of capital stock
authorized and issued and outstanding as of the date of this Agreement. All of
such issued and outstanding shares are duly authorized, validly issued, fully
paid and nonassessable and owned by the Company or a wholly owned Subsidiary of
the Company, and, except as set forth in Section 3.2(b) of the Disclosure
Schedule, are free and clear of any Lien, as defined herein.
(c) Except for the Voting Agreement, there are no agreements to which
the Company or any of its Subsidiaries is a party with respect to the voting of
the capital stock of the Company or any of its Subsidiaries.
SECTION 3.3 AUTHORITY. The Company has the requisite corporate power
and authority to enter into this Agreement and perform its obligations
hereunder. The execution, delivery and performance of this Agreement by the
Company and the Company's consummation of the Merger and the transactions
contemplated herein have been duly and validly authorized by all necessary
corporate action on the part of the Company, subject only to approval of the
Merger by holders of a two-thirds of the issued and outstanding Shares entitled
to vote thereon, which is the only stockholder vote required for approval of
this Agreement and the consummation of the Merger by the Company. This Agreement
has been duly executed and delivered by, and is a legal, valid and binding
obligation of, the Company enforceable against the Company in accordance with
its terms, except as (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses or the discretion of the court before which proceedings
therefor may be brought. The Board has unanimously: (a) approved this Agreement
and the Merger; (b) determined that the Merger and the transactions described in
this Agreement are in the best interests of the Company and its stockholders;
10
(c) determined that the consideration to be received by the holders of Shares is
fair from a financial point of view; and (d) resolved to recommend approval of
the Merger and adoption of this Agreement by the Company's stockholders.
SECTION 3.4 NO DEFAULT; EFFECT OF AGREEMENT. Except as set forth in
Section 3.4 of the Disclosure Schedule, the execution, delivery and performance
of this Agreement by the Company and the Company's consummation of the Merger
and other transactions described herein will not (i) violate the charter, bylaws
or other similar governing document of the Company or any Subsidiary, (ii)
violate any applicable Law, except for such violations that would not,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect, (iii) result in a breach or violation of any of the terms or
conditions of, constitute a default under, or otherwise cause an impairment or a
revocation of, any Permit (as defined in Section 3.8 hereof), except for such
breaches, violations, defaults, impairments or revocations that would not,
individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect, (iv) violate, conflict with, result in the breach of or default
under (or with notice, lapse of time, or both would result in such a breach or
default), result in any modification of, provide the other contracting party the
right to terminate or materially amend, require the other contracting party to
receive notice of or consent to the assignment or continuation of, or cause the
acceleration of rights or obligations under, any agreement, lease, note,
mortgage, arrangement, commitment, contract, indenture, plan, understanding,
undertaking or other obligation ("CONTRACT") other than such breaches,
violations and defaults that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (v) violate any Order
against or binding upon the Company or any of its Subsidiaries, or (vi) violate
any agreement with, or condition imposed by, any Governmental Entity
specifically upon the Company or any of its Subsidiaries. Except (A) filings
which may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), (B) the filing of the Articles of Merger with
the Secretary of State of Massachusetts, (C) the filing of the definitive Proxy
Statement with the SEC, (D) post-Closing written notices to states whose Permits
regulate the activities of the Company or a Subsidiary and (E) as otherwise set
forth in Section 3.4 of the Disclosure Schedule, the consummation by the Company
of the Merger will not require the consent or approval of or filing by the
Company or any Subsidiary with any third party or any Governmental Entity.
SECTION 3.5 FINANCIAL STATEMENTS; SEC REPORTS.
(a) Since January 1, 1998, the Company has filed with the SEC all
materials required to be filed by it pursuant to the federal securities Laws
(collectively, the "SEC FILINGS"). The Company has made available to Parent
true, correct and complete copies of all SEC Filings made to date and will
provide Parent with copies of all SEC Filings to be made after the date hereof
simultaneously with the filing thereof. Except as set forth in Section 3.5(a) of
the Disclosure Schedule, the SEC Filings (i) complied and will comply in all
material respects with the applicable requirements of the federal securities
Laws and (ii) did not and will not (as of their respective filing dates, mailing
dates or effective dates, as the case may be) contain any untrue statement of a
material fact or
11
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. No Subsidiary of the Company is required
to make any SEC filings.
(b) The audited and unaudited consolidated financial statements of the
Company included in the SEC Filings complied as to form in all material respects
with the applicable published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied consistently throughout the periods involved (except as may
be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and present
fairly, in all material respects, the financial position of the Company and its
consolidated Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and changes in financial position for
the respective periods then ended in conformity with generally accepted
accounting principles applied consistently throughout the periods, except (i) as
stated in such financial statements or notes thereto and (ii) subject, in the
case of the unaudited financial statements, to normal year-end audit
adjustments.
SECTION 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the SEC Filings or in Section 3.6 of the Disclosure Schedule, since December
31, 1999, (i) there has not been any Material Adverse Effect and (ii) the
Company and its Subsidiaries have not taken any action which, if taken after the
date of this Agreement, would represent or result in a material breach or
violation of any of the covenants and agreements of the Company provided in
Sections 5.3(c)(i), (iii), (viii), (ix) and (xi).
SECTION 3.7 COMPLIANCE WITH LAW; LITIGATION. The businesses of the
Company and its Subsidiaries have been conducted in compliance in all material
respects with all applicable Laws. Section 3.7 of the Disclosure Schedule lists
all suits, actions, causes of actions (whether at law or in equity),
arbitrations, claims, complaints, administrative and similar proceedings, and
criminal prosecutions and investigations ("LITIGATION") pending or, to the
Knowledge of the Company and its Subsidiaries, threatened against the Company or
any of its Subsidiaries or any of their respective assets or properties.
Schedule 3.7 of the Disclosure Schedule also lists all decrees, injunctions,
judgments, order, awards, assessments, rulings and writs ("ORDERS") outstanding
against the Company or any of its Subsidiaries. Except as described in the SEC
Filings or as reflected in Section 3.7 of the Disclosure Schedule, there is no
Litigation pending or, to the Knowledge of the Company and its Subsidiaries,
threatened against the Company or any of its Subsidiaries or any of their
respective assets or properties which, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect; nor is there any Order
outstanding against the Company or any of its Subsidiaries which could
reasonably be likely to result in a Material Adverse Effect.
SECTION 3.8 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Except as set
forth in Section 3.8 of the Disclosure Schedule, the Company and its
Subsidiaries hold all federal, state, local and foreign governmental licenses,
approvals permits, franchises, authorizations, consents, certificates of
authority, or orders, or any waivers of the
12
foregoing (collectively, "PERMITS") required to own, lease or operate their
respective properties and assets and to conduct their respective businesses as
now conducted, and all Permits are valid and in full force and effect, except
where the failure to hold or maintain such Permits would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in Section 3.8
of the Disclosure Schedule, since January 1, 1998, the Company has not received
any notification or communication from any Governmental Entity (i) asserting
that the Company or any Subsidiary is not in compliance with any of the Laws or
Orders which such Governmental Entity enforces, (ii) threatening to revoke any
Permits, or (iii) requiring the Company or any Subsidiary to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or to adopt any Board of
Directors' resolution or similar undertaking, which restricts materially the
conduct of its business or in any manner relates to its capital adequacy, its
credit or reserve policies, its management, or the payment of dividends.
SECTION 3.9 BROKERS. No agent, broker, finder, or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of the
Company or its Subsidiaries or any of their respective affiliates in connection
with the negotiation, execution or performance of this Agreement or the
consummation of the Merger, is or will be entitled to any brokerage or finder's
or similar fee or other commission as a result of this Agreement or the
consummation of the Merger, except that (a) the Financial Advisor has been
retained as financial advisor to the Company, pursuant to arrangements that have
been disclosed in writing to Parent and Purchaser prior to the execution of this
Agreement, and as to whose fees, commissions, expenses and other charges the
Company shall have full responsibility and (b) if and only if the Closing occurs
on or before May 5, 2001, the Company will be obligated to pay fees to XX Xxxxx
Securities Corporation pursuant to arrangements that have been disclosed in
writing to Parent and Purchaser prior to the execution of this Agreement, and as
to which fees the Company shall have full responsibility.
SECTION 3.10 EMPLOYEE AGREEMENTS AND BENEFITS.
(a) Section 3.10 of the Disclosure Schedule contains a true, complete
and correct list of the names of each employee and consultant of the Company and
(i) the current annual rate of regular compensation and (ii) all bonuses or
anticipated bonuses paid or payable by the Company not otherwise described in
item (b) below (including payments which are not reflected on the records of the
Company to each such employee and consultant), exclusive of employees or
consultants that in an individual case were paid $10,000 or less in the
preceding twelve months. Except as set forth in Section 3.10 of the Disclosure
Schedule, employment of all employees of the Company and its Subsidiaries is
terminable at will by such employer without any penalty or severance obligation.
(b) Section 3.10 of the Disclosure Schedule lists any and all
employment, bonus, profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, vacation, insurance,
material consulting or other
13
employee benefit arrangements, trusts, plans, funds, or other arrangements, in
each case as currently in effect, for the benefit or welfare of any current,
former or retired director, officer, or employee of the Company or any of its
Subsidiaries (each an "EMPLOYEE BENEFIT PLAN" and collectively "EMPLOYEE BENEFIT
PLANS"), true, correct and complete copies of which have been delivered to
Parent.
(c) In connection with any of the Employee Benefit Plans listed in
Section 3.10 of the Disclosure Schedule, there have not been any "prohibited
transactions" within the meaning of Section 406(a) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or "reportable events" within
the meaning of Section 4043(b) of ERISA. All reports and filings required with
respect to such Employee Benefit Plans pursuant to state or federal Law have
been timely filed.
