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AGREEMENT AND PLAN OF MERGER
among
CHINADOTCOM CORPORATION
CDC SOFTWARE HOLDINGS, INC.
and
XXXX SYSTEMS, INC.
Dated as of SEPTEMBER 4, 2003
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS............................................................1
Section 1.01. Definitions............................................................1
Section 1.02. Other Definitions......................................................6
Section 1.03. Construction...........................................................8
ARTICLE II THE MERGER.............................................................8
Section 2.01. The Merger.............................................................8
Section 2.02. Effective Time; Closing................................................8
Section 2.03. Effect of the Merger...................................................8
Section 2.04. Conversion of Securities................................................
Section 2.05. Exchange of Certificates...............................................9
Section 2.06. Stock Transfer Books..................................................12
ARTICLE III THE SURVIVING CORPORATION.............................................12
Section 3.01. Certificate of Incorporation; By-laws.................................12
Section 3.02. Directors and Officers................................................12
Section 3.03. Employee Stock Options; Employee Stock Purchase Plan..................12
Section 3.04. Dissenting Shares.....................................................13
Section 3.05. Further Assurances....................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................14
Section 4.01. Organization and Qualification; Subsidiaries..........................14
Section 4.02. Certificate of Incorporation and By-laws..............................14
Section 4.03. Capitalization........................................................15
Section 4.04. Authority Relative to This Agreement..................................16
Section 4.05. Section 203...........................................................16
Section 4.06. No Conflict; Required Filings and Consents............................16
Section 4.07. Permits; Compliance...................................................17
Section 4.08. SEC Filings; Financial Statements.....................................17
Section 4.09. Absence of Certain Changes or Events..................................19
Section 4.10. Absence of Litigation.................................................19
Section 4.11. Employee Benefit Plans................................................19
Section 4.12. Labor and Employment Matters..........................................21
Section 4.13. Form F-4; Proxy Statement.............................................23
Section 4.14. Property and Leases...................................................23
Section 4.15. Intellectual Property.................................................24
Section 4.16. Taxes.................................................................31
Section 4.17. Environmental Matters.................................................31
Section 4.18. Material Contracts....................................................32
Section 4.19. Insurance.............................................................34
Section 4.20. Brokers and Fees......................................................34
Section 4.21. Customers.............................................................34
Section 4.22. Sale of Products; Performance of Services.............................35
Section 4.23. Compliance with Law...................................................35
Section 4.24. Certain Business Practices............................................35
Section 4.25. Transactions with Affiliates..........................................35
Section 4.26. Vote Required.........................................................35
Section 4.27. Fairness Opinion......................................................35
Section 4.28. Company Rights Agreement..............................................35
Section 4.29. Silicon Valley Bank...................................................35
Section 4.30. Accounts Receivable...................................................35
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............36
Section 5.01. Corporate Organization................................................36
Section 5.02. Authority Relative to This Agreement..................................36
Section 5.03. No Conflict; Required Filings and Consents............................36
Section 5.04. Financing.............................................................37
Section 5.05. Form F-4; Proxy Statement.............................................37
Section 5.06. Brokers...............................................................37
Section 5.07. Capitalization........................................................37
Section 5.08. SEC Filings; Financial Statements.....................................38
Section 5.09. Compliance with Law...................................................39
Section 5.10. Absence of Litigation.................................................39
Section 5.11. No Vote Required......................................................39
Section 5.12. Operations of Merger Sub..............................................39
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER................................39
Section 6.01. Conduct of Business by the Company Pending the Merger.................39
Section 6.02. Conduct of Business by Parent and Merger Sub Pending the Merger.......43
Section 6.03. Tax Matters...........................................................43
ARTICLE VII ADDITIONAL AGREEMENTS.................................................44
Section 7.01. Stockholders' Meeting.................................................44
Section 7.03. Registration Statement................................................44
Section 7.04. Access to Information; Confidentiality................................45
Section 7.05. No Solicitation of Transactions.......................................45
Section 7.06. Employee Benefits Matters.............................................46
Section 7.07. Directors' and Officers' Indemnification and Insurance................47
Section 7.08. Notification of Certain Matters.......................................47
Section 7.09. Further Action; Reasonable Best Efforts...............................47
Section 7.10. Regulatory Authorization..............................................48
Section 7.11. Public Announcements..................................................48
Section 7.12. Resignation of Officers and Directors.................................49
Section 7.13. General Cooperation.....................................................
Section 7.14. Conveyance Taxes......................................................49
Section 7.15. Affiliates............................................................49
Section 7.16. Plan of Reorganization................................................49
Section 7.17. Nasdaq Quotation......................................................50
ARTICLE VIII CONDITIONS TO THE MERGER..............................................50
Section 8.01. Conditions to the Obligations of Each Party...........................50
Section 8.02. Conditions to the Obligations of Parent and Merger Sub................51
Section 8.03. Conditions to the Obligations of the Company..........................51
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.....................................52
Section 9.01. Termination...........................................................52
Section 9.02. Effect of Termination.................................................53
Section 9.03. Fees and Expenses.....................................................53
Section 9.04. Amendment.............................................................54
Section 9.05. Waiver................................................................54
ARTICLE X GENERAL PROVISIONS....................................................54
Section 10.01. Notices...............................................................54
Section 10.02. Severability..........................................................55
Section 10.03. Entire Agreement; Assignment..........................................55
Section 10.04. Parties in Interest...................................................56
Section 10.05. Specific Performance..................................................56
Section 10.06. Governing Law.........................................................56
Section 10.07. Waiver of Jury Trial..................................................56
Section 10.08. Headings..............................................................56
Section 10.09. Counterparts..........................................................56
THIS AGREEMENT AND PLAN OF MERGER is dated as of September 4, 2003 (the
"Agreement") by and among CHINADOTCOM CORPORATION, a company organized under the
laws of the Cayman Islands ("Parent"), CDC SOFTWARE HOLDINGS, INC., a Delaware
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corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and XXXX
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SYSTEMS, INC., a Delaware corporation (the "Company").
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WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transaction provided for herein, pursuant to which and upon the terms and
subject to the conditions set forth herein, Merger Sub will merge with and into
the Company (the "Merger");
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WHEREAS, the Board of Directors of the Company (the "Board") has approved
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the Merger and declared its advisability, and resolved to recommend that holders
of shares of common stock, par value $0.001 per share of the Company (the
"Shares"), vote their Shares in favor of the Merger; and
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WHEREAS, Parent, Merger Sub and certain stockholders of the Company set
forth in Schedule I hereto (the "Principal Stockholders") have entered into
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stockholder agreements dated as of the date hereof (the "Stockholder
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Agreements"), providing that, among other things, such Principal Stockholders
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shall vote their Shares or Preferred Shares (as defined below), as applicable,
in favor of the Merger on the terms and subject to the conditions set forth
therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Parent, Merger Sub
and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
(a) For purposes of this Agreement:
"Acquisition Proposal" means (i) any proposal or offer from any Person
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other than Parent or Merger Sub relating to any direct or indirect acquisition
of (A) all or a substantial part of the assets of the Company and its
consolidated Subsidiaries, taken as a whole or (B) over 15% of any class of
equity securities of the Company or of any material consolidated Subsidiary;
(ii) any tender offer or exchange offer, as defined pursuant to the Exchange
Act, that, if consummated, would result in any Person beneficially owning 15% or
more of any class of equity securities of the Company or any consolidated
Subsidiary; or (iii) any proposal or offer from any Person other than Parent or
Merger Sub regarding any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any consolidated Subsidiary, other than the Transactions.
"Affiliate" of a specified Person means a Person who, directly or
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indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.
"Beneficial Owner" means a Person with respect to any Shares (i) which such
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Person or any of its affiliates or associates (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such Person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject to the passage of time or other conditions),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding or
(iii) which are beneficially owned, directly or indirectly, by any other Persons
with whom such Person or any of its affiliates or associates or Person with whom
such Person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any Shares.
"Business Day" means any day, other than a Saturday, Sunday or other day on
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which commercial banks are required or authorized to close in the City of New
York.
"Certificate of Designations" means the Certificate of Designations of
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Rights, Preferences and Privileges with respect to the Preferred Shares dated
June 29, 2001.
"Company Disclosure Schedule" means the corresponding disclosure schedule
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dated the date hereof and delivered to Parent and Merger Sub by the Company
concurrently with the execution and delivery of this Agreement.
"Company Indebtedness" means all obligations and liabilities created,
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issued or incurred by the Company or any Subsidiary for borrowed money or long
term debt, including bank loans, mortgages, notes payable, purchase money
installment debt, capital lease obligations, guarantees of indebtedness of
others, loans from stockholders or other Affiliates of the Company or any
Subsidiary, and all principal, interest, fees prepayment penalties or amounts
due or owing with respect thereto.
"Company Material Adverse Effect" means any change, event, circumstance,
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development or effect on the Company and its Subsidiaries that is or is
reasonably likely to be materially adverse to the business, assets, properties,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole; provided, however, that "Company Material
Adverse Effect" shall not include any effect arising out of or attributable to:
(a) any change, event, circumstance, development or effect resulting from a
change in general economic or financial market conditions; (b) any change,
event, circumstance, development or effect resulting from or relating to any
acts of terrorism or war; (c) any change, event, circumstance, development or
effect resulting from a change in industry conditions, except, in the case of
(a), (b), or (c), to the extent such change, event, circumstance, development or
effect disproportionately affects the Company as compared to the technology
industry as a whole; (d) any change, event, circumstance, development or effect
resulting from the announcement of the execution of this Agreement or the
pendency or consummation of the Transactions; or (e) any change, event,
circumstance, development or effect resulting from or relating to compliance
with the terms of, or the taking of any action required by, this Agreement;
provided, however, that for purposes of clauses (d) and (e), the Company shall
have used its reasonable best efforts to ameliorate or prevent any such adverse
change, event, circumstance, development or effect.
"Company Owned Intellectual Property" means all Intellectual Property in
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which the Company or any Subsidiary has (or purports to have) an ownership
interest.
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"Confidentiality Agreement" means that certain confidentiality agreement,
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dated November 21, 2002, between the Company and a subsidiary of Parent.
"Contract" means any written, oral or other agreement, contract,
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subcontract, lease, understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature.
"control" (including the terms "controlled by" and "under common control
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with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, as trustee or
executor, by Contract or credit arrangement or otherwise.
"Delaware Law" means the General Corporation Law of the State of Delaware.
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"Disclosure Schedules" means the Company Disclosure Schedule and the Parent
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Disclosure Schedule.
"Environmental Laws" means any Laws of any Governmental Authority relating
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to (i) releases or threatened releases of Hazardous Substances or materials
containing Hazardous Substances; (ii) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials containing
Hazardous Substances; or (iii) pollution or protection of the environment,
health or natural resources.
"Exchange Act " means the Securities Exchange Act of 1934, as amended.
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"Executive Options" means the Options held by the persons set forth on
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Schedule II attached hereto.
"Governmental Authority" means any United States federal, state, county or
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local or non-United States government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body.
"Hazardous Substances" means (i) those substances defined in or regulated
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under the following United States federal Laws and their state counterparts, as
each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products, including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos or asbestos containing materials, radon, lead and lead-based
paint; and (v) any substance, material or waste regulated by any Governmental
Authority pursuant to any Environmental Law.
"Intellectual Property" means and includes all past, present, and future
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rights of the following types, which may exist or be created under the Laws of
any jurisdiction in the world: (i) patents, patent applications and statutory
invention registrations, (ii) trademarks, service marks, trade dress, logos,
trade names, corporate names and other source identifiers, and registrations and
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applications for registration thereof, (iii) rights associated with works of
authorship, including exploitation rights, copyrights, moral rights, mask works
and registrations and applications for registration thereof, (iv) confidential
and proprietary information, including trade secrets, technical information and
know-how, customer lists, confidential marketing and customer information, (v)
Software, (vi) domain names, URLs, world wide web pages, internet and intranet
sites (including all content thereof), together with member or user lists and
information associated therewith, (vii) other intellectual property rights of
every kind and nature and (viii) rights in or relating to registrations,
renewals, extensions, combinations, divisions, and reissues of, and applications
for, any of the rights referred to in clauses (i) through (vii) above.
"knowledge" means (i) with respect to the Company, the actual knowledge of
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the following persons: Xxxxx X. Xxxxxxxxx, J. Xxxxxxx Xxxxxxx, III, Xxxxxx
Xxxxxxxx, Xxxx X. Xxxxxx, Xxxx Xxxxxxxxx, Xxxxx X. Xxxx, Xxxxxxx Xxxxxx, J.
Xxxxxxx Xxxxxx and Xxxxxx X. Xxxxxxx and; and (ii) with respect to Parent, the
actual knowledge of the following persons: Xxxxx Xxx, Xxxxxx Xxxxxxxxxx and
Xxxxxx Xxxx.
"Law" means any United States or non-United States statute, law, ordinance,
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regulation, rule, code, common law standard or obligation, executive order,
governmental directive, injunction, judgment, decree or other order.
"Nasdaq" means The Nasdaq National Market.
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"Options" means the options, issued by the Company, to purchase Shares
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under the Option Plans.
"Option Plans" means, collectively, the Company 1998 Stock Option Plan, as
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amended, and the Company 1988 Stock Option Plan, as amended.
"Parent Common Stock" means the Class A Common Shares, par value $0.00025
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per share, of Parent.
"Parent Disclosure Schedule" means the corresponding disclosure schedule
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dated the date hereof and delivered to the Company by Parent concurrently with
the execution and delivery of this Agreement.
"Parent Material Adverse Effect" means any change, event, circumstance,
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development or effect on Parent and its controlled subsidiaries that is or is
reasonably likely to be materially adverse to the business, assets, properties,
financial condition or results of operations of Parent and its controlled
subsidiaries, taken as a whole; provided, however, that "Parent Material Adverse
Effect" shall not include any effect arising out of or attributable to: (a) any
change, event, circumstance, development or effect resulting from a change in
general economic or financial market conditions; (b) any change, event,
circumstance, development or effect resulting from or relating to any acts of
terrorism or war; (c) any change, event, circumstance, development or effect
resulting from a change in industry conditions, except, in the case of (a), (b),
or (c), to the extent such change, event, circumstance, development or effect
disproportionately affects Parent as compared to the technology industry as a
whole; (d) any change, event, circumstance, development or effect resulting from
the announcement of the execution of this Agreement or the pendency or
consummation of the Transactions; or (e) any change, event, circumstance,
development or effect resulting from or relating to compliance with the terms
of, or the taking of any action required by, this Agreement; provided, however,
that for purposes of clauses (d) and (e), Parent shall have used its reasonable
best efforts to ameliorate or prevent any such adverse change, event,
circumstance, development or effect.
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"Parent Mean Price" means the average of the per share closing prices of
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Parent Common Stock on the Nasdaq during the ten consecutive trading days ending
on (and including) the trading day that is two trading days prior to the date of
the Effective Time.
"Parent Price" means the average of the per share closing prices of Parent
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Common Stock on the Nasdaq during the ten consecutive trading days ending on
(and including) the trading day that is two trading days prior to the date of
the Effective Time; provided, however, that for purposes of this Agreement and
subject to the provisions of Section 9.01(e), the Parent Price shall not be
greater than $10.50 or less than $8.50.
"Person" means an individual, corporation, partnership, limited
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partnership, joint venture, limited liability company, syndicate, person
(including a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
"Preferred Shares" means shares of 7.5% Series A Convertible Preferred
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Stock, par value $0.001 per share, of the Company.
"Preferred Stockholder Agreement" means the Stockholder Agreement entered
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into among Parent, Merger Sub and Xxxxxxxx X. Xxxxxxxx, III.
"Registered IP" means all Intellectual Property that is registered, filed,
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or issued under the authority of any Governmental Authority, including all
patents, copyright registrations, mask work registrations and trademark
registrations and all applications for any of the foregoing.
"Representatives" of any entity means such entity's directors, officers,
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employees, legal, investment banking and financial advisors, accountants and any
other agents and representatives.
"SEC" means the United States Securities and Exchange Commission.
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"Software" means computer software, programs and databases in any form,
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including source code, object code, operating systems and specifications, data,
databases, database management code, utilities, graphical user interfaces,
menus, images, icons, forms, methods of processing, software engines, platforms,
and data formats, all versions, updates, corrections, enhancements, and
modifications thereof, and all related documentation, developer notes, comments
and annotations.
"Subsidiary" or "Subsidiaries" means, with respect to the Company, any
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Person the majority of the voting or equity interests of which is controlled by
the Company, directly or indirectly through one or more intermediaries.