(d) Except as listed in Section 3.10 of the Disclosure Schedule, the
Company does not and never has sponsored a defined benefit plan within the
meaning of Section 3(35) of ERISA. Except as listed in Section 3.10 of the
Disclosure Schedule, none of the Subsidiaries or ERISA Affiliates (as defined in
subsection (h) below) of the Company, nor any corporation that has been merged
into the Company, has sponsored a defined benefit plan within the meaning of
Section 3(35) of ERISA at any time in the last five years. Except as listed in
Section 3.10 of the Disclosure Schedule, the Company does not and never has
contributed to or been required to contribute to a multiemployer plan within the
meaning of Section 3(37) of ERISA. Except as listed in Section 3.10 of the
Disclosure Schedule, none of the Subsidiaries or ERISA Affiliates of the
Company, nor any corporation that has been merged into the Company, has
contributed to or been required to contribute to a multiemployer plan within the
meaning of Section 3(37) of ERISA at any time in the last five years. Except as
listed in Section 3.10 of the Disclosure Schedule, all employer contributions
that were required to be made to all defined contribution plans of the Company
or any of its ERISA Affiliates have been made within the time required by Law.
Except as listed in Section 3.10 of the Disclosure Schedule, all employee
contributions to any defined contribution plan sponsored by the Company or any
of its ERISA Affiliates, including contributions in accordance with Section
401(k) of the Internal Revenue Code of 1986, as amended (the "CODE"), have been
deposited to the appropriate plans within the time required by Law in accordance
with regulations issued by the Secretary of Labor.
(e) Except as listed in Section 3.10 of the Disclosure Schedule, with
respect to all Employee Benefit Plans sponsored by the Company and any of its
ERISA Affiliates, all 5500 forms, Summary Plan Descriptions, Summaries of
Material Modifications and summary annual reports have been filed or furnished
to employees as required and within the time required by Law, and all other
reporting and disclosure requirements have been met, including, but not limited
to: enrollment and annual notices required by the Women's Health and Cancer
Rights Act; notices required by the Health Insurance Portability and
Accountability Act; notices required by the Consolidated Omnibus Budget
Reconciliation Act ("COBRA"); and disclosures required by the Family Medical
Leave Act.
14
(f) Except as listed in Section 3.10 of the Disclosure Schedule, with
respect to all Employee Benefit Plans sponsored by the Company and any of its
ERISA Affiliates, there have been no events that could result in the
disqualification of such plan. With respect to all Employee Benefit Plans
sponsored by the Company and any of its ERISA Affiliates, there are no claims
outstanding (other than ordinary claims for benefits), and no pending or
threatened litigation. No Employee Benefit Plan sponsored by the Company or any
of its ERISA Affiliates is currently under audit or investigation by any federal
agency, including the Internal Revenue Service, the Department of Labor, and the
Pension Benefit Guaranty Corporation. All premiums, fines, penalties, excise
taxes and similar amounts owed to any federal agency, including the Internal
Revenue Service, the Department of Labor, and the Pension Benefit Guaranty
Corporation, with respect to any Employee Benefit Plan sponsored by the Company
or any of its ERISA Affiliates, have been paid. All extraordinary or unusual
amounts required to be contributed to any Employee Benefit Plan sponsored by the
Company or any of its ERISA Affiliates, as a result of any agreement or
settlement with any federal agency, including the Internal Revenue Service, the
Department of Labor, and the Pension Benefit Guaranty Corporation, have been
contributed.
(g) Except as listed in Section 3.10 of the Disclosure Schedule, the
Company has incurred no obligation to continue medical benefits to any employee
following termination of employment beyond the time required by accordance with
COBRA. The Company and all of its ERISA Affiliates are in full compliance with
COBRA requirements with respect to notification and continuation of coverage to
terminated employees.
(h) For purposes of this Section 3.10, the term "ERISA AFFILIATE" shall
mean any corporation, partnership or other business entity that is considered to
be the same employer as the Company or part of the Company's Controlled Group of
Corporations or Affiliated Service Group or under common control with the
Company under Sections 414(b), (c) or (m) of the Code.
(i) Except as set forth in Section 3.10 of the Disclosure Schedule or
as expressly provided for in this Agreement, the consummation of the Merger will
not (i) entitle any current or former employee, officer or director of the
Company or any Subsidiary of the Company to severance pay, unemployment
compensation or any other payment, including any severance benefit provided for
under Section 183 of Chapter 149 of the General Laws of the Commonwealth of
Massachusetts, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee, officer or director, or (iii)
result in any breach or violation of, or default under, of the Employee Benefit
Plans listed on Schedule 3.10 of the Disclosure Schedule.
SECTION 3.11 FAIRNESS OPINION. The Company has received from the
Financial Advisor, and provided to Parent, an executed copy of the Fairness
Opinion. The Company has been authorized by the Financial Advisor to include the
Fairness Opinion in the Proxy Statement and has not been notified by the
Financial Advisor that the Fairness Opinion has been withdrawn or modified.
15
SECTION 3.12 MATERIAL CONTRACTS. Except as set forth in Section 3.12 of
the Disclosure Schedule, none of the Company or any of its Subsidiaries is a
party to any Material Contract (as defined below). True, correct and complete
copies of the Material Contracts, including all amendments and supplements
thereto, have been made available to Parent. Except as set forth in Section 3.12
of the Disclosure Schedule: (a) each Material Contract is in full force and
effect and is valid, binding and enforceable upon the Company or the applicable
Subsidiary, except as (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses or the discretion of the court before which proceedings
therefor may be brought, and, subject to obtaining any required consents of the
counterparties thereto will continue to be following the Effective Time; (b) the
Company or the applicable Subsidiary has performed all its material obligations
thereunder to the extent that such obligations have accrued; (c) neither the
Company nor the applicable Subsidiary has repudiated or waived any provision of
any Material Contract; and (d) no breach or default by the Company, any of its
Subsidiaries or, to the Knowledge of the Company and its Subsidiaries, any other
party or obligor with respect thereto has occurred or as a result of this
Agreement or the Merger will occur. Except as described in Section 3.12 of the
Disclosure Schedule, consummation of the Merger will not (and will not give any
Person a right to) terminate or modify any rights of, or accelerate any
obligation of, the Company or any of its Subsidiaries under any Material
Contract except where such termination, modification or acceleration would not
reasonably be expected to have a Material Adverse Effect. For purposes of this
Agreement, "MATERIAL CONTRACT" means any Contract that (i) after December 31,
2000 obligates the Company or any of its Subsidiaries to pay an amount of
$100,000 or more annually, or entitles the Company or any of its Subsidiaries to
receive an amount of $300,000 or more annually; (ii) requires or could require
any severance or retention payments to employees of the Company or its
Subsidiaries; (iii) contains any provision or covenant limiting in any material
respect the ability of the Company or any of its Subsidiaries or, assuming the
consummation of the transactions contemplated by this Agreement, Parent or any
of its Subsidiaries, to (A) sell any products or services of or to any other
Person, (B) engage in any line of business or (C) compete with or obtain
products or services from any Person or limiting the ability of any Person to
provide products or services to the Company or any of its Subsidiaries; or (iv)
is otherwise required to be described in or filed as an exhibit to the SEC
Filings.
SECTION 3.13 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth in
Section 3.13 of the Disclosure Schedule, each of the Company and its
Subsidiaries has good and marketable title to or other legal right to use all of
its respective properties and assets reflected on the audited consolidated
balance sheet of the Company and its Subsidiaries as at December 31, 1999
prepared in accordance with generally accepted accounting principles (the
"BALANCE SHEET") or acquired after the date thereof (excluding Intellectual
Property which is covered in Section 3.14), except for properties and assets
disposed of since December 31, 1999 in the ordinary course of business. Except
as set forth in Section 3.13 of the Disclosure Schedule, none of such properties
or assets are subject to
16
any Lien except (i) statutory Liens for taxes not yet delinquent or the validity
of which are being contested in good faith and for which appropriate reserves
have been established in accordance with generally accepted accounting
principles, (ii) materialmen's or similar Liens arising in the ordinary course
of business securing accrued obligations not yet due and payable and which,
individually or in the aggregate, would not be material to any of the Company or
its Subsidiaries, and (iii) any minor imperfection of title that does not
materially interfere with the present use or continuation of such present use in
the businesses of the Company and its Subsidiaries. All tangible properties used
in the businesses of the Company and its Subsidiaries are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with past practices. To the Knowledge of the Company and its
Subsidiaries, (A) the properties currently owned or operated by the Company or
any of its Subsidiaries are not contaminated with any Hazardous Substances; (B)
the properties formerly owned or operated by the Company or any of its
Subsidiaries were not contaminated with Hazardous Substances during the period
of ownership or operation by the Company or any of its Subsidiaries; (C) neither
the Company nor any of its Subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (D)
neither the Company nor any of its Subsidiaries has been responsible for any
release or threat of release of any Hazardous Substance; (E) neither the Company
nor any of its Subsidiaries is subject to any Orders or other arrangements with
any Governmental Entity or is subject to any indemnity or other agreement with
any third party relating to liability under any Law relating to Hazardous
Substances; and (F) there are no circumstances or conditions involving the
Company or any of its Subsidiaries that could reasonably be expected to result
in any claims, liability, investigations, costs or restrictions on the
ownership, use, or transfer of any property of the Company or any of its
Subsidiaries pursuant to any Law relating to Hazardous Substances; provided,
however, that the use of cleaning solutions, printer or copier toner or other
materials typically used in the operation of business offices shall be deemed
not to constitute a breach of this Section 3.13. For purposes of this Agreement,
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
infringement, charge, security interest, restriction, adverse right or intent or
encumbrance of any kind whatsoever in respect of such asset. "HAZARDOUS
SUBSTANCE" means any substance that is: (1) listed, classified or regulated
pursuant to any Law relating to pollution or protection of human health or the
environment; (2) any petroleum product or by-product, asbestos-containing
material, lead-containing paint, polychlorinated biphenyls, radioactive
materials or radon; or (3) any other substance that may be the subject of
regulatory action by any Government Entity pursuant to any Law relating to
pollution or protection of human health or the environment.