"Superior Proposal" means any Acquisition Proposal not solicited or
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initiated in violation of Section 7.05(a) that (i) relates to more than 50% of
the outstanding Shares or all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole, (ii) is made by a Person who the Board
has reasonably concluded in good faith will have adequate sources of financing
to consummate such Superior Proposal, and (iii) is on terms that the Board
determines in its good faith judgment (after receiving the advice of a financial
advisor of nationally-recognized reputation, and after taking into account all
the terms and conditions of the Acquisition Proposal, including any regulatory
obstacles, break-up fees, expense reimbursement provisions and conditions to
consummation) are more favorable to the Company's stockholders than this
Agreement and the Merger, taken as a whole.
5
"Taxes" means any and all taxes, fees, levies, duties, tariffs, imposts and
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other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Authority or taxing authority, including: taxes or other
charges on or with respect to income, franchise, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customers' duties, tariffs and similar charges.
"Transactions" means the transactions contemplated hereunder, including the
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Merger and the transactions contemplated by the Stockholder Agreements.
"Unaudited Interim Balance Sheet" means the unaudited consolidated balance
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sheet of the Company and its consolidated subsidiaries as of March 31, 2003,
included in the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 2003, and as filed with the SEC prior to the date of this
Agreement.
"Warrant" means the Xxxx Systems, Inc. Stock Purchase Warrant dated June
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29, 2001 pursuant to which the holder thereof is entitled to purchase 47,244
Shares in accordance with the terms and subject to the conditions set forth
therein.
Section 1.02. Other Definitions. Each of the following terms is defined in
the section set forth opposite such term:
Defined Term Location of Definition
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2002 Balance Sheet 4.08(c)
Action 4.10(a)
Agreement Preamble
Assumed Options 3.03(a)
Blue Sky Laws 4.06(b)
Board Recitals
Broadview 4.20
Certificate of Incorporation 4.02
Certificate of Merger 2.02
Certificate 2.05(b)
Closing Date 2.02
Code Recitals
Company Preamble
Company Licensed Intellectual Property 4.15(g)(v)
Company Preferred Stock 4.03(a)
Company Rights 4.03(a)
Company Rights Agreement 4.03(a)
Company Series B Preferred Stock 4.03(a)
Company Stockholders' Approval 7.01
Conversion Ratio 3.03(a)
Dissenting Shares 3.04(a)
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Defined Term Location of Definition
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DOJ 7.10
Effective Time 2.02
Environmental Permits 4.17
ERISA 4.11(a)
ESPP 3.03(b)
ESPP Date 3.03(c)
Exchange Ratio 2.04(a)(i)
Expenses 9.03(a)
Fee 9.03(b)
FTC 7.10
GAAP 4.08(b)
HSR Act 4.06(b)
incentive stock options 3.03(a)
IRS 4.11(a)
Liens 4.14(b)
Material Contracts 4.18(a)
Merger Recitals
Merger Consideration 2.04(a)(i)
Merger Sub Preamble
Multiemployer Plan 4.11(b)
Multiple Employer Plan 4.11(b)
Number of Optioned Shares 3.03(b)
Options 3.03(a)
Parent Preamble
Parent SEC Reports 5.08(a)
Parent Preferred Stock 5.07(a)
Paying Agent 2.05(a)
Payment Fund 2.05(a)
Per Share Amount 2.04(a)
Permits 4.06
Permitted Investments 2.05(a)
Permitted Liens 4.14(b)
Plans 4.11(a)
Principal Stockholders Recitals
Proxy Statement 7.02
Registration Statement 7.03
SEC Reports 4.08(a)
Securities Act 4.08(a)
Shares Recitals
Standard Form Confidentiality Agreement 4.12(d)
Stockholder Agreements Recitals
Stockholders' Meeting 7.01
Surviving Corporation 2.03
SVB 4.29
Tail Policy 7.07(b)
Tax Opinion 7.16(a)
Warrants 4.03(b)
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Section 1.03. Construction. Unless the context of this Agreement otherwise
clearly requires, (a) references to the plural include the singular, and
references to the singular include the plural, (b) references to any gender
include the other genders, (c) the words "include," "includes" and "including"
do not limit the preceding terms or words and shall be deemed to be followed by
the words "without limitation", (d) the terms "hereof", "herein", "hereunder",
"hereto" and similar terms in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, (e) the terms "day" and
"days" mean and refer to calendar day(s) and (f) the terms "year" and "years"
mean and refer to calendar year(s). Unless otherwise set forth herein,
references in this Agreement to (i) any document, instrument or agreement
(including this Agreement) (A) includes and incorporates all exhibits, schedules
and other attachments thereto, (B) includes all documents, instruments or
agreements issued or executed in replacement thereof and (C) means such
document, instrument or agreement, or replacement or predecessor thereto, as
amended, modified or supplemented from time to time in accordance with its terms
and in effect at any given time, and (ii) a particular Law means such Law as
amended, modified, supplemented or succeeded, from time to time and in effect at
any given time. All Article, Section, Schedule and Exhibit references herein are
to Articles, Sections and Exhibits of this Agreement, the Company Disclosure
Schedule or the Parent Disclosure Schedule, unless otherwise specified. This
Agreement shall not be construed as if prepared by one of the Parties, but
rather according to its fair meaning as a whole, as if all Parties had prepared
it.
ARTICLE II
THE MERGER
Section 2.01. The Merger. Upon the terms and subject to the conditions set
forth in Article VIII and Section 7.16(b), Merger Sub shall be merged with and
into the Company at the Effective Time in accordance with Delaware Law.
Section 2.02. Effective Time; Closing. Subject to the terms and conditions
of this Agreement, as promptly as practicable after the satisfaction or, if
permissible, waiver of the conditions set forth in Article VIII, the parties
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hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
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Delaware in such form as is required by, and executed in accordance with, the
relevant provisions of Delaware Law (the date and time of such filing being, the
"Effective Time"). Immediately prior to such filing, a closing shall be held at
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the offices of King & Spalding LLP, 000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
00000, or such other place as the parties shall agree, for the purpose of
confirming the satisfaction or waiver, as the case may be, of the conditions set
forth in Article VIII (the "Closing Date").
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Section 2.03. Effect of the Merger. Subject to Section 7.16(b), at the
Effective Time, the separate corporate existence of Merger Sub shall cease, the
Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"), and the effect of the Merger shall be as provided in
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the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of the Company and Merger Sub shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
Section 2.04. Conversion of Securities. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
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(i) subject to the provisions of Sections 2.05 and 9.01(e), each
Share (together with the associated Company Right) issued and
outstanding immediately prior to the Effective Time (other than
any Shares to be canceled pursuant to Section 2.04(a)(ii) and any
Dissenting Shares (as hereinafter defined)) shall be canceled and
converted automatically into the right to receive (A) the number
(the "Exchange Ratio") of shares of Parent Common Stock
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determined by dividing $14.00 by the Parent Price and rounding
the result to the nearest one thousandth of a share, payable upon
surrender, in the manner provided in Section 2.05, of the
certificate that formerly evidenced such Share; and (B) $5.00 in
cash ((A) and (B) together being the "Merger Consideration");
---------------------
(ii) each Share (together with the associated Company Right) held in
the treasury of the Company and each Share (together with the
associated Company Right) owned by Merger Sub, Parent or any
direct or indirect wholly owned subsidiary of Parent or of the
Company immediately prior to the Effective Time shall be canceled
without any conversion thereof and payment or other consideration
made with respect thereto; and
(iii) each share of common stock, par value $0.001 per share, of
Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one
validly issued, fully paid and non-assessable share of common
stock, par value $.0001 per share, of the Surviving Corporation.
(b) Immediately prior to the Effective Time, all Preferred Shares
issued and outstanding immediately prior to the Effective Time shall be
converted into Shares in accordance with terms of the Certificate of
Designations and the Preferred Stockholder Agreement.
(c) Upon exercise of the Warrant, the holder of the Warrant shall have
the right to receive the Merger Consideration for each Share issuable upon
such exercise in accordance with the terms of the Warrant. The Company
shall use its reasonable best efforts to cause the Warrant to be either
vested and exercised or redeemed prior to the Effective Time.
Section 2.05. Exchange of Certificates. (a) Paying Agent. Prior to the
------------
Closing Date, Parent shall designate a bank or trust company reasonably
satisfactory to the Company to act as agent (the "Paying Agent") for the holders
------------
of Shares to receive the funds and Parent Common Stock to which holders of
Shares shall become entitled pursuant to Section 2.04. As of the Effective Time,
Parent shall deposit or shall cause to be deposited with the Paying Agent in a
separate fund established for the benefit of the holders of Shares, for payment
in accordance with this Article II through the Paying Agent, (i) certificates
----------
representing the shares of Parent Common Stock issuable pursuant to Section 2.04
as of the Effective Time, (ii) cash in amounts payable pursuant to Section 2.04
as of the Effective Time, and (iii) cash, from time to time as required to make
payments in lieu of any fractional shares pursuant to Section 2.05(c) (such cash
and certificates for shares of Parent Common Stock, together with any dividends
or distributions with respect thereto being, the "Payment Fund"). The Paying
------------
Agent shall, pursuant to irrevocable instructions, pay the Merger Consideration
payable pursuant to Section 2.04 out of the Payment Fund. The Paying Agent shall
invest cash portions of the Payment Fund as Parent directs in obligations of or
guaranteed by the United States of America, in commercial paper obligations
receiving the highest investment grade rating from both Xxxxx'x Investors
9
Services, Inc. and Standard & Poor's Corporation, or in certificates of deposit,
bank repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $1,000,000,000 (collectively, "Permitted Investments");
---------------------
provided, however, that the maturities of Permitted Investments shall be such as
to permit the Paying Agent to make prompt payment to former holders of the
Shares entitled thereto as contemplated by this Agreement. All earnings on
Permitted Investments shall be the sole and exclusive property of Parent and no
part of the earnings shall accrue to the benefit of holders of Shares. If for
any reason the Payment Fund is inadequate to pay the amounts to which holders of
Shares shall be entitled, Parent and the Surviving Corporation shall in any
event be liable for payment thereof. The Payment Fund shall not be used for any
purpose except as expressly provided in this Agreement.
(b) Exchange Procedures. Promptly after the Effective Time, Parent shall
-------------------
cause the Paying Agent to mail to each Person who was, at the Effective Time, a
holder of record of a certificate (a "Certificate") which immediately prior to
------------
the Effective Time represented outstanding Shares (and associated Company
Rights) entitled to receive the Merger Consideration pursuant to this Article II
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates to the Paying Agent pursuant to such
letter of transmittal. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor: (i) the Merger
Consideration for each Share formerly evidenced by such Certificate (with the
portion of the Merger Consideration consisting of Parent Common Stock being
evidenced by certificates representing that number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to Section
2.04), (ii) cash in lieu of any fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.05(c) and (iii) any other
dividends or other distributions to which such holder is entitled pursuant to
Section 2.05(d), and such Certificate shall then be canceled. No interest shall
accrue or be paid on the Merger Consideration payable upon the surrender of any
Certificate for the benefit of the holder of such Certificate, including any
interest accrued in respect of the Payment Fund. If the payment under this
Section 2.05(b) is to be made to a Person other than the Person in whose name
the surrendered certificate formerly evidencing Shares is registered on the
stock transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the Person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the Certificate
surrendered, or shall have established to the satisfaction of Parent that such
taxes either have been paid or are not applicable. After the Effective Time, the
holders of Certificates shall cease to have rights with respect to such
Certificates (except such rights, if any, as they may have as dissenting
shareholders), and except as aforesaid their sole rights shall be to exchange
said Certificates for the amounts payable pursuant to this Agreement.
(c) No Fractional Shares. No certificates or scrip representing fractional
---------------------
shares of Parent Common Stock will be issued upon the surrender for exchange of
Certificates, but in lieu thereof, each holder of a fractional share interest
shall be paid an amount in cash (without interest) equal to the product obtained
by multiplying (i) such fractional share interest which such holder (after
taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii) the Parent Mean Price.
10
(d) Distributions with Respect to Unexchanged Shares of Parent Common
-----------------------------------------------------------------
Stock. No dividends or other distributions declared or made after the Effective
-----
Time with respect to the Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to any such holder
pursuant to Section 2.05(c), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of Parent Common
Stock to which such holder is entitled pursuant to Section 2.05(c) and the
amount of dividends or other distributions with a record date after the
Effective Time and theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
-----------------------------
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Shares), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or other
like change with respect to Parent Common Stock or Shares occurring on or after
the date hereof and prior to the Effective Time.
(f) Lost Certificates. In the event that any Certificate shall have been
-----------------
lost, stolen or destroyed, the Paying Agent shall issue in exchange for such
lost, stolen or destroyed Certificate, upon the making of an affidavit of that
fact by the holder thereof, for each Share, the Merger Consideration, any cash
in lieu of fractional shares to which such holder is entitled pursuant to
Section 2.05(c) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.05(d); provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance of such Merger
Consideration, require the owner of such lost, stolen or destroyed Certificate
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Paying Agent with respect to the Certificate alleged to have been lost, stolen
or destroyed.
(g) Termination of Payment Fund. Any portion of the Payment Fund that
----------------------------
remains undistributed to the holders of Shares for 180 days after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Shares who
have not theretofore complied with this Article II shall thereafter look only to
Parent for the Merger Consideration, any cash in lieu of fractional shares of
Parent Common Stock payable pursuant to Section 2.05(c) and any dividends or
other distributions with respect to the Parent Common Stock payable pursuant to
Section 2.05(d); provided, however, that none of Parent, Surviving Corporation
or the Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar Law.
11
(h) Withholding Rights. Parent shall be entitled to deduct and
------------------
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares such amounts as Parent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax Law. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Shares in respect of which such
deduction and withholding was made by Parent.
Section 2.06. Stock Transfer Books. At the close of business on the day of
the Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of Shares on the
records of the Company.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.01. Certificate of Incorporation; By-laws. (a) At the Effective
Time the Certificate of Incorporation of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by Law and such
Certificate of Incorporation; provided, however, that, at the Effective Time,
-------- -------
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read as follows: "The name of the corporation is Xxxx Systems,
Inc."
(b) Unless otherwise determined by Parent prior to the Effective Time,
the By-laws of Merger Sub, as in effect immediately prior to the Effective Time
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by Law, the Certificate of Incorporation of the Surviving Corporation
and such By-laws.
Section 3.02. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time (which shall include the
officers of the Company immediately prior to the Effective Time) shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal.
Section 3.03. Employee Stock Options; Employee Stock Purchase Plan. (a)
Effective as of the Effective Time, Parent shall, for each Option (not including
any Executive Options) then outstanding with an exercise price of $19.00 or less
(the "Substituted Options"), substitute such Options with stock options to
-------------------
purchase Parent Common Stock. Each Substituted Option, whether vested or
unvested, shall be converted into an option to acquire, on the same terms and
conditions as were applicable under the Option Plans, a number of shares of
Parent Common Stock equal to the product of (i) the number of Shares subject to
such Substituted Option multiplied by (ii) the Conversion Ratio (as defined
below), at an exercise price per share of Parent Common Stock equal to the
quotient of (x) the per share exercise price of the Option to purchase Shares,
divided by (y) the Conversion Ratio; provided, however, that in the case of any
-------- -------
option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code ("incentive stock options"), the option price and
------------------------
12
the number of shares purchasable pursuant to such option shall be determined in
order to comply with Section 424(a) of the Code. Any such stock options to
purchase Parent Common Stock shall be issued contingent upon the consummation of
the Transactions and shall include an acknowledgement by the optionee that such
stock options to purchase Parent Common Stock are being substituted for the
Substituted Options.
(b) For purposes of Section 3.03(a), the "Conversion Ratio" shall be
----------------
the sum of (i) the quotient of (A) $14.00, divided by (B) the Parent Price (or,
in the event Parent agrees in writing pursuant to Section 9.01(e) that the
Exchange Ratio shall be determined based on the Parent Mean Price, then the
Parent Mean Price), plus (ii) the quotient of (X) $5.00, divided by (Y) the
closing sales price of Parent Common Stock on the Nasdaq for the last trading
day prior to the date of the Effective Time.
(c) As of the last day of the payroll period immediately preceding the
Effective Time (the "ESPP Date"), all offering and purchase periods under way
---------
under the Company's Employee Stock Purchase Plan (the "ESPP"), shall be
----
terminated and, as of the date of this Agreement, no new offering or purchase
periods shall be commenced. Unless a participant in the ESPP has withdrawn from
the ESPP in accordance with its terms, such participant's option to purchase
Shares under the ESPP shall be exercised automatically on the ESPP Date in
accordance with the terms of the ESPP. All Shares acquired by such participant
pursuant to the ESPP as of the Effective Time shall, at the Effective Time, be
converted into the right to receive the Merger Consideration in accordance with
Section 2.04(a).
(d) The Company shall use take all actions necessary to effectuate the
provisions of this Section 3.03.
Section 3.04. Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and that are held by stockholders who shall have not voted in
favor of the Merger and who shall have demanded properly in writing appraisal
for such Shares in accordance with Section 262 of Delaware Law and who shall
have not effectively withdrawn or lost such right to appraisal (collectively,
the "Dissenting Shares") shall not be converted into, or represent the right to
-----------------
receive, the Merger Consideration pursuant to Section 2.04. Such stockholders
shall be entitled to receive payment of the appraised value of such Shares held
by them, in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal with respect
to such Shares under such Section 262 shall thereupon be deemed to have been
converted into, and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration, without any interest thereon,
upon surrender, in the manner provided in Section 2.05, of the certificate or
certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any written
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to Delaware Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Delaware Law. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for appraisal or offer to settle or settle any such demands.
Section 3.05. Further Assurances. Each party hereto will, either prior to
or after the Effective Time, execute such further documents, instruments, deeds,
13
bills of sale, assignments and assurances and take such further actions as may
reasonably be requested by one or more of the others to consummate the Merger,
to vest the Surviving Corporation at or following the Effective Time with full
title to all assets, properties, privileges, rights, approvals, immunities and
franchises of either of the Merger Sub or the Company or to effect the other
purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub to enter into this
Agreement, the Company hereby represents and warrants to Parent and Merger Sub
as follows:
Section 4.01. Organization and Qualification; Subsidiaries. (a) Each of the
Company and each Subsidiary is a corporation duly organized, validly existing
and, to the extent applicable, in good standing under the Laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted. Each of
the Company and each Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except where the
failure to be so qualified, licensed or in good standing would not have a
Company Material Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with
the jurisdiction of incorporation of each Subsidiary, the percentage of the
outstanding capital stock of each Subsidiary owned by the Company and each other
Subsidiary and the authorized capital stock, the number of issued and authorized
shares of capital stock and the record owner of such shares, is set forth in
Section 4.01(b) of the Company Disclosure Schedule. Except as disclosed in
Section 4.01(b) of the Company Disclosure Schedule, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity. Neither the Company nor any Subsidiary has agreed or is
obligated to make, or is bound by any written, oral or other agreement,
Contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan or
legally binding commitment or undertaking of any nature, as in effect as of the
date hereof or as may hereafter be in effect under which it may become obligated
to make any future material investment in or material capital contribution to
any other entity. Neither the Company, nor any Subsidiary, is a general partner
of any general partnership, limited partnership or other similar entity.
Section 4.02. Certificate of Incorporation and By-laws. The Company has
heretofore made available to Parent a complete and correct copy of the
Certificate of Incorporation (the "Certificate of Incorporation") and the
By-laws or equivalent organizational documents, each as amended to date, of the
Company and each Subsidiary. Such Certificate of Incorporation, By-laws or
equivalent organizational documents are in full force and effect. Neither the
Company nor any Subsidiary is in material violation of any of the provisions of
its Certificate of Incorporation, By-laws or equivalent organizational
documents.
14
Section 4.03. Capitalization. (a) The authorized capital stock of the Company
consists of 15,000,000 Shares and 5,000,000 shares of preferred stock, no par
value ("Company Preferred Stock"), 35,000 of which shares have been designated
-----------------------
as Series B Participating Preferred Stock ("Company Series B Preferred Stock")
--------------------------------
and have been reserved for issuance upon exercise of preferred stock purchase
rights (the "Company Rights") issuable pursuant to that certain Amended and
--------------
Restated Preferred Stock Rights Agreement, dated as of July 6, 2001 between the
Company and Fleet National Bank (the "Company Rights Agreement"), and 500,000 of
------------------------
which shares have been designated as Preferred Shares. As of the date hereof,
(i) 2,681,848 Shares are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Company Series B
Preferred Stock were issued and outstanding, (iii) 500,000 Preferred Shares are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (iv) 133,977 Shares are held in the treasury of the Company, (v)
no Shares are held by any Subsidiary, (vi) 738,014 Shares are reserved for
future issuance pursuant to outstanding employee stock options or stock
incentive rights granted pursuant to the Option Plans and (vii) rights to
purchase 6,472 Shares are outstanding pursuant to the ESPP.
(b) As of the date hereof, except as set forth in Section 4.03(b) of
the Company Disclosure Schedule and except pursuant to (i) the Stockholder
Agreements, (ii) the Warrant, (iii) the ESPP, and (iv) the Company Rights
Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Subsidiary or obligating the Company or any
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Subsidiary. Section 4.03(b) of the Company
Disclosure Schedule accurately sets forth as of the date hereof information
regarding the holder, particular plan or program under which such Options were
granted, the exercise price, the grant date, the vesting schedule and the extent
to which the Option is vested, the date of expiration and the number of
underlying Shares issuable in respect of each Warrant, as applicable, and
Option, and in respect of each right to purchase Shares pursuant to the ESPP
(through the end of the ESPP's current offer period ending June 30, 2003) and
the number of underlying Shares issuable pursuant to vested Options as of the
date hereof. All Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
Section 4.03(b) of the Company Disclosure Schedule sets forth as of the date
hereof the number of unvested or unexercisable Options that will accelerate upon
the closing of the Merger and the number of Shares issuable upon exercise
thereof. As of the date hereof, the total number of Shares issuable pursuant to
the exercise of all Options and warrants held by all Principal Stockholders is
401,215.
(c) All of the outstanding shares of capital stock of each Subsidiary
are duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by the Company or a Subsidiary wholly owned,
directly or indirectly, by the Company, free and clear of any Liens. There are
no (i) outstanding options obligating the Company or any Subsidiary to issue or
sell any shares of capital stock of any Subsidiary or to grant, extend or enter
into any such option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any Person other than
the Company or a Subsidiary wholly owned, directly or indirectly, by the Company
with respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary.
15
(d) There are no outstanding contractual obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any
other capital stock or other securities of the Company or any Subsidiary or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary or any other Person.
Section 4.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to enter into and to perform its
obligations under this Agreement and the Transactions. The Board (at a meeting
duly called and held) has (a) determined that this Agreement and the
Transactions, including the Merger, are fair to and in the best interests of the
Company's stockholders, (b) approved and adopted this Agreement and the
Transactions in accordance with the requirements of Delaware Law, (c) declared
that this Agreement is advisable, (d) resolved to recommend that stockholders of
the Company vote to adopt and approve this Agreement and to approve the Merger,
and (e) to the extent necessary, adopted a resolution for the purpose of causing
the Company not to be subject to any state takeover Law or similar Law, that
might otherwise apply to the Merger or any of the other Transactions. This
Agreement has been duly executed and delivered by the Company and, assuming due
and valid authorization, execution and delivery thereof by Parent and Merger
Sub, this Agreement is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to (i) Laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of Law governing specific performance, injunctive relief and other
equitable remedies.
Section 4.05. Section 203. As of the date hereof and at all times on or
prior to the Effective Time, the Board has and will take all actions necessary
to ensure that the restrictions applicable to business combinations contained in
Section 203 of Delaware Law are not, and will not be, applicable to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or any of the other Transactions. Other than Section 203 of Delaware
Law, there is no anti-takeover Law of any state that is applicable to this
Agreement and the Transactions.
Section 4.06. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement and the Transactions by the Company will not, (i) conflict with
or violate the Certificate of Incorporation or By-laws of the Company or
equivalent organizational documents of any Subsidiary, (ii) subject to obtaining
the Company Stockholders' Approval and compliance with the requirements
described in Section 4.06(b) below, conflict with or violate any Laws of any
Governmental Authority applicable to the Company or any Subsidiary or by which
any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien or other encumbrance on any property or asset
of the Company or any Subsidiary pursuant to, any note, bond, mortgage,
indenture, Contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except as disclosed in Section 4.06 of the Company
Disclosure Schedule, and with respect to clauses (ii) and (iii), except for any
such conflicts, violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, prevent or materially delay consummation
of the Transactions and would not have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
16
to, any Governmental Authority, except (i) for applicable requirements, if any,
of the Exchange Act, state securities or "blue sky" Laws ("Blue Sky Laws"), and
--------------
filing and recordation of appropriate merger documents as required by Delaware
Law, (ii) for the filing of the Proxy Statement with the SEC pursuant to the
Exchange Act, (iii) for the filing of the Certificate of Merger and other
appropriate merger documents required by Delaware Law with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities in which the Merger Sub and the Company are qualified to do
business, (iv) for the filing of a premerger notification report by the Company
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the "HSR Act"), and (v) where the failure
-------
to obtain such consents, approvals or action of, filings with or notices to any
Governmental Authority would not have a Company Material Adverse Effect.
Section 4.07. Permits; Compliance. Each of the Company and the Subsidiaries
is in possession of all registrations, franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Authority necessary for each of the
Company or the Subsidiaries to own, lease and operate its properties or to carry
on its business as it is now being conducted (the "Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Permits,
individually or in the aggregate, would not prevent or materially delay
consummation of the Transactions and would not have a Company Material Adverse
Effect. As of the date hereof, no suspension or cancellation of any of the
Permits is pending or, to the knowledge of the Company, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Permits,
individually or in the aggregate, would not prevent or materially delay
consummation of the Transactions and would not have a Company Material Adverse
Effect. Neither the Company nor any Subsidiary is in conflict with, or in
default, breach or violation of, (a) any Law applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (b) any note, bond, mortgage, indenture, Contract,
agreement, lease, license, Permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound,
except for any such conflicts, defaults, breaches or violations, individually or
in the aggregate, that would not prevent or materially delay consummation of the
Transactions and would not have a Company Material Adverse Effect.
Section 4.08. SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
July 1, 2001 and has heretofore made available to Parent, in the form filed with
the SEC, (i) its Annual Reports on Form 10-K for the fiscal years ended June 30,
2001 and 2002, respectively, (ii) its Quarterly Reports on Form 10-Q for the
periods ended September 30, 2002 and December 31, 2002 and Xxxxx 00, 0000, (xxx)
all proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since July 1, 2001, (iv) all other forms including
reports on Form 8-K and other registration statements (other than Quarterly
Reports on Form 10-Q not referred to in clause (ii) above) filed by the Company
with the SEC since January 1, 2003 and (v) all other statements, reports,
schedules, forms and other documents filed by the Company with the SEC since
July 1, 2001 (each of the above referred to in clauses (i), (ii), (iii) and (iv)
above being, collectively, the "SEC Reports"). The SEC Reports (i) were prepared
in accordance with either the requirements of the Securities Act of 1933
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and (ii) did not, at the time they were filed, or, if
amended, as of the date of such amendment, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
17
circumstances under which they were made, not misleading. No consolidated
Subsidiary is required to file any form, report or other document with the SEC.
The Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003
(x) will be prepared in accordance with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder, and (y) will not, at the time
it is filed, or, if amended, as of the date of such amendment, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any notes thereto) contained in the SEC
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC applicable
thereto and was prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
----
periods indicated (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC, and except
that the unaudited financial statements may not contain footnotes and are
subject to normal and recurring year-end adjustments), and each fairly present,
in all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC, and except that the unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end adjustments). The
unaudited consolidated balance sheet of the Company and the Subsidiaries as of
June 30, 2003, along with the related unaudited consolidated statements of
income and cash flows will be prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated in any notes thereto or as
permitted by Form 10-Q of the SEC, and except that the unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end adjustments) and will fairly present, in all material respects, the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the date thereof.
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at June 30, 2002,
including the notes thereto (the "2002 Balance Sheet"), neither the Company nor
------------------
any consolidated Subsidiary has any accrued, contingent or other liabilities of
any nature, either matured or unmatured, required to be reflected on the balance
sheet of the Company except for: (i) liabilities identified as such in the
"liabilities" column of the Unaudited Interim Balance Sheet; (ii) normal and
recurring current liabilities (consistent in type and magnitude with those
reflected on the Unaudited Interim Balance Sheet) that have been incurred by the
Company or any Subsidiary since March 31, 2003 in the ordinary course of
business and consistent with past practices; and (iii) liabilities described in
Section 4.08(c) of the Company Disclosure Schedule.
(d) Except as and to the extent set forth on the Unaudited Interim
Balance Sheet or as set forth in Section 4.08(d) of the Company Disclosure
Schedule, as of the date of this Agreement, none of the Company nor any
consolidated Subsidiary has any material liability for Company Indebtedness.
(e) Except as disclosed in Section 4.08(e) of the Company Disclosure
Schedule, the Company has filed with the SEC all Material Contracts required to
be filed pursuant to the Securities Act or the Exchange Act.
18
(f) The Company has in place the "disclosure controls and procedures"
(as defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act) required in
order for the Chief Executive Officer and Chief Financial Officer of the Company
to engage in the review and evaluation process mandated by the Exchange Act. The
Company's "disclosure controls and procedures" are reasonably designed to ensure
that all information (both financial and non-financial) required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that all such information is accumulated
and communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the
Chief Executive Officer and Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports.
Section 4.09. Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement or as set
forth in Section 4.09 of the Company Disclosure Schedule, since March 31, 2003
(a) the Company and the Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice, (b) there has not
been any Company Material Adverse Effect, (c) there has not been any revaluation
by the Company of any of its material assets, other than in the ordinary course
of business, and (d) there has not been any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of the Company or any Subsidiary that has had individually or in the
aggregate, a Company Material Adverse Effect on the Company.
Section 4.10. Absence of Litigation. (a) Except as set forth in Section
4.10(a) of the Company Disclosure Schedule, there is no litigation, suit, claim,
action, proceeding or investigation (an "Action") and (to the knowledge of the
------
Company) no Person has threatened to commence any Action: (i) that involves the
Company or any Subsidiary or any of the assets owned or used by the Company or
any Subsidiary; or (ii) that seeks to materially delay or prevent the
consummation of the Merger. As of the date hereof, no director or executive
officer of the Company or any Subsidiary has asserted a claim to seek
indemnification from the Company under the Certificate of Incorporation or
By-laws of the Company or any Subsidiary or any indemnification agreement
between the Company or any Subsidiary and such Person.
(b) There is no material order, writ, injunction, judgment or decree
to which the Company or any Subsidiary, or any of the assets owned or used by
the Company or any Subsidiary, is subject. To the knowledge of the Company, no
executive officer of the Company is subject to any order, writ, injunction,
judgment or decree that prohibits such officer from engaging in or continuing
any conduct, activity or practice relating to the business of the Company or any
Subsidiary.
Section 4.11. Employee Benefit Plans. (a) Section 4.11(a) of the Company
Disclosure Schedule lists (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, compensation, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, termination, change in control, severance
or other Contracts or agreements, whether legally enforceable or not, to which
the Company or any Subsidiary is a party, with respect to which the Company or
any Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Subsidiary for the benefit of any current or
19
former employee, officer or director of the Company or any Subsidiary,
(ii) each employee benefit plan for which the Company or any Subsidiary would
incur liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated, (iii) any plan in respect of which the Company or any
Subsidiary would incur liability under Section 4212(c) of ERISA, and (iv) any
Contracts, arrangements or understandings between the Company or any Subsidiary
and any employee of the Company or any Subsidiary including any Contracts,
arrangements or understandings relating in any way to a sale of the Company or
any Subsidiary (collectively, the "Plans"). Each Plan is in writing and the
Company has ----- furnished to Merger Sub a true and complete copy of each Plan
and each material document, if any, prepared in connection with each such Plan,
including (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (iv) the most
recently received IRS --- determination letter for each such Plan, and (v) the
most recently prepared actuarial report and financial statement in connection
with each such Plan. Neither the Company nor any Subsidiary has any express or
implied commitment, whether legally enforceable or not, (i) to create, incur
liability with respect to or cause to exist any other employee benefit plan,
program or arrangement, (ii) to enter into any Contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by this Agreement, ERISA or the Code.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single
-------------------
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Subsidiary would incur liability under Section 4063 or
4064 of ERISA (a "Multiple Employer Plan"). Except as set forth in Section
----------------------
4.11(b) of the Company Disclosure Schedule, none of the Plans (i) provides for
the payment of separation, severance, termination or similar-type benefits to
any Person, (ii) obligates the Company or any Subsidiary to pay separation,
severance, termination or similar-type benefits solely or partially as a result
of any transaction contemplated by this Agreement, or (iii) obligates the
Company or any Subsidiary to make any payment or provide any benefit as a result
of a "change in control", within the meaning of such term under Section 280G of
the Code. None of the Plans provides for or promises retiree medical, disability
or life insurance benefits to any current or former employee, officer or
director of the Company or any Subsidiary. Each of the Plans is subject only to
the Laws of the United States or a political subdivision thereof.