SECTION 3.14 INTELLECTUAL PROPERTY.
(a) Section 3.14 of the Disclosure Schedule lists all of the
Intellectual Property (as hereinafter defined) that is used by the Company or
any of its Subsidiaries in the conduct of their businesses, and indicates for
each item whether it is owned, leased or licensed by the Company or the
applicable Subsidiary. The Company and its Subsidiaries own or have the legally
enforceable right (except as (i) such enforcement
17
may be subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar Laws affecting creditors' rights generally or (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses or the discretion of the court before which
proceedings therefor may be brought) to use all Intellectual Property utilized
in connection with their businesses as presently conducted. Except as disclosed
in Section 3.14 of the Disclosure Schedule, (i) there are no claims pending or,
to the Knowledge of the Company and its Subsidiaries, threatened alleging that
the Company or any of its Subsidiaries is or has been in violation of any
Contract governing the Company's use of the Intellectual Property, is or has
otherwise been infringing on the rights of any third party with respect to the
Intellectual Property, or otherwise challenging the ownership rights or the
rights of the Company or its Subsidiaries to use the Intellectual Property; (ii)
the Company and its Subsidiaries have no Knowledge of any valid grounds for any
such bona fide claims; (iii) to the Knowledge of the Company and its
Subsidiaries, there is no unauthorized use, infringement or misappropriation of
any of the Intellectual Property by any third party, including any employee or
former employee of the Company or any of its Subsidiaries; and (iv) the Company
and its Subsidiaries have not received any written notice to the effect that the
use of the Intellectual Property by the Company or its Subsidiaries conflicts
with any Intellectual Property rights of any Person. Except as disclosed in
Section 3.14 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries is obligated to pay any recurring royalties to any Person with
respect to any Intellectual Property.
(b) As used in this Agreement, the term "INTELLECTUAL PROPERTY" means
(i) copyrights (including, without limitation, the right to reproduce,
distribute copies of, display and perform the copyrighted work and to prepare
derivative works in any format or media), patents, trade marks, service marks,
service names, Internet domain names, computer software (other than computer
software with license fees of $1,000 or less per user), logos, trade names,
trade secrets, algorithms, trade dress and other proprietary rights, and all
applications, registrations, renewals, divisions, continuations,
continuations-in-part, reissues, additions and extensions thereof, regardless of
whether any of such rights arise under the Laws of the United States or any
other state, country or jurisdiction; (ii) rights or interests protected by
non-statutory or common law evidenced by or embodied in any idea, design,
concept, process, technology, invention, discovery, enhancement, improvement or
information and data which is not generally known, (including formulae,
procedures, protocols, techniques and results of experimentation and testing)
that is necessary or useful, regardless of patentability, including but not
limited to, trade secrets, and know-how; and (iii) all appurtenances related to,
and derivatives of any of the foregoing.
SECTION 3.15 TAX MATTERS.
(a) Except as set forth in Section 3.15 of the Disclosure Schedule, the
Company has paid, or the most recent financial statements in the SEC Filings
contain adequate provision for, all material Company Taxes (as defined herein)
for the taxable period ended on the date of such financial statements in the SEC
Filings and all fiscal
18
periods of the Company and its Subsidiaries prior thereto. Except as set forth
in Section 3.15 of the Disclosure Schedule, all Tax Returns (as defined herein)
required to be filed with respect to Company Taxes under federal, state, local
or foreign Laws by the Company or any Subsidiary have been timely filed (taking
into account any extensions of time for filing such Tax Returns), and, at the
time filed, were true, correct and complete in all material respects. Each of
the Company and its Subsidiaries has timely paid all Company Taxes due and
payable, and there are no material outstanding deficiencies for any Company
Taxes proposed, asserted or assessed against the Company or any of its
Subsidiaries which are not provided for in the financial statements included in
the SEC Filings (other than those which are being contested in good faith and
either for which adequate reserves have been established or the amounts are
immaterial). Neither the Company nor any of its Subsidiaries have executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Company Tax due that is currently in effect. Deferred Taxes of
the Company and its Subsidiaries have been provided for in the most recent
financial statements included in the SEC Filings in accordance with generally
accepted accounting principles. The Company and each of its Subsidiaries has
properly accrued in all material respects all Company Taxes for periods
subsequent to the periods covered by the Tax Returns filed by the Company or any
such Subsidiary. The Company has made available true, correct and complete
copies of all such Tax Returns to Parent. Except as set forth in Section 3.15 of
the Disclosure Schedule, no action, audit, examination, suit or other proceeding
is pending or, to the Knowledge of the Company and its Subsidiaries, threatened
by any Governmental Entity for assessment or collection from the Company or any
of its Subsidiaries of any Company Taxes, no unresolved claim for assessment or
collection of any Company Taxes has been asserted against the Company or any of
its Subsidiaries (other than those for which adequate reserves have been
established, which are being contested in good faith or are immaterial), and all
resolved assessments of the Company Taxes have been paid or are reflected in the
financial statements included in the SEC Filings.
(b) Except as disclosed in Section 3.15 of the Disclosure Schedule,
neither the Company nor its Subsidiaries has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Code.
(c) All Company Taxes that the Company and its Subsidiaries are
required by Law to withhold and collect have been duly withheld and collected,
and have been paid over, in a timely manner, to the proper taxing authorities to
the extent due and payable.
(d) The Company and its Subsidiaries have never been members of any
consolidated group for income tax purposes other than the consolidated group of
which the Company is the common parent; and the Company and its Subsidiaries are
not parties to any tax sharing agreement or arrangement, other than with each
other.
(e) No liens for Company Taxes exist with respect to any of the assets
or properties of the Company or its Subsidiaries, except for statutory liens for
Company Taxes not yet due or payable or that are being contested in good faith;
19
(f) There is no audit, examination, deficiency, or refund litigation
pending with respect to any Taxes and during the past three years no taxing
authority has given written notice of the commencement of any audit,
examination, deficiency or refund litigation, with respect to any Company Taxes.
(g) The Company is not bound by any currently effective private ruling
specifically addressed to or binding the Company, closing agreement or similar
agreement with any taxing authority relating to a material amount of Company
Taxes.
(h) The Company shall not be required to include in a taxable period
ending after the Effective Time any taxable income attributable to income that
economically accrued in a prior taxable period as a result of Section 481 of the
Code, the installment method of accounting or any comparable provision of state
or local tax Law.
(i) Immediately following the Merger, the Company will not have any
material amount of income or gain that has been deferred under Treasury
Regulation Section 1.1502-13, or any material excess loss account in a
Subsidiary under Treasury Regulation Section 1.1502-19.
(j) The Company is not a "consenting corporation" within the meaning of
Section 341(f) of the Code.
(k) As used in this Agreement, (i) "COMPANY TAXES" shall mean any
federal, state, county, local, or foreign taxes, charges, fees, levies, imposts,
duties, or other assessments, including income, gross receipts, excise,
employment, sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use, commercial
rent, customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax or governmental fee of any kind whatsoever,
imposes or required to be withheld by the United States or any state, county,
local or foreign government or subdivision or agency thereof, including any
interest, penalties, and additions imposed thereon or with respect thereto, on
the Company or any of its Subsidiaries and (ii) "TAX Return" shall mean any
return or other filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Company Taxes.
(l) All of the income Tax Returns filed by or on behalf of each of the
Company and its Subsidiaries have been examined by and settled with the IRS, or
the statute of limitations with respect to the relevant Company Tax liability
has expired, for all taxable periods through and including the period ending on
December 31, 1996.
SECTION 3.16 TAKEOVER STATUTES. The Company has taken all actions
necessary such that no "fair price," "moratorium," "control share acquisition,"
"interested stockholder" or other similar antitakeover statute or regulation
enacted under state or
20
federal laws in the United States (each a "TAKEOVER STATUTE") including Chapters
110C-110F of the Massachusetts General Laws, applicable to the Company or any of
its Subsidiaries, and no restrictive provision of any applicable antitakeover
provision in the governing documents of the Company or its Subsidiaries, is or
at the Effective Time will be applicable to the execution, delivery and
performance by the Company of this Agreement, the consummation by the Company of
the Merger, the Voting Agreement or the transactions described herein or
therein.
SECTION 3.17 RIGHTS AGREEMENT.
(a) The Company has taken all actions necessary such that, for all
purposes under the Shareholder Rights Agreement, dated as of September 21, 1999
between the Company and State Street Bank and Trust Company, as Rights Agent, as
amended (the "RIGHTS AGREEMENT"), Parent shall not be deemed an Acquiring Person
(as defined in the Rights Agreement), a Triggering Event (as defined in the
Rights Agreement) shall not be deemed to occur, and the rights issuable pursuant
to the Rights Agreement (the "RIGHTS") will not separate from the Shares, as a
result of Parent's entering into this Agreement, the Voting Agreement, the
Merger and/or the other transactions contemplated herein or therein.
(b) The Company has taken all necessary action with respect to all of
the outstanding Rights so that, as of immediately prior to the Effective Time,
(i) neither the Company nor Parent will have any obligations under the Rights or
the Rights Agreement and (ii) the holders of Rights will have no rights under
the Rights or the Rights Agreement, in either case as a result of the execution
by the Company of this Agreement.
SECTION 3.18 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company
nor its Subsidiaries has any debts, liabilities or obligations, whether accrued,
absolute or contingent, whether due or to become due, which would have been
required to be disclosed by the Company or applicable Subsidiary by generally
accepted accounting principles, other than (i) as set forth in Section 3.18 of
the Disclosure Schedule, or (ii) as reserved against or otherwise reflected in
the consolidated balance sheets of the Company, included in the Financial
Statements included in the SEC Filings or reflected in the notes thereto.
Neither the Company nor its Subsidiaries has incurred or paid any liability
since December 31, 1999, except for such liabilities incurred or paid (i) in the
ordinary course of business consistent with past practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect or (ii) in connection with the transactions contemplated by this
Agreement. Except as disclosed in Section 3.18 of the Disclosure Schedule,
neither the Company nor its Subsidiaries are directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any liability or any Person for
any amount in excess of $50,000.
21
SECTION 3.19 LABOR RELATIONS. Except as set forth in Section 3.19 of
the Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries is
a party to any union agreement or collective bargaining agreement or work rules
or practices agreed to with any labor organization or employee association and,
to the Company's Knowledge, no attempt to organize any of their employees has
been made or is pending, (ii) since January 1, 1998, neither the Company nor any
of its Subsidiaries has had any Equal Employment Opportunity Commission charges
or other claims of employment discrimination made against them by any employee,
(iii) since January 1, 1998, no state wage and hour department investigations
have been made of the Company or any of its Subsidiaries with respect to
employees, (iv) since January 1, 1998, there has not been any labor dispute,
other than routine individual grievances, or any activity or proceeding by a
labor union or representative thereof to organize any employees, or any
lockouts, strikes, slowdowns or work stoppages against or affecting the Company
or any of its Subsidiaries, or, to the Company's Knowledge, any threats thereof
by or with respect to any employees, and (v) no unfair labor practice charge or
complaint against the Company or any of its Subsidiaries is pending before the
National Labor Relations Board or any similar Governmental Entity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser represents and warrants to the Company as
follows:
SECTION 4.1 ORGANIZATION. Parent is a corporation duly organized and
validly existing and in good standing under the laws of the State of Nevada.
Purchaser is a corporation duly organized and validly existing and in good
standing under the laws of the Commonwealth of Massachusetts. Parent and
Purchaser have all necessary corporate power and authority to own their
respective properties and assets and to carry on their respective businesses as
now conducted and are duly qualified to do business as foreign corporations in
good standing in all jurisdictions in which the character of their properties or
the nature of their business requires qualification except where the failure to
be so qualified would not have a material adverse effect on the ability of
Parent or Purchaser to consummate the transactions contemplated hereby.
SECTION 4.2 AUTHORITY. Each of Parent and Purchaser has the requisite
corporate power and authority to enter into this Agreement and perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by Parent and Purchaser and Parent's and Purchaser's consummation of the Merger
have been duly authorized by all necessary corporate action on of the part of
Parent and Purchaser, respectively, and no other corporate proceedings on either
of their part are necessary to authorize the execution, delivery and performance
of this Agreement or the consummation of the Merger. This Agreement constitutes
a legal, valid and binding obligation of Parent and Purchaser enforceable
against Parent and Purchaser in accordance with its terms, except as (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting creditors' rights generally, and (ii)
the remedy of specific performance and injunctive and other forms of equitable
22
relief may be subject to equitable defenses or the discretion of the court
before which proceedings therefor may be brought.
SECTION 4.3 EFFECT OF AGREEMENT. The execution, delivery and
performance of this Agreement by Parent and Purchaser and the consummation of
the Merger by Parent or Purchaser will not constitute a breach or violation of
or a default under (i) the Articles of Incorporation or the Bylaws of Parent or
Purchaser, (ii) any applicable Law, (iii) any Permit issued by a Governmental
Entity or otherwise, or (iv) any indenture, agreement or instrument of Parent or
Purchaser or to which Parent or Purchaser or any of their respective properties
is subject, other than such breaches, violations or defaults which would not
have a material adverse effect on the ability of Parent or Purchaser to
consummate the transactions contemplated hereby. Except as may be required under
the HSR Act, the consummation by Parent and Purchaser of the Merger will not
require the consent or approval of or filing by Parent or Purchaser with any
third party or any Governmental Entity.
SECTION 4.4 FINANCING. Prior to the Effective Time, Purchaser will have
all funds necessary to consummate the Merger and all other transactions
contemplated hereunder.
SECTION 4.5 BROKERS. No agent, broker, finder, or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of
Parent or Purchaser or any of their respective affiliates in connection with the
negotiation, execution or performance of this Agreement or the consummation of
the Merger, is or will be entitled to any brokerage or finder's or similar fee
or other commission as a result of this Agreement, the Merger or such
transactions.
ARTICLE V
COVENANTS
SECTION 5.1 NO SOLICITATION.
(a) Effective upon the execution and delivery of this Agreement, the
Company and its Subsidiaries shall immediately cease any and all existing
activities, discussions or negotiations with any parties conducted with respect
to any Acquisition Proposal prior to the execution of this Agreement.
(b) The Company and its Subsidiaries will not, and will cause their
respective officers, directors, employees, affiliates and investment bankers,
attorneys or other advisors or agents retained by or acting on behalf of the
Company or any of its Subsidiaries (collectively, the "REPRESENTATIVES"), as
applicable, not to, (i) initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any Acquisition Proposal (as defined below), (ii)
except as permitted below, engage in negotiations or discussions with, or
furnish any information or data to any third party relating to an Acquisition
Proposal, (iii) except as permitted below, enter into any letter of intent or
similar document or any Contract with respect to any Acquisition Proposal or
approve,
23
resolve to approve or recommend any Acquisition Proposal or (iv) except as
permitted below, participate in any discussions regarding, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to any Acquisition Proposal
(other than the transactions contemplated hereby).
(c) Notwithstanding the foregoing, in response to any Acquisition
Proposal which has not been solicited in violation of Section 5.1 (a) or (b),
the Company may furnish information concerning its business, properties or
assets to the Person (a "POTENTIAL ACQUIROR") making such unsolicited
Acquisition Proposal and participate in negotiations with the Potential Acquiror
if (i) the Board concludes in good faith, after consultation with its financial
advisors, that such Person is reasonably capable of consummating such
Acquisition Proposal, taking into account all legal, financial, regulatory and
other aspects of the Acquisition Proposal and the Person making the Acquisition
Proposal, and that such Acquisition Proposal could reasonably be expected to
result in a Superior Offer (as defined below), (ii) the Board concludes in good
faith, after consultation with its outside legal counsel, that the failure to
take such action would reasonably be likely to be inconsistent with its
fiduciary obligations to the stockholders of the Company under applicable Laws
of the Commonwealth of Massachusetts, (iii) at least two business days prior to
furnishing any such nonpublic information to, or entering into discussions or
negotiations with, such Person, the Company (A) gives Parent written notice of
the identity of such Person and of the Company's intention to furnish nonpublic
information to, or enter into discussions or negotiations with, such Person, (B)
provides Parent with a copy of any written offer (or if such offer is not in
writing, a written summary of the terms thereof) and all other materials
received by the Company, its Subsidiaries or Representatives in connection
therewith, (C) receives from such Person an executed confidentiality agreement
containing terms no less favorable to the disclosing party than the terms of
that certain confidentiality agreement between the Company and Parent, dated as
of September 26, 2000 (the "CONFIDENTIALITY AGREEMENT"), and (D)
contemporaneously with furnishing any such nonpublic information to such person
or group, the Company furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by the
Company to Parent). The Company will keep Parent fully informed of amendments or
proposed amendments to, any such Acquisition Proposal. In addition to the
foregoing, the Company shall provide Parent with at least two business days
prior written notice of a meeting of the Board at which meeting the Board is
reasonably expected to recommend a Superior Proposal to its stockholders and
together with such notice a copy of the definitive documentation relating to
such Superior Proposal.
(d) The Board of Directors of the Company (i) shall not withdraw or
modify or propose to withdraw or modify, in any manner adverse to Parent, the
approval or recommendation of such Board of Directors of this Agreement or the
Merger or (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal unless, in each case, such Board of Directors determines in
good faith, based on advice of outside legal counsel, that such Acquisition
Proposal is a Superior Offer and the failure to take such action would
reasonably be likely to be inconsistent with its fiduciary duties under
applicable Laws of the Commonwealth of Massachusetts.
24
(e) For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean
any bona fide offer, proposal or indication of interest, whether in writing or
otherwise, made by a third party for a merger, acquisition, consolidation,
reorganization, share exchange, tender offer, exchange offer or similar
transaction involving the Company or any Subsidiary, or any proposal, offer or
indication of interest to acquire in any manner, directly or indirectly, more
than (i) ten percent (10%) of the assets of the Company or (ii) five percent
(5%) of the outstanding equity of the Company.
(f) The term "SUPERIOR OFFER" means an Acquisition Proposal that the
Board of Directors determines in good faith (i) is more favorable to the
Company's stockholders from a financial point of view than the Merger and the
Potential Acquiror making such Acquisition Proposal has demonstrated that any
necessary financing has been obtained or, in the reasonable judgment of the
Company's financial advisor, such Potential Acquiror is reasonably likely to
obtain such financing, (ii) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into accounting, legal, financial,
regulatory and other aspects of the Acquisition Proposal and the Person making
the Acquisition Proposal, and (iii) after consultation with its financial
advisor and based upon the advice of outside legal counsel and such other
matters as the Board of Directors deems relevant, after considering applicable
provisions of state law, that failure to approve such Acquisition Proposal could
reasonably be expected to result in a breach of its fiduciary duties under
applicable Law.