(c) Each Plan is now, and during the past six years has been, operated
in all material respects in accordance with its terms and the requirements of
all applicable Law including ERISA and the Code, except where the failure to do
so would not have a Company Material Adverse Effect. The Company and the
Subsidiaries have performed all material obligations required to be performed by
them under, are not in any respect in default under or in violation of, and have
no knowledge of any default or violation by any party to, any Plan. No Action is
pending or, to the knowledge of the Company, threatened with respect to any Plan
(other than claims for benefits in the ordinary course) and, to the knowledge of
the Company (after such inquiry as the relevant officer of the Company has
determined to be reasonably appropriate under the circumstances), no fact or
event exists that could give rise to any such Action.
(d) Each Plan that is intended to be qualified under Section 401(a) of
the Code or Section 401(k) of the Code (i) has timely received a favorable
determination letter from the IRS covering all of the provisions applicable to
the Plan for which determination letters are currently available, (ii) is so
qualified and (iii) each trust established in connection with any Plan which is
20
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and,
to the knowledge of the Company (after such inquiry as the relevant officer of
the Company has determined to be reasonably appropriate under the
circumstances), no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the qualified
status of any such Plan or the exempt status of any such trust.
(e) To the knowledge of the Company, there has not been any prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) within the last six years with respect to any Plan. Neither the Company
nor any Subsidiary has incurred any liability under, arising out of or by
operation of Title IV of ERISA (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course), including any
liability in connection with (i) the termination or reorganization of any
employee benefit plan subject to Title IV of ERISA, or (ii) the withdrawal from
any Multiemployer Plan or Multiple Employer Plan, and, to the knowledge of the
Company (after such inquiry as the relevant officer of the Company has
determined to be reasonably appropriate under the circumstances), no fact or
event exists which could give rise to any such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority and,
to the knowledge of the Company (after such inquiry as the relevant officer of
the Company has determined to be reasonably appropriate under the
circumstances), no fact or event exists which could give rise to any such
challenge or disallowance.
(g) Except as set forth in Section 4.11(g) of the Company Disclosure
Schedule, no Plan provides for the payment to any present or former employee of
the Company or its Subsidiaries of any money or other property or accelerate or
provide any other rights or benefits to any present or former employee of the
Company or its Subsidiaries as a result of the Transactions, whether or not such
payment would constitute a parachute payment within the meaning of Code Section
280G.
(h) Any amount or economic benefit that could be received (whether in
cash or property or the vesting of property) by any current or former director,
officer, employee or consultant of the Company or any Subsidiary who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Plan, employment agreement or otherwise
as a result of the execution and delivery of this Agreement by the Company or
the consummation of the Merger or any other Transaction (including as a result
of termination of employment on or following the Effective Time) would not be
characterized as an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code).
Section 4.12. Labor and Employment Matters. There are no controversies or
claims pending or, to the knowledge of the Company, threatened between the
Company or any Subsidiary and any of their respective employees, which
controversies or claims, individually or in the aggregate, would prevent or
materially delay consummation of the Merger or would have a Company Material
Adverse Effect. Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement, work council agreement, work force agreement or
21
other labor union Contract applicable to Persons employed by the Company or any
Subsidiary, nor, to the knowledge of the Company, are there any activities or
proceedings of any labor union to organize any such employees. There are no
unfair labor practice complaints pending against the Company or any Subsidiary
before the National Labor Relations Board, any other court or tribunal or any
current union representation questions involving employees of the Company or any
Subsidiary and there is no strike, slowdown, work stoppage or lockout, or, to
the knowledge of the Company, threat thereof, by or with respect to any
employees of the Company or any Subsidiary.
(b) The Company and the Subsidiaries are in compliance in all material
respects with all applicable Laws relating to the employment of labor and
employment practices, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Company or any Subsidiary and are not liable for any arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing.
The Company and the Subsidiaries have paid in full to all employees or
adequately accrued in accordance with GAAP, all wages, salaries, commissions,
bonuses, benefits and other compensation due to or on behalf of such employees
and there is no claim with respect to payment of wages, salary or overtime pay
that has been asserted or is now pending or, to the knowledge of the Company,
threatened before any Governmental Authority with respect to any Persons
currently or formerly employed by the Company or any Subsidiary. Neither the
Company nor any Subsidiary is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating to employees or
employment practices. There is no charge or proceeding with respect to a
violation of any occupational safety or health standards that has been asserted
or is now pending or, to the knowledge of the Company, threatened with respect
to the Company. There is no charge of discrimination in employment or employment
practices, for any reason, including age, gender, race, religion or other
legally protected category, which has been asserted or is now pending or, to the
knowledge of the Company, threatened before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction
in which the Company or any Subsidiary have employed or employ any Person.
(c) Except as set forth in Section 4.12(c) of the Company Disclosure
Schedule, (i) all subsisting Contracts of employment to which the Company or any
Subsidiary is a party are terminable by the Company or any Subsidiary on three
months' notice or less without compensation (other than in accordance with
applicable legislation); (ii) there are no customs, established practices or
discretionary arrangements of the Company or any Subsidiary in relation to the
termination of employment of any of its employees (whether voluntary or
involuntary); (iii) neither the Company nor any Subsidiary has any outstanding
liability to pay compensation for loss of office or employment or a redundancy
payment to any present or former employee or to make any payment for breach of
any agreement listed in Section 4.12(c) of the Company Disclosure Schedule; and
(iv) there is no term of employment of any employee of the Company or any
Subsidiary which shall entitle that employee to treat the consummation of the
Transactions as amounting to a breach of his Contract of employment or entitling
the employee to any payment or benefit whatsoever or entitling the employee to
treat himself or herself as redundant or otherwise dismissed or released from
any obligation.
22
(d) All directors, officers, management employees, and technical and
professional employees of the Company and the Subsidiaries have entered into the
standard form assignment of proprietary information and confidentiality
agreement of the Company (the "Standard Form Confidentiality Agreement") a form
---------------------------------------
of which is attached at Section 4.12(d) of the Company Disclosure Schedule. To
the Company's knowledge, no employee of the Company or any Subsidiary has
materially violated any employment Contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound due to such employee
being employed by the Company and disclosure to the Company or using trade
secrets or proprietary information of any other Person.
(e) The information made available to Parent by the Company prior to
the Effective Time regarding current fiscal year employment, salary and other
compensation information with respect to each current salaried employee,
officer, director, consultant or agent of the Company and each Subsidiary was,
as of the date that such information was made available to Parent, true and
correct in all material respects.
Section 4.13. Form F-4; Proxy Statement. The information supplied by or on
behalf of the Company for inclusion in the Registration Statement will not, at
the time the Registration Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading. The
information supplied by or on behalf of the Company for inclusion in the Proxy
Statement will not, at the date the Proxy Statement (or any amendment or
supplement thereto) is filed with the SEC, at the date it is first mailed to
stockholders of the Company, at the time of the Stockholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not false or misleading, or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Stockholders' Meeting which will have become false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by or on behalf of Parent or any of its
representatives for inclusion in any of the foregoing documents. The Proxy
Statement will comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
Section 4.14. Property and Leases. (a) The Company and the Subsidiaries
have sufficient title to all their properties and assets to conduct their
respective businesses as currently conducted, with only such exceptions as would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) Neither the Company nor any Subsidiary owns any real property.
Each parcel of real property leased by the Company or any Subsidiary (i) is
leased free and clear of all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
restrictions of any kind against the Company or any Subsidiary, including any
easement, right of way or other encumbrance to title, or any option, right of
first refusal, or right of first offer applicable to the Company or any
Subsidiary (collectively, "Liens"), other than (A) Liens for current taxes and
-----
assessments not yet past due, (B) inchoate mechanics' and materialmen's Liens
for construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of the Company or
such Subsidiary consistent with past practice, and (D) all matters of record,
Liens and other imperfections of title and encumbrances that, individually or in
23
the aggregate, would not have a Company Material Adverse Effect (collectively,
"Permitted Liens"), and (ii) is neither subject to any governmental decree or
----------------
order to be sold nor is being condemned, expropriated or otherwise taken by any
public authority with or without payment of compensation therefor, nor, to the
knowledge of the Company, has any such condemnation, expropriation or taking
been proposed.
(c) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party, and
all amendments and modifications thereto, are in full force and effect and have
not been modified or amended, and there exists no default under any such lease
by the Company or any Subsidiary, nor any event which, with notice or lapse of
time or both, would constitute a default thereunder by the Company or any
Subsidiary, except as would not, individually or in the aggregate, prevent or
materially delay consummation of the Merger or would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(d) To the knowledge of the Company, there are no contractual or legal
restrictions that preclude or materially restrict the ability to use any real
property leased by the Company or any Subsidiary for the purposes for which it
is currently being used. To the knowledge of the Company, there are no material
latent defects or material adverse physical conditions affecting the real
property, and improvements thereon, leased by the Company or any Subsidiary.
Section 4.15. Intellectual Property. (a) Section 4.15(a) of the Company
Disclosure Schedule accurately identifies the following information:
(i) Section 4.15(a)(i) of the Company Disclosure Schedule accurately
identifies (A) each current and material proprietary product or
service developed, manufactured, marketed, or sold by the Company
or any Subsidiary, including any product or service currently
under development by the Company or any Subsidiary, (B) all
registered and unregistered trademarks, trade names, service
marks, and applications therefor, registered copyrights and
applications therefor, patents and patent applications, in each
case owned by the Company or any Subsidiary and indicating
whether owned by the Company or a Subsidiary and (C) all domain
names owned by or registered to the Company or any Subsidiary.
(ii) Section 4.15(a)(ii) of the Company Disclosure Schedule accurately
identifies (A) each item of Registered IP in which the Company or
any Subsidiary has or purports to have an ownership interest of
any nature (whether exclusively, jointly with another Person, or
otherwise), (B) the jurisdiction in which such item of Registered
IP has been registered or filed and the applicable registration
or serial number and (C) any other Person that has an ownership
interest in such item of Registered IP and the nature of such
ownership interest. The Company has made available to Parent
complete and accurate copies of all applications, material
correspondence and other material documents related to each such
item of Registered IP.
24
(iii) Section 4.15(a)(iii) of the Company Disclosure Schedule
accurately identifies (A) all Intellectual Property licensed to
the Company or any Subsidiary (other than any non-customized
software that (1) is not incorporated into, or used directly in
the development, manufacturing, or distribution of, the products
or services of the Company or any Subsidiary and (2) is generally
available on standard terms for less than $5,000), (B) the
corresponding Contract or Contracts pursuant to which such
Intellectual Property is licensed to the the Company or any
Subsidiary, and (C) whether the license or licenses granted to
the Company or any Subsidiary are exclusive or nonexclusive.
(iv) Section 4.15(a)(iv) of the Company Disclosure Schedule accurately
identifies each Contract in which the aggregate unpaid fees and
royalties (including maintenance and support fees for the first
year of maintenance and support, if any) payable to the Company
or any Subsidiary equal or exceed $100,000 and pursuant to which
any Person has been granted any license under, or otherwise has
received or acquired any right (whether or not currently
exercisable) or interest in, any Company Owned Intellectual
Property. Except as set forth in Section 4.15 of the Company
Disclosure Schedule, none of the Company or any Subsidiary is
bound by, and no Company Owned Intellectual Property is subject
to, any Contract containing any covenant or other provision that
in any way limits or restricts the ability of the Company or any
Subsidiary to use, exploit, assert, or enforce any Company Owned
Intellectual Property anywhere in the world.
(b) The Company has provided to Parent a complete and accurate copy of
each standard form of Company Owned Intellectual Property Contract used
currently by the Company or any Subsidiary, including each standard form of (A)
end user software license and professional services agreement, (B) development
agreement, (C) distributor or reseller agreement, (D) employee agreement
together with assignment or license of Intellectual Property rights or any
confidentiality provision, including the Standard Form Confidentiality
Agreement, (E) consulting or independent contractor agreement containing any
assignment or license of Intellectual Property or any confidentiality provision
or (F) confidentiality or nondisclosure agreement. Section 4.15(b) of the
Company Disclosure Schedule accurately identifies (i) each Company Owned
Intellectual Property Contract entered into in the past two years, and (ii) each
maintenance and support agreement entered into with the Company's 100 largest
maintenance and support customers (measured by the total maintenance and support
amounts invoiced to such customers in fiscal year 2003), in each case, in which
there is a material deviation from the corresponding standard form agreement
provided to Parent. For purposes of this Section 4.15(b), "material deviation"
shall mean any (1) "source code escrow" or source code licensing provision, (2)
non-standard assignment or termination provision, (3) most-favored customer
provision, (4) non-standard limitation of liability or warranty provision, (5)
exclusivity arrangement, or (6) any Contract with any Governmental Body.
(c) Except as set forth in Section 4.15(c) of the Company Disclosure
Schedule, the Company and each Subsidiary owns all right, title, and interest to
and in or has a valid and enforceable license to use all Intellectual Property
necessary to conduct the business of the Company and each Subsidiary as
currently conducted and presently planned by each of Company and each Subsidiary
25
to be conducted (other than Intellectual Property exclusively licensed to the
Company or any Subsidiary, as identified in Section 4.15(a)(iv) of the Company
Disclosure Schedule) free and clear of any encumbrances (other than licenses
granted pursuant to the Contracts listed in the Company Disclosure Schedule and
licenses granted to customers in the ordinary course of business). Without
limiting the generality of the foregoing:
(i) Each Person who is or was an employee or contractor of the
Company or any Subsidiary after September 30, 2001, and who
is or was involved in the creation or development of any
Company Owned Intellectual Property, has signed a valid,
enforceable agreement containing an assignment of Company
Owned Intellectual Property to the Company and/or any
Subsidiary and confidentiality provisions protecting the
Company Owned Intellectual Property. Prior to September 30,
2001, the Company had procedures in place to cause employees
and contractors of the Company or any Subsidiary who were
involved in the creation or development of any Company Owned
Intellectual Property to assign such Company Owned
Intellectual Property to the Company and/or any Subsidiary
and to maintain the confidentiality of such Company Owned
Intellectual Property. No current or former stockholder,
officer, director, contractor or employee of the Company or
any Subsidiary has any claim, right (whether or not
currently exercisable), or interest to or in any Company
Owned Intellectual Property. To the knowledge of the
Company, no employee of the Company or any Subsidiary is (A)
bound by or otherwise subject to any Contract restricting
him or her from performing his or her duties for the Company
or any Subsidiary or (B) in breach of any Contract with any
former employer or other Person concerning Intellectual
Property or confidentiality.
(ii) No funding, facilities, or personnel of any Governmental
Authority were used, directly or indirectly, to develop or
create, in whole or in part, any Company Owned Intellectual
Property.
(iii) Each of the Company and each Subsidiary has taken
reasonable steps to maintain the confidentiality of and
otherwise protect and enforce their rights in all
Intellectual Property the value of which is dependent upon
its confidentiality, including proprietary information held
by the Company or any Subsidiary, or purported to be held by
the Company or any Subsidiary, as a trade secret.
(iv) Except as set forth in Section 4.15(c) of the Company
Disclosure Schedule, since January 1, 2000, none of the
Company or any Subsidiary has assigned or otherwise
transferred ownership of, or agreed to assign or otherwise
transfer ownership of, any Intellectual Property to any
other Person.
(v) None of the Company or any Subsidiary is now or ever was a
member or promoter of, or a contributor to, any industry
standards body or similar organization that could require or
obligate the Company or any Subsidiary to grant or offer to
any other Person any license or right to any Company Owned
Intellectual Property.
26
(vi) To the knowledge of the Company after reasonable inquiry,
each license of the Company Licensed Intellectual Property
is valid and enforceable, subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to
creditors' rights and general principles of equity, is
binding on all parties to such license, and is in full force
and effect.
(vii) To the knowledge of the Company, no party to any license of
the Company Licensed Intellectual Property is in breach
thereof or default thereunder in any material respect and no
event has occurred that, with notice or lapse of time, would
constitute such breach or default or permit the termination
or cancellation of the license.
(viii) Neither the Company nor any Subsidiary has received any
notice of termination or cancellation under any license for
the Company Licensed Intellectual Property.