SECTION 5.2 APPRAISAL RIGHTS. The Company shall not settle or
compromise any claim for appraisal rights in respect of the Merger without the
prior written consent of Parent or Purchaser.
SECTION 5.3 CONDUCT OF BUSINESS OF THE COMPANY. The Company covenants
and agrees as to itself and its Subsidiaries that, after the date hereof and
prior to the Effective Time (unless Parent shall otherwise approve in advance in
writing, and except as otherwise expressly contemplated by this Agreement or set
forth in Section 5.3 of the Disclosure Schedule):
(a) The Company's and its Subsidiaries' businesses shall be conducted
only in the ordinary course (it being understood and agreed that nothing
contained herein shall permit the Company to enter into or engage in (through
acquisition, product extension or otherwise) the business of selling any
products or services materially different from existing products or services of
the Company and its Subsidiaries or to enter into or engage in new lines of
business without Parent's prior written approval).
(b) To the extent consistent with (a) above, the Company shall, and
shall cause each of its Subsidiaries to, use all commercially reasonable efforts
to preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers, reinsurers, distributors, creditors,
lessors, employees and business associates.
25
(c) Without limiting the generality of the foregoing subsections (a)
and (b):
(i) Neither the Company nor any of its Subsidiaries shall (A) issue,
sell, pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire any shares of, its or such
Subsidiary's capital stock of any class (except that the Company may issue
shares of its Common Stock upon the exercise of any of the Options or Warrants
upon receipt of the applicable Exercise Price therefor and otherwise in
accordance with all terms and conditions thereof); (B) amend its or such
Subsidiary's Articles of Organization, By-Laws or other similar governing
documents, or amend, modify or terminate the Rights Agreement (other than
amendments or modifications to the Rights Agreement to permit the Company to
comply with its obligations under this Agreement); (C) split, combine,
reorganize or reclassify its or such Subsidiary's outstanding shares of capital
stock; (D) authorize, declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock (other than dividends paid to
the Company by its wholly owned Subsidiaries); or (E) purchase, redeem or
otherwise acquire, any shares of its or such Subsidiary's capital stock or any
securities convertible into or exchangeable or exercisable for any shares of its
or such Subsidiary's capital stock.
(ii) Neither the Company nor any of its Subsidiaries shall merge or
consolidate with, or purchase substantially all of the assets of, or otherwise
acquire, any business, business organization or division thereof, or any other
Person.
(iii) Neither the Company nor any of its Subsidiaries shall (A) other
than in the ordinary course of business, transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber or subject to any Lien any of its
respective property or assets (including capital stock of any of its
Subsidiaries held by the Company); (B) incur, increase or modify any
indebtedness, other than (I) trade payables incurred in the ordinary course of
business, (II) borrowings under the Credit Agreement in the ordinary course of
business or (III) other short term indebtedness incurred in the ordinary course
of business not exceeding one million dollars ($1,000,000) in the aggregate; or
(C) except as set forth in Section 5.3 of the Disclosure Schedule, make,
authorize or commit for any capital expenditures, including entering into
capital lease obligations, other than in amounts not exceeding $250,000 in the
aggregate or, by any means, make any acquisition of, or investment in, assets or
stock of any other Person.
(iv) Neither the Company nor any of its Subsidiaries shall (A) grant
any increase in fees, benefits, salary, bonuses or other compensation to any
employees, officers or directors of the Company or any of its Subsidiaries,
except as expressly set forth in Section 5.3 of the Disclosure Schedule; (B) pay
any severance or termination pay or any bonus except as expressly set forth in
Section 5.3 of the Disclosure Schedule; (C) enter into or amend any severance
agreements with employees, officers or directors of the Company or any of its
Subsidiaries; or (D) enter into or amend any employment contract between the
Company or any of its Subsidiaries and any Person (unless such amendment is
required by Law) that neither the Company nor such Subsidiary has the
unconditional
26
right to terminate without liability (other than liability for services already
rendered), at any time on or after the Effective Time.
(v) Except as expressly set forth in Section 5.3 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries shall (A) adopt any
new Employee Benefit Plan; (B) terminate (except as set forth in Section 5.14)
or withdraw from any existing Employee Benefit Plan; or (C) make any amendment,
modification or change in or to any existing Employee Benefit Plan, other than
any such amendment, modification or change that is required by Law (provided
that if the Company or any of its Subsidiaries determines that such an
amendment, modification or change is necessary, it will, in advance of making
such amendment, modification or change, give Parent timely written notice
thereof and consult with Parent regarding any objection Parent may have
thereto).
(vi) Neither the Company nor any of its Subsidiaries shall pay,
discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of claims, liabilities or obligations legally
due and payable and arising in the ordinary course of business, claims arising
under the terms of Contracts in the ordinary and usual course of business, and
such other claims, liabilities or obligations as shall not exceed $250,000 in
the aggregate.
(vii) The Company and each of its Subsidiaries shall (A) pay accounts
payable and other obligations, when they become due and payable, in the ordinary
course of business unless contested in good faith, (B) perform in all material
respects all of their respective obligations required to be performed during
such period under any Material Contracts, agreements or other instruments
relating to or affecting any of their respective properties or assets, (C)
maintain their respective books of account and corporate and other business
records in the usual, regular and ordinary manner consistent with past policies
and practice, and (D) comply in all material respects with all applicable Laws.
(viii) Neither the Company nor any of its Subsidiaries shall make or
change any Tax election, settle any material audit (other than any settlement
which imposes no liability on the Company or any Subsidiary), file any amended
Tax returns or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be canceled or terminated except in the ordinary course of
business.
(ix) Neither the Company nor any of its Subsidiaries shall enter into
any agreement containing any provision or covenant limiting in any material
respect the ability of the Company or any Subsidiary or affiliate thereof to (A)
sell any products or services of or to any other Person, (B) engage in any line
of business or (C) compete with or obtain products or services from any Person
or limiting the ability of any Person to provide products or services to the
Company or any of its Subsidiaries or affiliates.
(x) Neither the Company nor any of its Subsidiaries shall take any
action that would cause any of the Company's representations and warranties
herein to become untrue in any material respect.
27
(xi) Neither the Company nor any of its Subsidiaries shall permit a
material change in any of its underwriting, investment, financial reporting or
accounting practices or policies or in any material assumption underlying an
underwriting or investment practice or policy, except as may be required by any
change in generally accepted accounting principles, statutory accounting
principles or applicable Law.
(xii) Except as expressly set forth in Section 5.3 of the Disclosure
Schedule, or except as may be required by applicable Law, neither the Company
nor any of its Subsidiaries shall enter into or terminate, or modify or amend in
any manner materially adverse to the Company or any of its Subsidiaries, any
Material Contract (except for termination as the result of expiration or
non-renewal in accordance with the terms of such Material Contract) or waive,
release, compromise or assign any material rights or claims.
(xiii) Neither the Company nor any of its Subsidiaries will authorize
or enter into an agreement to do any of the foregoing.
SECTION 5.4 ACCESS AND INFORMATION. The Company shall and shall cause
its Subsidiaries to, upon reasonable notice and subject to restrictions
contained in confidentiality agreements to which they are subject that are
listed in Section 5.4 to the Disclosure Schedule, give to Parent, Purchaser and
their representatives and designees full access to all of their employees, and
to all the premises and books and records of the Company and its Subsidiaries
and shall, and shall cause its Subsidiaries, officers and independent auditors
to furnish to Parent, Purchaser and their representatives and designees such
financial and operating data and other information, including access to the
working papers of its independent auditors, with respect to its business and
properties and the business and properties of its Subsidiaries as Parent or
Purchaser shall from time to time reasonably request. In addition, at the
request of Parent, the Company shall, and shall cause its Subsidiaries to, use
all commercially reasonable efforts to arrange for Parent and its
representatives and designees to meet with clients and customers of the Company
and its Subsidiaries, provided that the Company shall be entitled to have a
representative present at any such meeting. Notwithstanding the foregoing, the
Company shall not be obligated to arrange any such meeting if the Company
determines that such a meeting could reasonably be expected to (a) cause such
customer or client to terminate its relationship with the Company or any
Subsidiary or (b) otherwise result in a Material Adverse Effect, and the Company
so notifies the Parent in writing setting forth in detail the reasons underlying
its determination. Any investigation or access contemplated by this Section 5.4
shall be conducted in such manner as not to interfere unreasonably with the
operation of the business of the Company and its Subsidiaries. No investigation
pursuant to this Section shall affect or be deemed to modify any representations
or warranties made in this Agreement or the conditions to the obligations of the
parties to consummate the Merger. The Confidentiality Agreement between Parent
and the Company shall apply to the information provided pursuant to this Section
5.4.
28
SECTION 5.5 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS.
(a) Parent, Purchaser and the Company shall use all commercially
reasonable efforts to assist the other in obtaining any Permits required to be
obtained by such other party for the consummation of the transactions
contemplated by this Agreement, provided that the Company shall not, without the
consent of Parent (which consent shall not be unreasonably withheld), agree to
any amendment to any material instrument or agreement to which it is a party.
Such assistance shall include providing the other party or appropriate
Governmental Entity all information reasonably required to be submitted in
connection with obtaining the Permits.
(b) Each party shall use all commercially reasonable efforts promptly
to take, or cause to be taken, all actions and promptly to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this Agreement.
The Company shall take all actions reasonably requested by Parent to ensure the
orderly transition of the business of the Company and to preserve and maintain
the Company's business relationships. Without limiting the generality of the
foregoing, the Company shall and shall cause its Subsidiaries to (i) provide
Parent with access to individuals reasonably specified by Parent to plan the
transition of the Company's business to Parent, which may include, at the
discretion of Parent, communicating offers regarding employment terms to be
effective after the Effective Time, (ii) designate individuals to serve as
members of a Company/Parent transition team and cause such individuals to devote
reasonable time to transition matters, (iii) devote reasonable resources to
transition matters, (iv) consult with Parent regarding the Company's development
work pertaining to systems, products, distribution and customer services, and
(v) cooperate with Parent in its development work pertaining to systems,
products, distribution and customer services.
(c) In the event that the Company or any of its Subsidiaries acquires
Knowledge that any of the lead reinsurers on the reinsurance pools maintained by
DRMS intends to terminate or reduce its relationship with DRMS or the Company in
any manner, the Company will promptly notify Parent and will cooperate fully
with Parent to take such actions as Parent may reasonably request, including,
without limitation, arranging meetings among the Company, DRMS, Parent and such
reinsurer.
SECTION 5.6 STATE TAKEOVER STATUTES. The Company shall, upon the
request of Parent or Purchaser, take all reasonable steps to assist in any
challenge by Parent or Purchaser to the validity or applicability to the Merger,
the Voting Agreement or other transactions contemplated by this Agreement, of
any state takeover statutes.
SECTION 5.7 COMPLIANCE WITH ANTITRUST LAWS. Each party shall as
promptly as practicable make all filings necessary under the HSR Act or to
comply with any other request or demand by a Governmental Entity investigating
the Merger under applicable antitrust Laws. Each party shall use all
commercially reasonable efforts to resolve such objections, if any, as any
Governmental Entity may assert with respect to the Merger. Nothing in this
Agreement shall be construed to require Parent or any of its affiliates, in
29
connection with the receipt of any Permit or other Governmental Entity approval
or investigation, to proffer to or agree to (i) sell or hold separate and agree
to sell or to discontinue or to limit, before or after the Effective Time, any
assets, businesses or interest in any assets or businesses of Parent or any of
its affiliates (including for this purpose the Company and its Subsidiaries), or
(ii) agree to any conditions relating to, or changes or restrictions in, the
operations of any such asset or businesses which, in either case, could, in the
reasonable judgment of the board of directors of Parent, adversely impact the
economic or business benefits to Parent of the transactions contemplated by this
Agreement.
SECTION 5.8 PRESS RELEASES. Prior to the Effective Time, no party
hereto shall make, or shall permit its affiliates or their respective
representatives to make, any press release or other public statement with
respect to the transactions contemplated hereby without the prior written
consent of the other parties, except that such public statement or disclosure
may be made immediately upon written notice to the other parties hereto: (i) if
required by applicable Law or by obligations pursuant to any listing agreement
with any national securities exchange, (ii) to any Governmental Entity having
jurisdiction over the disclosing party, (iii) in order for the parties to comply
with their obligations hereunder, or (iv) if a default by the other party hereto
(Parent and Purchaser, on the one hand, and the Company, on the other hand, each
being a party for this purpose) has occurred under this Agreement to the extent
reasonable for the non-defaulting party to enforce its rights and remedies
hereunder Upon execution of this Agreement, each party shall be permitted to
issue a press release disclosing the execution of this Agreement and containing
a description of the transactions contemplated hereby, provided that each party
will provide the other with the opportunity to review and comment upon its press
release prior to its release and will use commercially reasonable efforts to
coordinate the timing of its press release with the press release of the other
party.
SECTION 5.9 INDEMNIFICATION; INSURANCE.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to continue to indemnify, defend and hold harmless the present and
former directors and officers of the Company and its Subsidiaries (each an
"INDEMNIFIED PARTY") against all losses, claims, damages or liabilities arising
out of actions or omissions in their capacity as a director or officer of the
Company or a Subsidiary occurring on or prior to the Effective Time to the
maximum extent permitted or required under the Massachusetts BCL and the
Company's Bylaws in effect on the date hereof, including provisions with respect
to advances of expenses incurred in the defense of any action or suit, provided
that any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under the
Massachusetts BCL and the Company's Bylaws shall be made by independent legal
counsel selected in good faith by the Surviving Corporation. From and after the
Effective Time, Parent shall cause the Surviving Corporation to pay from time to
time in advance of the disposition of any such action, suit or other proceeding
expenses, including counsel fees, reasonably incurred by the Indemnified Party
in connection with any such action, suit or other proceeding; provided that such
Indemnified Party shall repay the amounts so paid if it is ultimately
30
determined that indemnification for such expenses is not authorized under this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
Surviving Corporation shall be obligated to provide indemnification only to the
extent that any directors' and officers' liability insurance policy of the
Surviving Corporation does not provide coverage and actual payment thereunder
with respect to the matters that would otherwise be subject to indemnification
hereunder.
(b) From and after the Effective Time, Parent shall cause the Surviving
Corporation to maintain the Company's existing officers' and directors'
liability insurance ("D&O INSURANCE"), or D&O Insurance that provides identical
limits of coverage and is otherwise substantially comparable to the Company's
existing D&O Insurance, in full force and effect without reduction of coverage
for a period of three years after the Effective Time so long as the annual
premium therefor is not in excess of 300% of the annual premium paid by the
Company therefor on the date of this Agreement (the "CURRENT PREMIUM");
provided, that if the existing D&O Insurance or substantially comparable D&O
Insurance cannot be maintained or acquired for such 3-year period for a premium
not in excess (on an annualized basis) of the Current Premium, the Surviving
Corporation will use reasonable efforts to obtain as much D&O Insurance as can
be obtained for the remainder of such period for a premium on an annualized
basis not in excess of 300% of the Current Premium.
(c) The Company will maintain, through the Effective Time, the
Company's existing D&O Insurance in full force and effect without reduction of
coverage.
(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
and the continuing or surviving entity does not assume the obligations of the
Surviving Corporation set forth in this Section 5.9, or (ii) transfers all or
substantially all of its properties and assets to any Person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
the Surviving Corporation assume the obligations set forth in this Section 5.9.
SECTION 5.10 NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent and Purchaser of (i) any claims, actions, proceedings or
investigations commenced or, to the best of its Knowledge, threatened, involving
or affecting the Company or any of its Subsidiaries or any of their property or
assets, that relate to the Merger and the transactions contemplated herein, (ii)
the occurrence, or failure to occur, of any event that would be likely to cause
(with the passage of time or otherwise) any of the Company's representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect or a Material Adverse Effect, (iii) any material failure of the
Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, and (iv) if, to the Knowledge of the
Company or any of its Subsidiaries, a material client or customer intends to
terminate its agreement with the Company or such Subsidiary, whether or not such
termination could be reasonably likely to result in a Material Adverse Effect.
Parent or Purchaser shall give
31
prompt notice to the Company of (i) any claims, actions, proceedings or
investigations commenced or, to the best of its Knowledge, threatened, involving
or affecting Parent or Purchaser that relate to the Merger and the transactions
contemplated herein, (ii) the occurrence, or failure to occur, of any event that
would be likely to cause (with the passage of time or otherwise) any of Parent's
or Purchaser's representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect or would be likely to materially
adversely affect Parent's or Purchaser's ability to consummate the transactions
contemplated herein, and (iii) any material failure of Parent or the Purchaser
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. No such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
SECTION 5.11 FEES AND EXPENSES. Except as set forth in Section 7.2, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses (including, in the case of the Company, the costs of printing the Proxy
Statement), whether or not the Merger is consummated.
SECTION 5.12 ACTIONS REGARDING THE RIGHTS. Prior to or simultaneously
with the execution of this Agreement, the Company, in accordance with the terms
and provisions of the Rights Agreement, has amended the Rights Agreement so that
the transactions contemplated by this Agreement are exempted from certain
provisions of the Rights Agreement and a "Triggering Event" thereunder will not
occur as a result of such transactions. The Company, with the consent of Parent,
shall continue to take all actions necessary to cause the transactions
contemplated by this Agreement to remain exempted from such provisions of the
Rights Agreement, including, if desirable, entering into further amendments to
the Rights Agreement or causing the Rights to be extinguished, canceled or
redeemed.
SECTION 5.13 SHAREHOLDER LITIGATION. Prior to the Effective Time, the
Company shall give Parent the opportunity to participate in the defense or
settlement of any shareholder litigation against the Company and its directors
relating to the transactions contemplated by this Agreement; provided, however,
that Parent shall have the right to prevent the Company from entering into any
such settlement without Parent's consent if Parent agrees to indemnify the
Company and each director of the Company for the amount of its, his or her
liability, if any, arising from the underlying claim, net of any insurance
proceeds received by such Person, that is in excess of the amount that such
Person would have been liable for under such settlement.
SECTION 5.14 TREATMENT OF CERTAIN EMPLOYEE BENEFIT PLANS. Prior to the
Effective Time, the Company will take all actions reasonably necessary or
appropriate to fulfill all of its obligations to contribute to and administer
the Employee Benefit Plans in accordance with their terms. In addition, at the
request of Parent, the Company will take all steps reasonably necessary to
terminate, effective on the business day immediately preceding the Effective
Time, each Employee Benefit Plan that is a plan subject to ERISA including, but
not limited to, providing any required notices, adopting any
32
required amendments and adopting Board resolutions. Furthermore, the Company
shall take any and all further actions necessary to retain the tax-qualified
status of each Employee Benefit Plan that is a tax-qualified retirement plan
including (without limitation): (i) the preparation, execution and submission of
such plans to the Internal Revenue Service under the Employee Plan Compliance
Resolution System set forth in Revenue Procedure 2001-17; (ii) the preparation
and execution of any amendment deemed necessary in connection with such
submission; (iii) the retention of service providers to assist in the
preparation of such submission; and (iv) the preparation and distribution of the
appropriate employee communications related to the submission. The Company shall
provide the Parent with copies of all documents produced in accordance with the
preceding sentence prior to their execution or distribution, as applicable.