(d) To the knowledge of the Company, all Company Owned Intellectual
Property is valid, subsisting, and enforceable. Without limiting the generality
of the foregoing, except as set forth in Section 4.15(d) of the Company
Disclosure Schedule:
(i) Neither the Company nor any Subsidiary owns (or purports to
own) or has filed any U.S. or foreign patent applications or
foreign patents.
(ii) Each item of Company Owned Intellectual Property that is
Registered IP is and, to the knowledge of the Company, at
all times has been in compliance with all applicable
requirements of the applicable issuing Governmental
Authority, and all filings, payments, and other actions
required to be made or taken to maintain such item of
Company Owned Intellectual Property in full force and effect
have been made by the applicable deadline. No application
for a patent or for a copyright registration, mask work
registration or trademark registration or any other type of
Registered IP filed by or on behalf of the Company or any
Subsidiary has been abandoned, allowed to lapse, or rejected
(other than for non-use of a trademark) since January 1,
2000. Section 4.15(d)(iii) of the Company Disclosure
Schedule accurately identifies and describes each filing,
payment, and action that must be made or taken on or before
the date that is 90 days after the date hereof in order to
maintain each such item of Company Owned Intellectual
Property in full force and effect.
(iii) No interference, opposition, reissue, reexamination, or
other Proceeding of any nature is or has been pending or
threatened, in which the scope, validity, or enforceability
of any Company Owned Intellectual Property is being, has
been, or could reasonably be expected to be contested or
challenged. To the knowledge of the Company, there is no
basis for a claim that any Company Owned Intellectual
Property is invalid or unenforceable.
(e) To the knowledge of the Company, no Person has infringed,
misappropriated, or otherwise violated, and no Person is currently infringing,
27
misappropriating, or otherwise violating, any Company Owned Intellectual
Property. Section 4.15(e) of the Company Disclosure Schedule accurately
identifies, and the Company has provided to Parent a complete and accurate copy
of each letter or other written or electronic communication or correspondence
that has been sent or otherwise delivered by or to the Company or any Subsidiary
or any Representative of the Company or any Subsidiary regarding, any actual,
alleged, or suspected infringement or misappropriation of any Company Owned
Intellectual Property since January 1, 2000, and provides a brief description of
the current status of the matter referred to in such letter, communication or
correspondence.
(f) Except as described in Section 4.15(a)(iii) of the Company
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement (or any of the ancillary agreements) nor the consummation of any of
the Transactions (or any of the ancillary agreements) will, with or without
notice or the lapse of time, (x) adversely affect any of the Company's or any
Subsidiary's rights with respect to the Company Owned Intellectual Property or
the Company Licensed Intellectual Property or (y) result in or give any other
Person the right or option to cause or declare, (i) a loss of, or encumbrance
on, any Company Owned Intellectual Property; (ii) a breach of any Contract
listed or required to be listed in Section 4.15(a)(iii) of the Company
Disclosure Schedule; (iii) the release, disclosure or delivery of any Company
Owned Intellectual Property by or to any escrow agent or other Person; or (iv)
the grant, assignment or transfer to any other Person of any license or other
right or interest under, to or in any of the Company Owned Intellectual
Property.
(g) Except as described in Section 4.15(g) of the Company Disclosure
Schedule, to the knowledge of the Company after reasonable inquiry, none of the
Company or any Subsidiary has ever infringed (directly, contributorily, by
inducement, or otherwise), misappropriated or otherwise violated any
Intellectual Property of any other Person. Without limiting the generality of
the foregoing:
(i) To the knowledge of the Company, no product, information or
service ever manufactured, produced, distributed, published,
provided or sold by or on behalf of the Company or any
Subsidiary, and no Intellectual Property ever owned or
developed by the Company or any Subsidiary, has ever
conflicted with, infringed, misappropriated or otherwise
violated any Intellectual Property of any other Person.
(ii) No infringement, misappropriation or similar claim or Action
is pending or, to the knowledge of the Company, has been
threatened against the Company or any Subsidiary or against
any other Person who may be entitled to be indemnified,
defended, held harmless or reimbursed by the Company or any
Subsidiary with respect to such claim or Proceeding. To the
knowledge of the Company, since January 1, 2000, none of the
Company or any Subsidiary has received any notice or other
communication (in writing or otherwise) relating to any
actual, alleged or suspected infringement, misappropriation
or violation of any Intellectual Property Right of another
Person.
(iii) None of the Company or any Subsidiary is bound by any
Contract to indemnify, defend, hold harmless or reimburse
any other Person with respect to any intellectual property
infringement, misappropriation or similar claim. To the
28
knowledge of the Company, after such inquiry as the relevant
officer of the Company has determined to be reasonably
appropriate under the circumstances, none of the Company or
any Subsidiary has ever assumed or agreed to discharge or
otherwise take responsibility for, any existing or potential
liability of another Person for infringement,
misappropriation or violation of any Intellectual Property.
(iv) No claim or Proceeding involving any Intellectual Property
licensed to the Company or any Subsidiary is pending or, to
the knowledge of the Company, has been threatened, except
for any such claim or Proceeding that, if adversely
determined, would not adversely affect (A) the use or
exploitation of such Intellectual Property by the Company or
any Subsidiary or (B) the manufacturing, distribution or
sale of any product or service currently being developed,
offered, manufactured, distributed or sold by the Company or
any Subsidiary.
(v) To the knowledge of the Company, after such inquiry as the
relevant officer of the Company has determined to be
reasonably appropriate under the circumstances, with respect
to each item of Intellectual Property licensed to the
Company or any Subsidiary ("Company Licensed Intellectual
-----------------------------
Property"), the Company and/or each such Subsidiary has
--------
valid licenses or other rights to use such Company Licensed
Intellectual Property in the continued operation of its
respective business in accordance with the terms of the
license agreements governing such Company Licensed
Intellectual Property. A copy of each such license
pertaining to the Company Licensed Intellectual Property has
been delivered to Parent.
(h) Except as disclosed to Parent, none of the Company Owned Software
(A) contains any bug, defect or error (including any bug, defect or error
relating to or resulting from the display, manipulation, processing, storage,
transmission or use of date data) that materially and adversely affects the use,
functionality or performance of such Company Owned Software or any product or
system containing or used in conjunction with such Company Owned Software or (B)
fails in any material respect to comply with any applicable warranty or other
contractual commitment relating to the use, functionality or performance of such
Company Owned Software or any product or system containing or used in
conjunction with such Company Owned Software, other than ordinary course
warranty compliance issues. The Company has made available to Parent a complete
and accurate list of all known material bugs, defects, and errors in each
version and component of the Company Owned Software.
(i) Except as described in Section 4.15(i) of the Company Disclosure
Schedule, the Company has not inserted into the Company Owned Software any "back
door," "drop dead device," "time bomb" or "Trojan horse," (as such terms are
commonly understood in the software industry) or any other code designed or
intended by the Company to have, or capable of performing, any of the following
functions: (A) disrupting, disabling, harming or otherwise impeding in any
manner the operation of, or providing unauthorized access to, a computer system
or network or other device on which such code is stored or installed or (B)
damaging or destroying any data or file without the user's consent. The Company
has not intentionally inserted into the Company Owned Software any "virus" or
"worm" (as such terms are commonly understood in the software industry).
29
(j) The Company has obtained all approvals necessary for exporting the
Company Owned Software outside the United States, and all such export approvals
in the United States are valid, current, outstanding and in full force and
effect. To the knowledge of the Company, the Company has obtained all approvals
necessary for importing the Company Owned Software into any country in which the
Company Owned Software is now sold or licensed for use, and all such import
approvals in the United States and throughout the world are valid, current,
outstanding and in full force and effect. The Company has no present knowledge
from which it would necessarily conclude that it does not have the right to use
all software development tools, library functions, compilers, and other third
party software that is material to the business of the Company, or that is
required to operate or modify the Company Owned Software.
(k) None of the Company Owned Software is subject to any "copyleft" or
other obligation or condition (including any obligation or condition under any
"open source" license such as the GNU Public License, Lesser GNU Public License
or Mozilla Public License) that (A) could require, or could condition the use or
distribution of such Company Owned Software on, the disclosure, licensing or
distribution of any source code for any portion of such Company Owned Software
or (B) could otherwise impose any limitation, restriction or condition on the
right or ability of the Company or any Subsidiary to use or distribute any
Company Owned Software.
(l) Except as set forth in Section 4.15(l) of the Company Disclosure
Schedule, (i) no source code for any Company Owned Software has been delivered,
licensed or made available to any escrow agent or other Person who is not, as of
the date of this Agreement, an employee of the Company or any Subsidiary, and
(ii) none of the Company or any Subsidiary has any duty or obligation (whether
present, contingent or otherwise) to deliver, license or make available the
source code for any Company Owned Software to any escrow agent or other Person
who is not, as of the date of this Agreement, an employee of the Company or any
Subsidiary. To the knowledge of the Company, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, result in the delivery, license or
disclosure of any source code for any Company Owned Software to any other Person
who is not, as of the date of this Agreement, an employee of the Company or any
Subsidiary. Without limiting the generality of the foregoing, no Person has made
any claim or delivered any notice that such Person is entitled to receive the
source code for any Company Owned Software pursuant to any source code escrow
agreement identified or required to be identified in Section 4.15(l) of the
Company Disclosure Schedule.
(m) Except as set forth in Section 4.15(m) of the Company Disclosure
Schedule, to the knowledge of the Company, no Person (i) has or had any
exclusive rights to any portion of the Company Owned Intellectual Property or
Company Owned Software, (ii) has or had any rights restricting the Company's use
of Company Owned Intellectual Property or Company Owned Software within any
field of use, (iii) has ever incorporated any source code for any Company Owned
Software into any of such Person's product, (iv) has ever redistributed any such
source code, or (v) has ever used any such source code to develop, market or
distribute any product.
30
(n) The Software manufactured by the Company and each Subsidiary and
sold to end user customers and, to the knowledge of the Company, the Software
manufactured by the Company and each Subsidiary and sold for use by original
equipment manufacturer customers and the Software sold by the Company or any
Subsidiary but manufactured by third parties, comply in all material respects
with all applicable Laws.
Section 4.16. Taxes. The Company and the Subsidiaries have filed all United
States federal, state, local and non-United States Tax returns and reports
required to be filed by them and have paid and discharged all Taxes required to
be paid or discharged (whether or not shown on such Tax returns) other than such
payments as are being contested in good faith by appropriate proceedings. All
such Tax returns were true, complete and correct in all material respects and
were filed on a timely basis. The Company and the Subsidiaries have not
requested any extension of time within which to file any Tax return, which Tax
return has not since been filed. Except as set forth in Section 4.16 of the
Company Disclosure Schedule, neither the IRS nor any other United States or
non-United States taxing authority or agency is now asserting or, to the
knowledge of the Company, threatening to assert against the Company or any
Subsidiary any deficiency or claim for any Taxes or interest thereon or
penalties in connection therewith. No audits or other administrative or court
proceedings are presently pending with regard to any Taxes or Tax returns of the
Company and its Subsidiaries. Neither the Company nor any Subsidiary has granted
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of any Tax. The accruals and reserves for Taxes
reflected in the 2002 Balance Sheet are adequate to cover all Taxes accruable
through such date (including interest and penalties, if any, thereon) in
accordance with GAAP. Neither the Company nor any Subsidiary has made an
election under Section 341(f) of the Code. There are no Tax liens upon any
property or assets of the Company or any of the Subsidiaries except liens for
current Taxes not yet due. Except as described in Section 4.16 of the Company
Disclosure Schedule, neither the Company nor any of the Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 of the Code
by reason of a voluntary change in accounting method initiated by the Company or
any of the Subsidiaries, and the IRS has not initiated or proposed any such
adjustment or change in accounting method, in either case which adjustment or
change would have a Company Material Adverse Effect. Except as set forth in the
financial statements described in Section 4.08, neither the Company nor any of
the Subsidiaries has entered into a transaction which is being accounted for
under the installment method of Section 453 of the Code, which would prevent or
materially delay consummation of the Merger or would have a Company Material
Adverse Effect. Section 4.16 of the Company Disclosure Schedule contains a list
of all jurisdictions (whether foreign or domestic) in which the Company or any
of its Subsidiaries currently files Tax returns. Neither the Company nor any
Subsidiary is or has been a U.S. real property holding company (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii). Section 4.16 of the Company Disclosure Schedule lists for each
Subsidiary (i) the amount of any net operating losses, net capital losses,
unused investment or other credits, unused foreign Tax, or excess charitable
contributions of such Subsidiary, and any limitations thereon, and (ii) the
amount of any deferred gain or loss allocable to such Subsidiary arising out of
any prior intercompany transaction.
Section 4.17. Environmental Matters. Except as specifically described in
Section 4.17 of the Company Disclosure Schedule or as would not, individually or
in the aggregate, have a Company Material Adverse Effect, (a) the Company and
each Subsidiary are in compliance with all applicable Environmental Laws; (b)
none of the properties currently or formerly owned, leased or operated by the
Company or any Subsidiary (including soils and surface and ground waters) are
contaminated with any Hazardous Substance; (c) the Company is not liable for any
off-site contamination by Hazardous Substances; (d) the Company is not liable
nor, to the knowledge of the Company, is it threatened to be made liable, under
any Environmental Law (including pending or threatened liens); (e) the Company
31
has all permits, licenses and other authorizations required under any
Environmental Law ("Environmental Permits"); (f) the Company is in compliance
---------------------
with its Environmental Permits; and (g) neither the execution of this Agreement
nor the consummation of the Transactions will require any investigation,
remediation or other action with respect to Hazardous Substances, or any notice
to or consent of Governmental Authorities or third parties, pursuant to any
applicable Environmental Law or Environmental Permit.
Section 4.18. Material Contracts. (a) Subsections (i) through (xii) of
Section 4.18(a) of the Company Disclosure Schedule contain a list of the
following types of Contracts and agreements to which the Company or any
Subsidiary is a party (such Contracts, agreements and arrangements as are
required to be set forth in Section 4.18(a) of the Company Disclosure Schedule
being the "Material Contracts"):
------------------
(i) each maintenance Contract and each Contract and agreement
which is likely to involve payment or receipt of annual
consideration of more than $300,000, in the aggregate, over
the remaining term of such Contract;
(ii) all broker, distributor, reseller, dealer, manufacturer's
representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising Contracts and
agreements to which the Company or any Subsidiary is a party
and which involve the payment or receipt of more than
$100,000 in any year;
(iii) all management Contracts (excluding Contracts for
employment) and Contracts with other consultants, including
any Contracts involving the payment of royalties or other
amounts calculated based upon the revenues or income of the
Company or any Subsidiary or income or revenues related to
any product or service of the Company or any Subsidiary to
which the Company or any Subsidiary is a party; and which
(A) is likely to involve payment of consideration of more
than $25,000, in the aggregate, during the fiscal year ended
June 30, 2004, (B) is likely to involve consideration of
more than $25,000, in the aggregate, over the remaining term
of such Contract, and which, in either case, cannot be
cancelled by the Company or any Subsidiary without penalty
or further payment and without more than 30 days' notice;
(iv) all Contracts and agreements evidencing indebtedness for
borrowed money, if any;
(v) all Contracts with any Governmental Authority to which the
Company or any Subsidiary is a party;
(vi) all Contracts imposing any restriction on the right or
ability of the Company or any Subsidiary (A) to compete with
any other Person or in any geographical area, (B) to acquire
any product or other asset or any services from any other
Person, or (C) to conduct its business as presently
conducted or materially and adversely affect or materially
restrict, the business, operations, assets, properties or
condition (financial or other) of the businesses of the
Company and its Subsidiaries, taken as a whole, as currently
conducted;
32
(vii) all material Contracts or arrangements that result in any
Person holding a power of attorney from the Company or any
Subsidiary that relates to the Company, any Subsidiary or
their respective businesses;
(viii) all Contracts for employment required to be listed in
Section 4.11(a) of the Company Disclosure Schedule;
(ix) all Contracts that provide for indemnification of any
officer, director, employee or agent;
(x) all material Contracts incorporating or relating to any
guaranty or warranty, except for Contracts substantially
identical to the standard forms of end-user software license
agreements previously made available by the Company to
Parent;
(xi) all Contracts which provide for termination, acceleration of
payment or other special rights upon the occurrence of a
change in control, by operation of Law or otherwise, of the
Company or any Subsidiary;
(xii) all other Contracts and agreements, whether or not made in
the ordinary course of business, which are material to the
Company, any Subsidiary or the conduct of their respective
businesses, or the absence of which would, to the knowledge
of the Company, prevent or materially delay consummation of
the Merger or would have a Company Material Adverse Effect.