SECTION 5.15 RESIGNATION OF DIRECTORS. At or before the Effective Time,
the Company shall deliver to Parent a written resignation signed by each member
of the Company's Board of Directors to be effective as of the Effective Time.
SECTION 5.16 UPDATING DISCLOSURE SCHEDULE. Prior to the Effective Time,
the Company shall supplement or amend the Disclosure Schedule to reflect any
matter that, if existing, occurring or known on the date hereof, should have
been so disclosed or that is necessary to correct any information in such
Disclosure Schedule that was or has been rendered inaccurate thereby; PROVIDED,
HOWEVER, that for purposes of determining the rights and obligations of the
parties under this Agreement, any such supplemental or amended disclosure shall
not be deemed to have been disclosed as of the date hereof, to constitute a part
of, or an amendment or supplement to, the Disclosure Schedule, or to cure any
breach or inaccuracy of a representation or warranty, unless so agreed to in
writing by Parent; and PROVIDED, FURTHER, that such supplemental or amended
disclosures shall not entitle Parent and Purchaser to refuse to consummate the
transactions contemplated herein unless such supplemental or amended
disclosures, individually or in the aggregate, disclose a failure of the Company
to satisfy the condition specified in Section 6.2(a) or Section 6.2(b).
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 CONDITIONS TO THE OBLIGATIONS OF PARENT, PURCHASER AND THE
COMPANY. The obligations of Parent, Purchaser and the Company to consummate the
Merger are subject to the satisfaction, at or before the Closing, of each of the
following conditions:
(a) The stockholders of the Company shall have duly approved this
Agreement, and the consummation of the Merger and other transactions
contemplated herein, if required by applicable Law, by the provisions of the
Company's Articles of Organization or By-Laws, or by the rules of the National
Association of Securities Dealers, Inc.
(b) The waiting period applicable to the consummation of the Merger
under
33
the HSR Act shall have expired or been terminated and, all notices, reports and
other filings required to be made prior to the Closing by the Company or Parent
or any of their respective Subsidiaries with, and all Permits required to be
obtained prior to the Closing by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (each a "GOVERNMENTAL
CONSENT"), in connection with the execution and delivery of this Agreement and
the consummation of the Merger and the other transactions contemplated herein
shall have been made or obtained (as the case may be).
(c) The consummation of the Merger shall not be precluded by any order
or injunction of a court of competent jurisdiction (each party agreeing to use
all commercially reasonable efforts to have any such order reversed or
injunction lifted), and there shall not have been any action taken or any
statute, rule or regulation enacted, promulgated or deemed applicable to the
Merger by any Governmental Entity that makes consummation of the Merger illegal.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER. The
obligations of Parent and Purchaser to effect the Merger are also subject to the
satisfaction or waiver by Parent at or prior to the Closing of the following
conditions:
(a) The representations and warranties of the Company set forth in
Section 3.2 shall be true and correct (except for inaccuracies that are de
minimis in amount). The representations and warranties set forth in Sections
3.3, 3.8, 3.11, 3.16 and 3.17 shall be true and correct in all material
respects. There shall not exist inaccuracies in the representations and
warranties of the Company set forth in this Agreement (including the
representations and warranties set forth in Sections 3.2, 3.3, 3.8, 3.11, 3.16
and 3.17) such that the aggregate effect of such inaccuracies has, or could
reasonably be likely to have, a Material Adverse Effect; provided that, for
purposes of this sentence only, those representations and warranties that are
qualified by references to "material" or "Material Adverse Effect" shall be
deemed not to include such qualifications. For purposes of this Section 6.2(a),
the accuracy of the representations and warranties of the Company set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Closing (provided that representations and warranties that are confined to a
specified date shall speak only as of such date).
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing.
(c) The Company shall have delivered to Parent (i) a certificate, dated
as of the Closing and signed on its behalf by a duly authorized officer, to the
effect that the conditions set forth in Section 6.1 as relates to the Company
and in Section 6.2(a) and 6.2(b) have been satisfied, and (ii) certified copies
of resolutions duly adopted by the Board of Directors and the Company's
stockholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the Merger and the other transactions contemplated herein, all
in such reasonable detail as Parent and its counsel shall request.
34
(d) No Material Adverse Effect shall have occurred and be continuing.
(e) No Distribution Date or Triggering Event (as such terms are defined
in the Rights Agreement) shall have occurred, and the Rights shall not have
become non-redeemable or exercisable upon consummation of the Merger.
(f) Parent shall have received an opinion of Rich, May Xxxxxxxx &
Xxxxxxxx, P.C., counsel to the Company, dated as of the date of Closing, in form
reasonably satisfactory to Parent, as to the matters set forth in EXHIBIT B.
(g) Those certain Amended and Restated Employment Agreements listed in
Section 6.2 of the Disclosure Schedule shall be in full force and effect at
Closing, without any amendments or modifications.
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Closing of the following conditions:
(a) There shall not exist inaccuracies in the representations and
warranties of Parent and Purchaser set forth in this Agreement such that the
aggregate effect of such inaccuracies has, or could reasonably be likely to
have, a material adverse effect on Parent's or Purchaser's ability to consummate
the Merger and the other transactions contemplated herein; provided that, for
purposes of this sentence only, those representations and warranties that are
qualified by references to "material" shall be deemed not to include such
qualifications. For purposes of this Section 6.3(a), the accuracy of the
representations and warranties of Parent and Purchaser set forth in this
Agreement shall be assessed as of the date of this Agreement and as of the
Closing (provided that representations and warranties that are confined to a
specified date shall speak only as of such date).
(b) Each of Parent and Purchaser shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Closing.
(c) Parent shall have delivered to the Company (i) a certificate, dated
as of the Closing and signed on its behalf by a duly authorized officer, to the
effect that the conditions set forth in Section 6.1 as relates to Parent and
Purchaser and in Section 6.3(a) and 6.3(b) have been satisfied, and (ii)
certified copies of resolutions duly adopted by the Board of Directors of
Purchaser and Purchaser's sole stockholder evidencing the taking of all
corporate action necessary to authorize the execution, delivery and performance
of this Agreement, and the consummation of the Merger and the other transactions
contemplated herein, all in such reasonable detail as the Company and its
counsel shall request.
(d) The Company shall have received an opinion of Xxxxxx & Bird, LLP,
counsel to the Parent, dated as of the date of Closing, in form reasonably
satisfactory to the Company, as to the matters set forth in EXHIBIT C.
35
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 TERMINATION. This Agreement may be terminated and the
Merger contemplated herein may be abandoned at any time prior to the Effective
Time, whether before or after shareholder approval thereof:
(a) by the mutual consent of Parent and the Company;
(b) by either the Company, on the one hand, or Parent and Purchaser, on
the other hand if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use their respective commercially reasonable efforts to
lift), in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement or prohibiting Parent or
Purchaser to acquire or hold or exercise rights of ownership of the Shares, and
such order, decree, ruling or other action shall have become final and
non-appealable;
(c) by the Company:
(i) if (A) the Board of Directors, subject to complying with the terms
and conditions of this Agreement, shall have authorized the Company to enter
into a binding written agreement concerning a transaction that constitutes a
Superior Proposal and the Company notifies Parent in writing that it intends to
enter into such agreement, attaching the most current version of such agreement
to such notice, (B) Parent does not make, within five business days after
receipt of the Company's written notification of its intention to enter into a
binding agreement for a Superior Proposal, an offer that the Board determines in
good faith, after consultation with its financial advisors, is at least as
favorable as the Superior Proposal, taking into account, to the extent relevant,
the long term prospects and interests of the Company and its stockholders and
(C) the Termination Fee (as defined in Section 7.2) is paid to Parent in
accordance with Section 7.2; or
(ii) if any representation or warranty of Parent and Purchaser set
forth in this Agreement shall be untrue in any material respect when made, or
upon a breach in any material respect of any covenant or agreement on the part
of Parent or Purchaser set forth in this Agreement, in each case where such
misrepresentation or breach would result in a failure to satisfy any of the
conditions set forth in Article 6, provided, that, if any such breach is curable
by Parent or Purchaser within 20 business days after written notice of such
breach is given by the Company, the Company must give such notice and may not
terminate this Agreement under this Section 7.1(c)(iv) until such twenty
business day period has lapsed with such breach remaining uncured.
(d) by Parent and Purchaser:
36
(i) if the Board of Directors of the Company shall have (A) withdrawn,
modified or changed in a manner adverse to Parent or Purchaser its approval or
recommendation of this Agreement or the Merger or (B) recommended an Acquisition
Proposal or shall have executed an agreement in principle or definitive
agreement relating to an Acquisition Proposal or similar business combination
with a person or entity other than Parent, Purchaser, or their affiliates (or
the Board of Directors resolves to do any of the foregoing); or
(ii) the Company's stockholders do not approve the Merger at a meeting
duly convened therefor, including any adjournment or postponement of such
meeting; or
(iii) if any representation or warranty of the Company set forth in
this Agreement shall be untrue in any material respect when made or upon a
breach in any material respect of any covenant or agreement on the part of the
Company set forth in this Agreement, in each case where such misrepresentation
or breach would result in a failure to satisfy any of the conditions set forth
in Article 6, provided, that, if any such breach is curable by the Company
within 20 business days after written notice of such breach is given by Parent,
Parent must give such notice and may not terminate this Agreement under this
Section 7.1(d)(iii) until such twenty business day period has lapsed with such
breach remaining uncured.