(b) Except as would not, individually or in the aggregate, have a
Company Material Adverse Effect, each Contract that constitutes a Material
Contract is valid and in full force and effect, constitutes the legal, valid and
binding obligation of the Company, and to the knowledge of the Company, the
other parties thereto, in accordance with the terms of such agreement and is
enforceable in accordance with its terms. Except as would not have a Company
Material Adverse Effect, individually or in the aggregate, (i) neither the
Company nor any of the Subsidiaries is in default under any Material Contract
and none of the Material Contracts have been canceled by the other party; (ii)
to the Company's knowledge, no other party to any Material Contract is in breach
with respect to such Material Contract; (iii) the Company and the Subsidiaries
are not in receipt of any written claim of default under any such Material
Contract; (iv) neither the execution of this Agreement nor the consummation of
any Transaction shall constitute default, give rise to cancellation or third
party consent rights, or otherwise adversely affect any of the Company's rights
under any Material Contract. The Company has made available to Parent true and
complete copies of all Material Contracts, including any amendments or
modifications thereto.
(c) Except as set forth in Section 4.18(c) of the Company Disclosure
Schedule, no Material Contract which is currently in effect contains any "most
favored customer" or similar provision.
(d) Other than any such agreement with Parent or Merger Sub, the
Company is not a party to any standstill agreement pursuant to which the other
party thereto has agreed that neither it nor any of its Affiliates will (i)
acquire or seek to acquire ownership of any capital stock of the Company or any
options or rights to acquire such ownership, (ii) seek or propose to influence
33
or control the management of the policies of the Company or obtain
representation on the Board, or (iii) solicit or participate in the solicitation
of any proxies or consents with respect to the capital stock of the Company.
Section 4.19. Insurance. (a) Section 4.19(a) of the Company Disclosure
Schedule sets forth, with respect to each material insurance policy under which
the Company or any Subsidiary is insured, a named insured or otherwise the
principal beneficiary of coverage which is currently in effect, (i) the names of
the insurer, the principal insured and each named insured, (ii) the policy
number, (iii) the period, scope and amount of coverage and (iv) the premium
charged. To the knowledge of the Company, such insurance policies and the types
and amounts of coverage provided therein are adequate and usual and customary in
the context of the businesses and operations in which the Company and
Subsidiaries are engaged.
(b) The Company has made available to Parent a copy of each such
insurance policy and all material self insurance programs and arrangements
relating to the business, assets and operations of the Company and each
Subsidiary. Each such insurance policy is in full force and effect. Neither the
Company nor any Subsidiary has received written notice of any material breach or
default (including any such breach or default with respect to the payment of
premiums or the giving of notice) with respect to any such insurance policy. To
the knowledge of the Company, no insurer on the policy has been declared
insolvent or placed in receivership, conservatorship or liquidation.
(c) Except as set forth in Section 4.19(c) of the Company Disclosure
Schedule, at no time subsequent to July 1, 2000 has the Company or any
Subsidiary (i) been denied any insurance or indemnity bond coverage which it has
requested, (ii) made any material reduction in the scope or amount of its
insurance coverage, or (iii) received notice from any of its insurance carriers
that any insurance premiums will be subject to increase in an amount materially
disproportionate to the amount of the increases with respect thereto (or with
respect to similar insurance) in prior years or that any insurance coverage
listed in Section 4.19(a) of the Company Disclosure Schedule will not be
available in the future substantially on the same terms as are now in effect.
(d) Section 4.19(d) of the Company Disclosure Schedule sets forth each
of the Actions that the Company or any Subsidiary has tendered to the
appropriate insurance carrier(s) and whether such carrier has issued a denial of
coverage or a reservation of rights with respect to any such Action, or informed
the Company of its intent to do so.
Section 4.20. Brokers and Fees. No broker, finder or investment banker
(other than Broadview International LLC ("Broadview")) is entitled to any
---------
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company. The
Company has furnished to Parent accurate and complete copies of all agreements
under which all fees (including legal fees), commissions and other amounts have
been paid or may become payable and all indemnification and other agreements
related to the engagement of Broadview or any other advisor.
Section 4.21. Customers. Section 4.21 of the Company Disclosure Schedule
accurately identifies, and provides an accurate and complete breakdown of
software license revenue from each customer of the Company during the fiscal
year ended June 30, 2003.
34
Section 4.22. Sale of Products; Performance of Services. Since January 1,
2002, no customer or other Person has asserted or, to the knowledge of the
Company, threatened to assert, any claim against the Company or any Subsidiary
based upon any services performed by the Company or any Subsidiary, other than
claims with respect to which the total cost to remedy does not exceed $300,000.
Section 4.23. Compliance with Law. Except as would not have a Company
Material Adverse Effect or as set forth in Section 4.23 of the Company
Disclosure Schedule, the Company and each Subsidiary is, and has at all times
since July 1, 2002 been, in compliance with all applicable Law. Since July 1,
2002, neither the Company nor any Subsidiary has received any written notice or
other communication from any Governmental Authority or other Person regarding
any actual or possible violation of, or failure to comply with, any Law.
Section 4.24. Certain Business Practices. To the knowledge of the Company,
since July 1, 2001, neither the Company nor any Subsidiary, and no director,
officer, agent or employee of the Company or any Subsidiary (i) has made any
unlawful payment to foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns or violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or (ii) has made any
illegal gift or illegal bribe to any Person, private or public, regardless of
form, whether in money, property or services,
Section 4.25. Transactions with Affiliates. Except as set forth in Section
4.25 of the Company Disclosure Schedule or in the SEC Reports filed prior to the
date of this Agreement, between the date of the Company's last annual meeting
proxy statement filed with the SEC and the date of this Agreement, no event has
occurred that would be required to be reported by the Company pursuant to Item
404 of Regulation S-K promulgated by the SEC.
Section 4.26. Vote Required. The affirmative vote of the holders of a
majority of the Shares outstanding on the record date for the Company
Stockholders' Meeting is the only vote of the holders of any class or series of
the Company's capital stock necessary to adopt this Agreement, approve the
Merger or consummate any of the other Transactions.
Section 4.27. Fairness Opinion. The Board has received the opinion of
Broadview, financial advisor to the Company to the effect that, as of the date
of such opinion, the Merger Consideration is fair to the stockholders of the
Company from a financial point of view. The Company shall furnish a true and
correct copy of said opinion to Parent as promptly as practicable after the date
hereof.
Section 4.28. Company Rights Agreement. The Company has taken all actions
necessary to render the Company Rights Agreement inapplicable to the execution
and delivery of the Agreement and the Transactions.
Section 4.29. Silicon Valley Bank. As of the date of this Agreement, no
borrowings are currently outstanding and owed by the Company or any Subsidiary
to Silicon Valley Bank ("SVB") pursuant to the Loan and Security Agreement with
---
SVB dated as of September 24, 2002.
Section 4.30. Accounts Receivable. Except as set forth in Section 4.30 of
the Company Disclosure Schedule, the Company and each Subsidiary is the sole and
absolute owner of all accounts receivable that comprise the accounts receivable
line item (as reserved for doubtful accounts) in the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as at March 31,
2003. Each such account receivable is based on an actual sale and delivery of
goods and/or services rendered by the Company and each Subsidiary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the Company to enter into this Agreement, Parent and
Merger Sub hereby, jointly and severally, represent and warrant to the Company
that:
Section 5.01. Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted. Parent
and Merger Sub have heretofore made available to the Company complete and
correct copies of their respective Certificates of Incorporation, By-laws or
equivalent organizational documents, and each such instrument is in full force
and effect.
Section 5.02. Authority Relative to This Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by Parent and
Merger Sub and the consummation by Parent and Merger Sub of the Transactions
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub enforceable against each of Parent
and Merger Sub in accordance with its terms subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to creditors' rights and
general principles of equity.
Section 5.03. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, (i) conflict
with or violate the Certificate of Incorporation, By-laws or equivalent
organizational documents of either Parent or Merger Sub, (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
5.03(b) have been obtained and all filings and obligations described in Section
5.03(b) have been made, conflict with or violate any Law applicable to Parent or
Merger Sub or by which any property or asset of either of them is bound or
affected, or (iii) result in any breach of, or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or Merger Sub pursuant to, any note, bond, mortgage,
indenture, Contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any property or asset of either of them is bound or
affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
35
individually or in the aggregate, prevent or materially delay consummation of
the Transactions or otherwise prevent Parent and Merger Sub from performing
their material obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with,
or notification to, any Governmental Authority, except (i) for applicable
requirements, if any, of the Securities Act, Exchange Act, Blue Sky Laws and
filing and recordation of appropriate merger documents as required by Delaware
Law, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay consummation of the Transactions, or otherwise
prevent Parent or Merger Sub from performing their material obligations under
this Agreement.
Section 5.04. Financing. Parent has, and will have through the Effective
Time, sufficient funds or available borrowing capacity to permit Merger Sub to
consummate all the Transactions, including the Merger. The shares of Parent
Common Stock to be issued as part of the Merger Consideration have been duly
authorized and, when issued and delivered in accordance with the terms of this
Agreement, will have been validly issued and will be fully paid and
nonassessable and the issuance thereof is not subject to any preemptive or other
similar right.
Section 5.05. Form F-4; Proxy Statement. The information supplied by or on
behalf of Parent for inclusion in the Registration Statement will not, at the
time the Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not false or misleading. The information supplied by
or on behalf of Parent for inclusion in the Proxy Statement will not, at the
date the Proxy Statement (or any amendment or supplement thereto) is filed with
the SEC, at the date it is first mailed to stockholders of the Company, at the
time of the Stockholders' Meeting or at the Effective Time, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not false or misleading, or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which will have become
false or misleading. Notwithstanding the foregoing, Parent and Merger Sub make
no representation or warranty with respect to any information supplied by the
Company or any of its representatives for inclusion in any of the foregoing
documents. The Registration Statement will comply in all material respects as to
form with the requirements of the Exchange Act and the rules and regulations
thereunder.
Section 5.06. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or Merger
Sub.
Section 5.07. Capitalization. (a) The authorized capital stock of Parent
consists of (i) 800,000,000 shares of Parent Common Stock and (ii) 5,000,000
shares of preferred stock, par value $0.001 per share ("Parent Preferred
----------------
Stock"). As of the date hereof, (i) 100,904,866 shares of Parent Common Stock
-----
are issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) 1,569,207 shares of Parent Common Stock are held in the
treasury of Parent, (iii) 100,000 shares of Parent Common Stock are held by
subsidiaries of Parent and (iv) 8,866,543 shares of Parent Common Stock are
reserved for future issuance pursuant to stock options. As of the date hereof,
36
no shares of Parent Preferred Stock are issued and outstanding. Except as set
forth in this Section 5.07 and except for stock options granted pursuant to the
stock option plans of Parent, there are no options, warrants or other rights,
agreements arrangements, or commitments of any character relating to the issued
or unissued capital stock of Parent or Merger Sub or obligating Parent or Merger
Sub to issue or sell any shares of capital stock of, or other equity interests
in, Parent or Merger Sub. There are no outstanding contractual obligations of
Parent or Merger Sub to repurchase, redeem or otherwise acquire any shares of
Parent Common Stock or any capital stock of Merger Sub.
(b) The authorized capital stock of Merger Sub consists of 100 shares
of common stock, par value $0.001 per share, all of which are duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive rights
in respect thereof and all of which are owned by Parent. Each outstanding share
of capital stock of Merger Sub is duly authorized, validly issued, fully paid
and non-assessable and each such share is owned by Parent or Merger Sub free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on Parent's or Merger Sub's voting
rights, charges and other encumbrances of any nature whatsoever, except where
the failure to own such shares free and clear would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(c) The shares of Parent Common Stock to be issued pursuant to the
Merger in accordance with Article II have been duly authorized and, when issued
and delivered in accordance with the terms of this Agreement, (i) will be
validly issued, fully paid and nonassessable and not subject to any preemptive
or other similar right; and (ii) will, when issued, be registered under the
Securities Act and the Exchange Act and registered or exempt from registration
under applicable Blue Sky Laws.
Section 5.08. SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed by it with the SEC since July
1, 1999 and has heretofore delivered or made available to the Company, in the
form filed with the SEC, (i) its Annual Reports on Form 20-F for the fiscal
years ended December 31, 2000, 2001 and 2002, respectively, (ii) all proxy
statements relating to Parent's meetings of stockholders (whether annual or
special) held since January 1, 2000, (iii) all other forms including reports on
Form 6-K and other registration statements filed by Parent with the SEC since
January 1, 2002 and (iv) all other statements, reports, schedules, forms and
other documents filed by Parent with the SEC (each of the above referred to in
clauses (i), (ii) and (iii) above being, collectively, the "Parent SEC
----------
Reports"). The Parent SEC Reports (i) were prepared in accordance with either
-------
the requirements of the Securities Act of 1933 or the Exchange Act, as the case
may be, and the rules and regulations promulgated thereunder (to the extent
applicable), and (ii) did not, at the time they were filed, or, if amended, as
of the date of such amendment, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No consolidated Subsidiary is
required to file any form, report or other document with the SEC.
(b) Each of the audited consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent SEC Reports complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC applicable thereto and was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and each are true
and correct in all respects and fairly present and disclose, in all material
respects, a true and correct view of the state of the affairs, financial
position and assets and liabilities of Parent as at the dates of such accounts
37
and the income, expenses, cash flows and results of operations of Parent and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein.
(c) Neither Parent nor Merger Sub has any material accrued, contingent
or other liabilities of any nature, either matured or unmatured, except: (i) as
set forth on the consolidated balance sheet of Parent and its consolidated
subsidiaries as at December 31, 2002, including the notes thereto; (ii) normal
and recurring current liabilities that have been incurred by Parent or Merger
Sub since December 31, 2002 in the ordinary course of business and consistent
with past practice; and (iii) liabilities described in Section 5.08 of the
Parent Disclosure Schedule.
(d) Except as disclosed in the Parent SEC Reports filed prior to the
date of this Agreement, since January 1, 2003, (i) there has not been any Parent
Material Adverse Effect, and (ii) Parent has not been engaged in any
negotiations or discussions with any third party regarding any transaction where
consummation of such transaction would, to the knowledge of Parent, reasonably
be expected to result in a Parent Material Adverse Effect.
(e) Parent is a "foreign private issuer" within the meaning of Rule
3b-4 of the Exchange Act.
Section 5.09. Compliance with Law. Except as would not have a Parent
Material Adverse Effect, each of Parent and Merger Sub is, and has at all times
since January 1, 2003 been, in compliance with all applicable Law. Since January
1, 2003, neither Parent nor Merger Sub has received any written notice or other
communication from any Governmental Authority or other Person regarding any
actual or possible violation of, or failure to comply with, any Law.
Section 5.10. Absence of Litigation. (a) Except as set forth in Section
5.10 of the Parent Disclosure Schedule, there is no Action and (to the knowledge
of Parent) no Person has threatened to commence any Action: (i) that
individually or in the aggregate has had a Parent Material Adverse Effect; or
(ii) that seeks to materially delay or prevent the consummation of the Merger.
Section 5.11. No Vote Required. No vote of the stockholders of Parent is
required by Law, Parent's Certificate of Incorporation or Bylaws or otherwise in
order for Parent and Merger Sub to consummate the Transactions.