(e) By either Party in the event that the Effective Time shall not have
occurred on or prior to July 31, 2001.
SECTION 7.2 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement as provided in
Section 7.1, written notice thereof shall forthwith be given to the other party
or parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall forthwith become null and void, and there shall
be no liability on the part of Parent, Purchaser or the Company or their
respective directors, officers, employees, shareholders, representatives, agents
or advisors other than, with respect to Parent, Purchaser and the Company, the
obligations pursuant to this Article VII and the last sentence of Section 5.4.
Nothing contained in this Section 7.2(a) shall relieve Parent, Purchaser or the
Company from liability for willful breach of this Agreement.
(b) The Company shall pay to Parent (or in the case of termination
pursuant to Section 7.1(c)(i), shall cause the Potential Acquiror making the
Acquisition Proposal to pay to Parent) by wire transfer of immediately available
funds two million two hundred fifty thousand dollars ($2,250,000) (the
"TERMINATION FEE") if (i) the Company terminates this Agreement pursuant to
Section 7.1(c)(i), in which case the Termination Fee must be paid simultaneously
with such termination, (ii) Parent or Purchaser terminates this Agreement
pursuant to Section 7.1(d)(i), in which case the Termination Fee must be paid
within one (1) business day after demand therefor by Parent; or (iii) this
Agreement is terminated for any reason (other than as a result of (x) the
failure of Parent or Purchaser to fulfill any material obligation under this
Agreement or (y) the applicable waiting
37
period under the HSR Act shall not have expired or been terminated on or prior
to the Effective Time), at any time after an Acquisition Proposal has been
received by the Company and within nine (9) months after such a termination, the
Company completes either a merger, consolidation or other business combination
between the Company or a Subsidiary of the Company and the Potential Acquiror
who made such Acquisition Proposal or any of its Affiliates, in which case the
Termination Fee must be paid immediately at the time of the completion of such
merger, consolidation or other business combination.
SECTION 7.3 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations and warranties in this Agreement shall terminate at the
Effective Time or the termination of this Agreement pursuant to Section 7.1, as
the case may be. The covenants and agreements contained in this Agreement shall
survive the Effective Time or termination of this Agreement, as the case may be,
and shall continue until they terminate in accordance with their terms.
SECTION 7.4 WAIVER AND AMENDMENT. Any provision of this Agreement may
be waived at any time by the party that is, or whose stockholders are, entitled
to the benefits thereof. This Agreement may be amended or supplemented at any
time, except that after approval hereof by the stockholders of the Company, no
amendment shall be made which decreases the Merger Consideration or that in any
other way materially adversely affects the rights of such stockholders (other
than a termination of this Agreement) without the further approval of such
stockholders. No such waiver, amendment or supplement shall be effective unless
in writing and signed by the party or parties intended to be bound thereby.
SECTION 7.5 ENTIRE AGREEMENT. Except for the Confidentiality Agreement
and the Voting Agreement (which are hereby incorporated herein by this
reference), this Agreement (a) contains the entire agreement among Parent,
Purchaser and the Company with respect to the Merger and the other transactions
contemplated hereby, and supersedes all prior agreements among the parties with
respect to such matters, and (b) except for Persons indemnified pursuant to
Section 5.9, is not intended to confer upon any other Persons any rights or
remedies hereunder. The parties hereto acknowledge that the Confidentiality
Agreement remains in full force and effect and is unmodified.
SECTION 7.6 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to contracts made and to be performed in that State.
SECTION 7.7 HEADINGS. The descriptive headings contained herein are for
convenience and reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 7.8 NOTICES. All notices or other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, overnight delivery, facsimile,
telegram or other standard form of
38
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested addressed as follows:
If to the Company:
CORE, INC.
00000 Xxx Xxxxxx Xxx., Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx XX
Chairman and Chief Executive Officer
With a copy to:
Rich, May, Xxxxxxxx & Xxxxxxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser or Parent:
Fortis, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxx & Bird, LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
SECTION 7.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original but all of
which together shall constitute but one agreement.
39
SECTION 7.10 PARTIES IN INTEREST; ASSIGNMENT. This Agreement is binding
upon and is solely for the benefit of the parties and their respective
successors, legal representatives and assigns except that Section 5.9 shall be
for the express benefit of the Persons in the categories referred to therein.
Parent and Purchaser shall have the right (i) to assign to one or more direct or
indirect wholly owned Subsidiaries of the Parent any and all rights and
obligations of Purchaser under this Agreement, including the right to substitute
in Purchaser's place such a Subsidiary as one of the constituent corporations in
the Merger (if such Purchaser assumes all of the obligations of Purchaser in
connection with the Merger) and (ii) to restructure the transaction to provide
for the merger of the Company with and into Purchaser or any such other
corporation as provided above. If Parent or Purchaser exercise their right to so
restructure the transaction, the Company shall promptly enter into appropriate
agreements to reflect such restructuring. In any such event the amounts to be
paid to holders of Shares shall not be reduced nor shall there be any material
delay of the Effective Time.
SECTION 7.11 SPECIFIC PERFORMANCE. The parties agree that irreparable
damage would occur if any of the provisions of this Agreement are not performed
in accordance with their specific terms or are otherwise breached. It is 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 the United States or any state having jurisdiction, in
addition to any other remedy to which any party is entitled at law or in equity.
SECTION 7.12 CERTAIN UNDERTAKINGS OF PARENT. Parent shall perform, or
cause to be performed, any obligation of Purchaser (or any successor person
pursuant to Section 7.10) under this Agreement which shall have been breached by
Purchaser (or such successor).
SECTION 7.13 INTERPRETATION. The words "hereof", "herein" and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, paragraph, exhibit and
schedule references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"include", "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation". The words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations, partnerships and limited liability companies and vice
versa. The phrases "the date of this Agreement", "the date hereof" and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to March 29, 2001. As used in this Agreement, the term "affiliate(s)" shall have
the meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended. The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
40
SECTION 7.14 SEVERABILITY. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental Entity,
the remaining provisions of this Agreement to the extent permitted by Law shall
remain in full force and effect provided that the essential terms and conditions
of this Agreement for all parties remain valid, binding and enforceable;
provided that the economic and legal substance of the transactions contemplated
is not affected in any manner materially adverse to any party. In the event of
any such determination, the parties agree to negotiate in good faith to modify
this Agreement to fulfill as closely as possible the original intents and
purposes hereof. To the extent permitted by Law, the parties hereby to the same
extent waive any provision of Law that renders any provision hereof prohibited
or unenforceable in any respect.
SECTION 7.15 PAYMENTS IN U.S. DOLLARS. All amounts required to be paid
under this Agreement shall be denominated and paid in United States Dollars.
41
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement under seal as of the date first written above.
FORTIS, INC.
By: /s/ XXXX XXXXX
-----------------------------
Name: Xxxx Xxxxx
Title: Vice President, M&A
CORE MERGER SUB, INC.
By: /s/ XXXX XXXXX
----------------------------
Name: Xxxx Xxxxx
Title: President
By: /s/ XXXX XXXXXXX
----------------------------
Name: Xxxx Xxxxxxx
Title: Treasurer
[SEAL]
CORE, INC.
By: /S/ XXXXX X. XXXXXX
------------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
By: /S/ XXXXXXX X. XXXXX
------------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Treasurer
[SEAL]
APPENDIX I
INDEX OF DEFINED TERMS
TERM SECTION
Acquisition Proposal 5.1(e)
Affiliate 7.13
Agreement Preamble
Articles of Merger 1.2
Balance Sheet 3.13
Board 1.10(c)
Board of Directors 1.10(c)
Certificates 2.2(b)(i)
Closing 1.15
COBRA 3.10(e)
Code 3.10(d)
Common Stock Recitals
Company Preamble
Company Taxes 3.15(k)
Confidentiality Agreement 5.1(a)
Contract 3.4
Current Premium 5.9(b)
D&O Insurance 5.9(b)
Disclosure Schedule Article III, 1st paragraph
Dissenting Shares 2.1
Effective Time 1.2
Employee Benefit Plan 3.10(b)
ERISA 3.10(c)
ERISA Affiliate 3.10(h)
Exchange Agent 2.2(a)
Exercise Price 1.10(a)
Fairness Opinion 1.13
Financial Advisor 1.13
Governmental Consent 6.1(b)
Governmental Entity 1.4
Hazardous Substance 3.13
HSR Act 3.4
In the Money Option 1.10(a)
Indemnified Party 5.9(a)
Intellectual Property 3.14(b)
Knowledge Article III, 5th paragraph
Law 1.4
Lien 3.13
Litigation 3.7
Massachusetts BCL 1.1
Material Adverse Effect Article III, 2nd paragraph
Material Contract 3.12
Merger 1.1
Merger Price 1.7
Option 1.10
Option Settlement Payment 1.10(a)
Orders 3.7
Parent Preamble
Permit 3.8
Person Article III, 4th paragraph
Potential Acquiror 5.1(c)
Preferred Stock 3.2(a)
Proxy Statement 1.14(b)
Purchaser Preamble
Representatives 5.1(b)
Rights 3.17(a)
Rights Agreement 3.17(a)
SEC 1.14(b)
SEC Filings 3.5(a)
Share 1.7
Stockholders' Meeting 1.14(a)
Subsidiary Article III, 3rd paragraph
Superior Offer 5.1(f)
Surviving Corporation 1.1
Takeover Statute 3.16
Tax Return 3.15(k)
Termination Fee 7.2(b)
Under-Water Option 1.10(b)
Voting Agreement 2nd Recital
Warrant 3.2(a)