Section 5.12. Operations of Merger Sub. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.01. Conduct of Business by the Company Pending the Merger. The
Company agrees that, between the date of this Agreement and the earlier of the
termination of this Agreement pursuant to Section 9.01 hereof or the Effective
38
Time, unless Parent shall otherwise consent in writing, the businesses of the
Company and the Subsidiaries shall be conducted only in, and the Company and the
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use its reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries, to keep available the services
of the current officers, employees and consultants of the Company and the
Subsidiaries and to preserve the current relationships of the Company and the
Subsidiaries with customers, suppliers and other Persons with which the Company
or any Subsidiary has significant business relations. By way of amplification
and not limitation, except as expressly contemplated by this Agreement and
Section 6.01 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary shall, between the date of this Agreement and the earlier of the
termination of this Agreement pursuant to Section 9.01 hereof or the Effective
Time, directly or indirectly, do, or propose to do, any of the following without
the prior written consent of Parent (which consent, in the case of paragraphs
(f), (h), (i), (j), (k), (m), (n), (o), (s), (t) and (v), shall not be
unreasonably withheld or delayed):
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares of
any class of capital stock of the Company or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including any
phantom interest), of the Company or any Subsidiary (except for the issuance of
(x) up to 100,000 options under the Option Plans pursuant to option grants made
in the ordinary course of business and consistent with past practice (which
grants shall include an exercise price equal to or greater than $19.00 per share
and be subject to a vesting schedule whereby 25% of such option shall vest on
the first year anniversary of such grant and the remaining 75% of such option
shall vest monthly over the three years following such first-year anniversary),
Shares issuable pursuant to the exercise of options issued under the Option
Plans, and 47,244 Shares issuable pursuant to the Warrants, (y) rights to
purchase Shares pursuant to the ESPP and Shares issuable pursuant to the
exercise of rights to purchase Shares under the ESPP or (z) issuances of the
Company Rights or the Company common stock in connection with conversion,
exercise or exchange of the Company Rights), or (ii) any assets of the Company
or any Subsidiary, except in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except for payment of dividends with respect to the
Preferred Shares in accordance with the terms of such Preferred Shares;
(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including by merger, consolidation, or acquisition of
stock or assets or any other business combination) any corporation, partnership,
other business organization or any division thereof or any material amount of
assets; or (ii) enter into or amend any Contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section 6.01(e);
39
(f) (i) incur any indebtedness for borrowed money other than
borrowings in the ordinary course of business under the Company's existing line
of credit with SVB in an amount not greater than $5,000,000) as required in
order to fund short term cash requirements or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for, the
obligations of any Person, or make any loans or advances, or grant any security
interest in any of its assets; (ii) enter into any Contract or agreement other
than in the ordinary course of business and consistent with past practice; (iii)
authorize, or make any commitment with respect to, any single capital
expenditure which is in excess of $25,000 or capital expenditures which are, in
the aggregate, in excess of $150,000 for the Company and the Subsidiaries taken
as a whole; (iv) make or direct to be made any capital investments or equity
investments in any entity, other than a wholly owned Subsidiary; or (v) enter
into or amend any Contract, agreement, commitment or arrangement with respect to
any matter set forth in this Section 6.01(f);
(g) revalue any of its assets, or except as required by GAAP, change
any accounting methods used by it;
(h) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the 2002 Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice;
(i) pay or delay the payment of accounts payable or accelerate the
collection of accounts receivable, in either case other than in the ordinary
course of business and consistent with past practice;
(j) amend, modify or consent to the termination of any Material
Contract, or amend, waive, modify or consent to the termination of the Company's
or any Subsidiary's rights thereunder, other than in the ordinary course of
business and consistent with past practice;
(k) amend or modify any of the employment agreements entered into
between the Company and certain officers of the Company as set forth in Schedule
--------
II hereto;
--
(l) other than as and to the extent expressly set forth in Section
4.03(b) of the Company Disclosure Schedule, amend or waive any of the Company or
any Subsidiary rights under, or accelerate the vesting under, any provision of
either of the Option Plans, any provision of any agreement evidencing any
outstanding stock option or any restricted stock purchase agreement, or
otherwise modify any of the terms of any outstanding option, warrant or other
security or any related Contract, in each case with respect to the capital stock
of the Company or any Subsidiary;
(m) (A) except as required to comply with applicable Law or to renew
Plans substantially on the same terms and at substantially the same costs,
establish, adopt or materially amend any employee benefit plan, pay, commit to
pay or accelerate the payment of any bonus or make, commit to make or accelerate
any profit-sharing or similar payment to, or increase or commit to increase the
amount of the wages, salary, commissions, fringe benefits, severance, insurance
or other compensation or remuneration payable to, any of the Company or any
40
Subsidiary directors, officers, employees or consultants, except to the extent
such payment is an obligation of the Company or any Subsidiary as of the date of
this Agreement, or (B) enter into or materially amend any employment,
consulting, severance or similar agreement with any individual other than
consulting agreements with up to ten consultants entered into in the ordinary
course of business involving payments not in excess of $20,000 per individual
consultant in any month and not with a term in excess of 60 days.
Notwithstanding the foregoing, the Company will be permitted to grant raises in
salary to employees in connection with the Company's normal annual compensation
review process, provided that the amount of the raise given to any one employee
does not exceed 5% and the average for all employees does not exceed 3%;
(n) hire any employee with an annual base salary in excess of
$110,000, or with total potential annual compensation in excess of $200,000;
(o) acquire, lease or license any right or other asset from any other
Person or sell or otherwise dispose of, or lease or license, any right or other
asset, including any Company Owned Intellectual Property, to any other Person
(except in each case for immaterial assets acquired, leased, licensed or
disposed of by the Company or any Subsidiary in the ordinary course of business
and consistent with past practices), or waive or relinquish any material right;
provided, however, that Parent acknowledges that the current lease with respect
to the Company's principal offices in Atlanta, Georgia will expire in April,
2004 and that the Company will be permitted to extend, renew, modify or replace
such lease (for a lease term not to exceed 5 years) at a rental rate not to
exceed $19.00 per square foot for the first year of the term of such lease and
annual increases thereafter not to exceed 4%, notwithstanding any provision of
this Agreement (including Section 4.14 and this Section 6.01) to the contrary;
(p) dispose of or permit to lapse any rights to the use of any Company
Owned Intellectual Property, or dispose of or disclose to any Person other than
representatives of Parent any trade secret, formula, process, know-how or other
Company Owned Intellectual Property not theretofore a matter of public
knowledge;
(q) change any personnel policy of the Company or any Subsidiary;
(r) make any change in any method of accounting or accounting practice
or policy (including any method, practice or policy relating to Taxes), except
as required by any changes in generally accepted accounting principles or as
otherwise required by Law;
(s) (A) commence or settle any Action, including any Action relating
to this Agreement, the Merger or the Transactions, or (B) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of claims, liabilities or obligations reflected or reserved against
in the consolidated financial statements (or the notes thereto) of the Company
and its Subsidiaries;
(t) permit any material insurance policy naming the Company or any
Subsidiary as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Parent;
41
(u) enter into any agreement, understanding or commitment that
restrains, limits or impedes the ability of the Company or any Subsidiary to
compete with or conduct any business or line of business, including geographic
limitations on the activities of the Company or any Subsidiary;
(v) enter into any licensing or other agreement with regards to the
acquisition, distribution or licensing of any material Intellectual Property
other than licenses, distribution or other similar agreements entered into in
the ordinary course of business consistent with past practice;
(w) enter into any transaction between the Company or any Subsidiary,
on the one hand, and any Affiliate of the Company, on the other hand (other than
a Subsidiary of the Company) other than on an arm's length basis;
(x) take any action that would, or that would reasonably be expected
to, result in (i) any of the conditions to the Merger set forth in Article VIII
not being satisfied; or (ii) any material delay in the satisfaction of any such
conditions; or
(y) announce an intention, enter into any formal or informal agreement
or otherwise make a commitment, to do any of the foregoing.
Section 6.02. Conduct of Business by Parent and Merger Sub Pending the
Merger. Parent agrees that, except as expressly contemplated by Section 6.02 of
the Parent Disclosure Schedule, between the date of this Agreement and the
earlier of the termination of this Agreement pursuant to Section 9.01 hereof or
the Effective Time, it shall not, directly or indirectly, do, or propose to do,
any of the following without the prior written consent of the Company:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents, except as would not (i) prevent
or materially delay consummation of the Merger or any of the Transactions or
(ii) adversely affect the economic benefits of the Merger to the Company or the
stockholders of the Company; or
(b) enter into any negotiation or Contract with respect to any
transaction (other than the Merger) that would, to the knowledge of Parent
acting reasonably, (i) materially delay or adversely affect the ability of the
parties to obtain any approvals or clearances from Governmental Authorities
required to permit consummation of the Merger, or (ii) delay the date of mailing
of the Proxy Statement (or require an amendment to the Proxy Statement following
such mailing) such that the Closing would be delayed past January 15, 2004.
Section 6.03. Tax Matters. Neither the Company nor any Subsidiary shall
make or change any material Tax election, change any annual tax accounting
period, adopt or change any method of tax accounting, file any material amended
Tax returns or claims for material Tax refunds, enter into any material closing
agreement, surrender any material Tax claim, audit or assessment, surrender any
right to claim a material Tax refund, offset or other reduction in Tax liability
surrendered, consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment or take or omit to take any other
action, if any such action or omission would have the effect of increasing the
Tax liability or reducing any Tax asset of the Company or any Subsidiary.
42
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.01. Stockholders' Meeting. The Company, acting through the Board,
shall, in accordance with applicable Law and the Company's Certificate of
Incorporation and By-laws, (i) duly call, give notice of, convene and hold an
annual or special meeting of its stockholders (the "Stockholders' Meeting") as
---------------------
promptly as practicable for the purpose of considering and taking action on this
Agreement and the Transactions (the "Company Stockholders' Approval") and (ii)
------------------------------
(A) except as provided in Section 7.05(b), include in the Proxy Statement, and
not subsequently withhold, withdraw, amend, change or modify in any manner
adverse to Merger Sub or Parent, the recommendation of the Board that the
stockholders of the Company approve and adopt this Agreement and the
Transactions and (B) use its reasonable best efforts to obtain such approval and
adoption. At the Stockholders' Meeting, Parent and Merger Sub shall cause all
Shares then owned by them and their subsidiaries to be voted in favor of the
approval and adoption of this Agreement and the Transactions.
Section 7.02. Proxy Statement. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the SEC a
proxy statement to be sent to the stockholders of the Company relating to the
Stockholders' Meeting (such proxy statement, as amended or supplemented, being
referred to herein as the "Proxy Statement"), and Parent and the Company shall
---------------
use their reasonable best efforts to have the Proxy Statement cleared by the SEC
promptly after such filing. Parent, Merger Sub and the Company shall cooperate
with each other in the preparation of the Proxy Statement, and the Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between the Company or any representative of the
Company and the SEC. The Company shall provide Parent and its counsel the
opportunity to review the Proxy Statement, including all amendments and
supplements thereto, prior to its being filed with the SEC and shall give Parent
and its counsel the opportunity to review all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. Each of the Company, Parent and Merger Sub agrees to use
its reasonable best efforts, after consultation with the other parties hereto,
to respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement and all required amendments and supplements thereto to be
mailed to the holders of Shares entitled to vote at the Stockholders' Meeting at
the earliest practicable time. If, at any time prior to the Effective Time, (i)
the Company discovers any event or circumstance relating to the Company or any
Subsidiary, or their respective officers or directors, that is required to be
set forth in an amendment or supplement to the Proxy Statement, the Company
shall promptly inform Parent; and (ii) Parent discovers any event or
circumstance relating to Parent or Merger Sub, or their respective officers or
directors, that is required to be set forth in an amendment or supplement to the
Proxy Statement, Parent shall promptly inform the Company.
Section 7.03. Registration Statement. Parent shall promptly prepare and
file with the SEC a registration statement on Form F-4 (together with all
amendments thereto, the "Registration Statement") in connection with the
----------------------
registration under the Securities Act of the shares of Parent Common Stock to be
issued to the stockholders of the Company pursuant to the Merger. Parent and the
Company shall each use their reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Parent shall promptly take any
action required to be taken under foreign or state securities or Blue Sky Laws
in connection with the issuance of Parent Common Stock in the Merger. If, at any
time prior to the Effective Time, (i) the Company discovers any event or
43
circumstance relating to the Company or any Subsidiary, or their respective
officers or directors, that is required to be set forth in an amendment or
supplement to the Registration Statement, the Company shall promptly inform
Parent; and (ii) Parent discovers any event or circumstance relating to Parent
or Merger Sub, or their respective officers or directors, that is required to be
set forth in an amendment or supplement to the Registration Statement, Parent
shall promptly inform the Company.
Section 7.04. Access to Information; Confidentiality. (a) From the date
hereof until the Effective Time, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of the
Company and the Subsidiaries to, afford the officers, employees and agents of
Parent and Merger Sub reasonable access at reasonable times and upon prior
notice to the officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company and each Subsidiary, and shall
furnish Parent and Merger Sub with such financial, operating and other data and
information as Parent or Merger Sub, through their officers, employees or
agents, may reasonably request.
(b) From the date hereof until the Effective Time, Parent shall, and
shall cause Merger Sub and the officers, directors, employees, auditors and
agents of Parent and Merger Sub to, afford the officers, employees and agents of
the Company reasonable access at reasonable times and upon prior notice to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of Parent and Merger Sub, and shall furnish the Company with
such financial, operating and other data and information as the Company, through
its officers, employees or agents, may reasonably request.
(c) All information obtained by the Company, Parent or Merger Sub
pursuant to this Section 7.04 shall be subject to the Confidentiality Agreement.
Parent and Merger Sub agree to be bound by the Confidentiality Agreement on the
same basis as the subsidiary of Parent that is a party to the Confidentiality
Agreement.
(d) No investigation pursuant to this Section 7.04 or otherwise shall
affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
Section 7.05. No Solicitation of Transactions. (a) Prior to the termination
of this Agreement, neither the Company nor any Subsidiary shall, directly or
indirectly, through any officer, director, employee, representative, agent or
otherwise, (i) solicit, initiate or take any action intended to encourage the
submission of any Acquisition Proposal, or (ii) participate in any discussions
or negotiations regarding, or furnish to any Person any non-public information
with respect to, an Acquisition Proposal; provided, however, that nothing
-------- -------
contained in this Agreement shall prevent the Company or the Board from
furnishing non-public information to, or engaging in negotiations or discussions
with, any Person in connection with an unsolicited bona fide Acquisition
Proposal by such Person, if and to the extent that (A) the Board believes in
good faith (after consultation with its advisors) that such Acquisition Proposal
is a Superior Proposal, and the Board determines in good faith (after
consultation with its outside legal counsel), in the exercise of its fiduciary
duties, that to do otherwise would not be in the best interests of the
stockholders of the Company, and (B) prior to furnishing such non-public
information to, or engaging in negotiations or discussions with, such Person or
entity, the Board receives from such Person or entity an executed
confidentiality agreement with terms no more favorable to such party than those
set forth in the Confidentiality Agreement.
44
(b) Except as set forth in this Section 7.05(b), neither the Board nor
any committee thereof shall (i) withhold, withdraw, amend, change or modify, in
each case in a manner adverse to Parent or Merger Sub, the approval or
recommendation by the Board or any such committee of this Agreement, the Merger
or any other Transaction, (ii) approve or recommend any Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that, prior to the approval and
adoption of this Agreement and the Transactions by the Company's stockholders at
the Stockholders' Meeting, the Board determines in good faith (after
consultation with its advisors), in the exercise of its fiduciary duties, that
(x) the Acquisition Proposal constitutes, or may reasonably be expected to lead
to, a Superior Proposal, and (y) to do otherwise would not be in the best
interests of the stockholders of the Company, after giving prior written notice
to Parent and Merger Sub, the Board may withhold, withdraw, amend, change or
modify its approval or recommendation of this Agreement, the Merger and/or any
other Transaction and may terminate this Agreement in accordance with Section
9.01(d).
(c) The Company shall, and shall direct its directors, officers,
employees, agents or other representatives to, immediately cease and cause to be
terminated any discussions or negotiations with any parties that may be ongoing
with respect to any Acquisition Proposal as of the date hereof.
(d) Nothing contained in this Agreement shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders, if the Board determines in good faith
that it is required to do so under applicable Law after consultation with
outside legal counsel; provided, however, that neither the Company nor the Board
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nor any committee thereof shall, except as permitted by Section 7.05(b),
withhold, withdraw, amend, change or modify its position with respect to this
Agreement, the Merger or any other Transaction or approve or recommend an
Acquisition Proposal, including a Superior Proposal.
(e) The Company will promptly (but in no case later than 48 hours)
notify Parent in writing of the existence of any proposal, discussion or
negotiation received by the Company regarding any Acquisition Proposal, and the
Company will promptly communicate to Parent the material terms of any proposal,
discussion or negotiation which it may receive regarding any Acquisition
Proposal (and will promptly provide to Parent copies of any written materials
received by the Company or any of its officers, directors or other
representatives describing such Acquisition Proposal) and the identity of the
party making such proposal or engaging in such discussion or negotiation. The
Company will promptly provide to Parent any non-public information concerning
the Company provided to any other Person in connection with any Acquisition
Proposal which was not previously provided to Parent. The Company will keep
Parent reasonably informed on a prompt basis of the status and details of any
such Acquisition Proposal and of any amendments or proposed amendments to any of
the material terms of any Acquisition Proposal and of the status of any
discussions or negotiations relating to any Acquisition Proposal.
Section 7.06. Employee Benefits Matters. Parent shall cause the Surviving
Corporation to keep in place and to honor, in accordance with their terms, all
employee benefit plans, programs and policies of the Company and its
Subsidiaries in effect immediately prior to the Effective Time that are
applicable to any current or former employees of the Company or any Subsidiary
45
from the Effective Time until the earlier of (i) the first year anniversary of
the Effective Time, and (ii) in the case of employee benefit plans of the
Company and its Subsidiaries with renewal dates, the next renewal date with
respect to such employee benefit plans. Employees of the Company or any
Subsidiary shall receive credit for the purposes of eligibility to participate
and vesting (but not for benefit accruals) under any employee benefit plan or
program established or maintained by the Surviving Corporation for service
accrued or deemed accrued prior to the Effective Time with the Company or any
Subsidiary; provided, however, that such crediting of service shall not operate
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to duplicate any benefit or the funding of any such benefit. Nothing in this
Section 7.06 shall be deemed to limit or otherwise affect the right of Parent or
the Surviving Corporation to terminate employment or change the place of work,
responsibilities, status or description of any employee or group of employees,
subject in any case to the terms of any applicable employment agreement. In
addition, Parent shall waive, or cause to be waived, any limitations on benefits
relating to any pre-existing conditions to the same extent such limitations are
waived under any comparable plan of Parent or its Subsidiaries and recognize,
for purposes of annual deductible and out-of-pocket limits under its medical and
dental plans, deductible and out-of-pocket expenses paid by employees of the
Company and its Subsidiaries in the calendar year in which the Effective Time
occurs.
Section 7.07. Directors' and Officers' Indemnification and Insurance. (a)
From and after the Effective Time, Parent shall cause the Surviving Corporation
to honor, in accordance with their respective terms, each indemnification
agreement in effect immediately prior to the Effective Time between the Company
and each officer and director of the Company. The By-laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the By-laws of the Company as of the date
hereof, which provisions shall not be amended, repealed or otherwise modified
for a period of five years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who, at or prior to the
Effective Time, were directors or officers of the Company, unless such
modification shall be required by Law.
(b) Prior to the Effective Time, Parent shall purchase a directors'
and officers' liability insurance policy in form and substance reasonably
satisfactory to the Company and issued by a carrier satisfactory to the
Company (the "Tail Policy") providing "tail" coverage to the Company's
-----------
officers and directors with respect to matters occurring prior to the
Effective Time. The Tail Policy shall (i) have a term of five years from
the Effective Time; and (ii) provide no greater coverage and contain terms
and conditions that are not materially more favorable than those provided
by the Company's directors' and officers' liability insurance policy in
effect immediately prior to the Effective Time. In no event shall the price
for the Tail Policy exceed $1,000,000.
Section 7.08. Notification of Certain Matters. Each of the Company and
Parent shall provide prompt notice to the other party of the occurrence, or
non-occurrence, of any event of which the Company or Parent, as applicable, has
knowledge and where such occurrence or non-occurrence results in any
representation or warranty contained in this Agreement being untrue or
inaccurate in any material respect; provided, however, that the delivery of any
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notice pursuant to this Section 7.08 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 7.09. Further Action; Reasonable Best Efforts. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter promptly make any other required
submissions in any country where a merger filing or other notification is
necessary or desirable, with respect to the Transactions and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
46
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective the
Transactions on or prior to December 31, 2003, including using its reasonable
best efforts to obtain all Permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to Contracts
with the Company and the Subsidiaries as are necessary for the consummation of
such Transactions and to inform or consult with any trade unions, work councils,
employee representative or any other representative body as required and to
fulfill the conditions to the Merger; provided, however, that, in the event that
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the Effective Time has not occurred on or prior to December 31, 2003 despite
each party's performance of its obligations pursuant to this Section 7.09(a),
each party shall use its reasonable best efforts to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws and regulations to consummate and make
effective the Transactions as promptly as practicable after December 31, 2003,
including using its reasonable best efforts to obtain all Permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
and parties to Contracts with the Company and the Subsidiaries as are necessary
for the consummation of such Transactions and to inform or consult with any
trade unions, work councils, employee representative or any other representative
body as required and to fulfill the conditions to the Merger; and provided,
--------
further, that neither Merger Sub nor Parent will be required by this Section
-------
7.09 to take any action, including entering into any consent decree, hold
separate orders or other arrangements, that (A) requires the divestiture of any
assets of any of Merger Sub, Parent, the Company or any of their respective
subsidiaries or (B) limits Parent's freedom of action with respect to, or its
ability to retain, the Company and the Subsidiaries or any portion thereof or
any of Parent's or its affiliates' other assets or businesses. In case, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall use their reasonable best efforts to take all
such action.
(b) Each of the parties hereto agrees to cooperate and use its
reasonable best efforts to vigorously contest and resist any Action,
including administrative or judicial Action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and that
restricts, prevents or prohibits consummation of the Transactions,
including by vigorously pursuing all available avenues of administrative
and judicial appeal.
(c) Prior to the Effective Time, the Company shall (i) make full
provision in its financial statements for the write-offs set forth in
Section 7.09(c)(i) of the Company Disclosure Schedule; and (ii) work in
good faith with Parent and Merger Sub on a development plan substantially
on the terms set forth in Section 7.09(c)(ii) of the Company Disclosure
Schedule.
Section 7.10. Regulatory Authorization. Parent and the Company shall,
within ten business days of the execution hereof, file with the United States
Federal Trade Commission ("FTC") and the United States Department of Justice
-----
("DOJ") their respective notification and report forms required for the
-----
Transactions in connection therewith pursuant to the HSR Act and each agrees to
file as promptly as practicable any supplemental information requested by the
FTC or DOJ. Any such notification and report forms and supplemental information
will be in substantial compliance with the requirements of the HSR Act. Each
party shall cooperate in all reasonable respects with each other and the
respective Governmental Authority, the FTC and the DOJ.
Section 7.11. Public Announcements. Except as otherwise required by Law or
the rules of any applicable securities exchange or national market system, so
47
long as this Agreement is in effect, Parent and the Company will not, and will
not permit any of their respective Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the Transactions without the consent of the other party, which
consent shall not be unreasonably withheld. Parent and the Company will
cooperate with each other in the development and distribution of all press
releases and other public announcements with respect to this Agreement and the
Transactions, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.
Section 7.12. Resignation of Officers and Directors. The Company shall
obtain and deliver to Parent on or prior to the Effective Time the resignation
of each officer and director of each of the Company and any Subsidiary as Parent
shall request.
Section 7.13. General Cooperation. From the date hereof through the
Effective Time, and without limiting the other provisions of this Agreement, the
Company and each Subsidiary shall use their good faith efforts to operate their
businesses in such a manner as to achieve a smooth transition consistent with
the mutual business interests of the Company and each Subsidiary and Parent, in
manner and scope as directed by Parent in its sole discretion. In this regard,
the Company and each Subsidiary and Parent agree that they will enter into good
faith discussions concerning the businesses of the Company and each Subsidiary,
including (i) personnel policies and procedures;(ii) operational matters; (iii)
pro forma financial projections; and (iv) potential transactions between the
Company and each Subsidiary and Parent.
Section 7.14. Conveyance Taxes. The Company and Parent shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any property transfer or gains, sales,
use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the Transactions that are required or permitted to be
filed on or before the Effective Time.
Section 7.15. Affiliates. Within 20 days following the date of this
Agreement, the Company shall cause to be delivered to Parent a letter
identifying all Persons who may be deemed at the Company's Stockholders' Meeting
to be "affiliates" of the Company for purposes of Rule 145 under the Securities
Act. The Company shall use its reasonable best efforts to cause each Person who
is identified as a possible "affiliate" to enter into prior to the Effective
Time an agreement in form and substance reasonably acceptable to Parent pursuant
to which each such Person acknowledges his responsibilities as such an
"affiliate".
Section 7.16. Plan of Reorganization. (a) From and after the date of this
Agreement and until the Effective Time, each party hereto shall use its
reasonable best efforts (i) to cause the Merger (taking into account the change
in structure described in Section 7.16(b)) to qualify, and will not knowingly
take any action, cause any action to be taken, fail to take any action or cause
any action to fail to be taken which action or failure to act would reasonably
be likely to prevent the Merger (taking into account the change in structure
described in Section 7.16(b)) from qualifying, as a reorganization within the
meaning of Section 368(a) of the Code; and (ii) to cause outside counsel to
Parent to deliver an opinion to the Company and its stockholders (in form and
substance reasonably satisfactory to the Company), as promptly as practicable
after the filing of the Registration Statement and prior to the Effective Time
and at the Effective Time, to the effect that, for federal income tax purposes,
the Merger (taking into account the change in structure described in Section
7.16(b)) will qualify as a reorganization within the meaning of Section 368(a)
of the Code (the "Tax Opinion"). In the event the Merger (taking into account
-----------
48
the change in structure described in Section 7.16(b)) so qualifies, following
the Effective Time, neither the Surviving Corporation, Parent nor any of their
Affiliates shall knowingly take any action, cause any action to be taken, fail
to take any action or cause any action to fail to be taken, which action or
failure to act would reasonably be likely to cause the Merger (taking into
account the change in structure described in Section 7.16(b)) to fail to qualify
as a reorganization within the meaning of Section 368(a) of the Code.
(b) In the event that, prior to the Effective Time, outside counsel to
Parent determines that it will be able to deliver the Tax Opinion as set
forth in Section 7.16(a)(ii), the parties agree that, notwithstanding
anything in this Agreement to the contrary, the Merger shall be effected by
means of a merger of the Company with and into Merger Sub, with the result
that the separate corporate existence of the Company shall cease and Merger
Sub shall continue as the Surviving Corporation; provided, however, that no
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such change in structure shall be made (and no such Tax Opinion shall be
delivered) in the event that effecting the Merger as set forth in this
Section 7.16(b) would reasonably be likely to result in a Company Material
Adverse Effect or a Parent Material Adverse Effect.
Section 7.17. Nasdaq Quotation. Parent shall promptly prepare and submit to
the Nasdaq a listing application covering the shares of Parent Common Stock to
be issued in the Merger and shall use its reasonable best efforts to obtain,
prior to the Effective Time, approval for the quotation of such Parent Common
Stock, subject to official notice of issuance to Nasdaq, and the Company shall
cooperate with Parent with respect to such quotation.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Sub to effect the Merger shall be subject to
the satisfaction, at or prior to the Effective Time, of the following
conditions:
(a) Under Delaware Law, this Agreement shall have been approved and
adopted by the requisite affirmative vote of the stockholders of the Company.
(b) No Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or permanent) which
is then in effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) No Action shall have been commenced by any Governmental Authority
against any of the Company, Parent or Merger Sub, which Action seeks to restrain
or materially and adversely alter the Transactions and is reasonably likely to
render it impossible or unlawful to consummate such Transactions.
(d) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(e) The Registration Statement shall have been declared effective and
no stop order suspending the effectiveness of the Registration Statement shall
be in effect and no proceeding for such purpose shall be pending before or
threatened by the SEC.
49
(f) The shares of Parent Common Stock to be issued in the Merger shall
have been approved for quotation on Nasdaq, subject to official notice of
issuance.
Section 8.02. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject to
the satisfaction, at or prior to the Effective Time, of the following
conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct (without giving effect to any
limitation as to materiality or Company Material Adverse Effect set forth
therein) as of the Effective Time, as though made on and as of the Effective
Time (except to the extent expressly made as of an earlier date, in which case
as of such earlier date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to materiality or Company Material Adverse Effect set forth therein) would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time.
(c) The Company shall have delivered to Parent a certificate, dated
the Closing Date, signed by an officer of the Company and certifying as to the
satisfaction of the conditions specified in Sections 8.02(a) and 8.02(b).
(d) No Company Material Adverse Effect shall have occurred since the
date of this Agreement.
(e) The number of Dissenting Shares shall be less than 9% of the
issued and outstanding Shares (including Shares issuable upon conversion of the
Preferred Shares).
Section 8.03. Conditions to the Obligations of the Company. The obligations
of the Company to effect the Merger shall be subject to the satisfaction, at or
prior to the Effective Time, of the following conditions:
(a) The representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material respects
as of the Effective Time, as though made on and as of the Effective Time (except
to the extent expressly made as of an earlier date, in which case as of such
earlier date), provided that any representation or warranty that is qualified by
materiality or Parent Material Adverse Effect shall be true and correct in all
respects as of the Effective Time, or as of such particular earlier date, as the
case may be.
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Effective Time.
50
(c) Parent shall have delivered to the Company a certificate, dated
the Closing Date, signed by an officer of Parent, certifying as to the
satisfaction of the conditions specified in Sections 8.03(a) and 8.03(b).
(d) No Parent Material Adverse Effect shall have occurred since the
date of this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.01. Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement by
the stockholders of the Company:
(a) by mutual written consent of each of Parent, Merger Sub and the
Company duly authorized by the Boards of Directors of Parent and Merger Sub and
the Board, respectively;
(b) by any of Parent, Merger Sub or the Company if (i) the Effective
Time shall not have occurred on or before March 1, 2004; provided, however, that
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the right to terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; (ii) any Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any injunction, order, decree
or ruling (whether temporary, preliminary or permanent) which has become final
and nonappealable and has the effect of making consummation of the Merger
illegal or otherwise preventing or prohibiting consummation of the Merger; or
(iii) this Agreement shall not have been approved and adopted in accordance with
Delaware Law by the Company's stockholders at the Company Stockholders' Meeting;
(c) by Parent if (i) the Board or any committee thereof shall have
withheld, withdrawn, amended, changed or modified, in a manner adverse to Merger
Sub or Parent, its approval or recommendation of this Agreement or the
Transactions, or (ii) the Board shall have recommended or approved any
Acquisition Proposal;
(d) by the Company if, prior to the approval and adoption of this
Agreement and the Transactions by the Company's stockholders at the
Stockholders' Meeting, the Board determines in good faith (after consultation
with its advisors), in the exercise of its fiduciary duties, that, in order to
enter into a definitive agreement with respect to a Superior Proposal, such
termination is in the best interests of the stockholders of the Company, upon
two Business Days' prior written notice to Parent, setting forth in reasonable
detail the identity of the Person making, and the final terms and conditions of,
the Superior Proposal and after duly considering any proposals that may be made
by Parent during such two Business Day period; provided, however, that any
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termination of this Agreement pursuant to this Section 9.01(d) shall not be
effective until the Company has made full payment of the Fee and Expenses; or
(e) by the Company, if the Parent Mean Price at the Effective Time
would be less than $8.50 per share; provided, however, that the right to
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51
terminate this Agreement under this Section 9.01(e) shall not be available if
Parent agrees in writing that, in such event and notwithstanding anything to the
contrary in Section 2.04(a)(i), the Exchange Ratio shall be determined by
dividing $14.00 by the Parent Mean Price and rounding the result to the nearest
one thousandth of a share; and provided, further, that any termination by the
Company pursuant to this Section 9.01(e) shall not be deemed to be a
withholding, withdrawal, amendment, change or modification, in a manner adverse
to Merger Sub or Parent, of the Board's approval or recommendation of this
Agreement, the Merger or any other Transaction.
Section 9.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 9.01, this Agreement shall forthwith become
void, and there shall be no liability on the part of any party hereto, except
(a) as set forth in Section 9.03 and (b) that nothing herein shall relieve any
party from liability for any breach hereof prior to the date of such
termination; provided, however, that the Confidentiality Agreement shall survive
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any termination of this Agreement.
Section 9.03. Fees and Expenses.
(a) In the event that
(i) this Agreement is terminated by Parent pursuant to Section 9.01(c), or
(ii) any Person shall have commenced, publicly proposed or communicated to
the Company an Acquisition Proposal that is publicly disclosed and (A)
this Agreement and the Merger shall not have been approved and adopted
at the Stockholders' Meeting in accordance with Delaware Law by the
Company's stockholders and (B) this Agreement shall have been
terminated by Parent, Merger Sub or the Company pursuant to Section
9.01(b)(iii),
the Company shall pay to Parent all of the charges and expenses (including
fees and expenses of Parent's attorneys, accountants and advisors) incurred
by Parent and Merger Sub in connection with this Agreement and the
Transactions (the "Expenses"); provided, however, that in no event shall
-------- -------- -------
the Expenses for purposes of this Section 9.03 be in excess of $750,000;
and provided, further, that such Expenses shall be paid, in immediately
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available funds, no later than two Business Days after receipt by the
Company of reasonable documentation with respect to such Expenses.
(b) In the event that (i) this Agreement is terminated by Parent
pursuant to Section 9.01(c); and (ii) the Company enters into, or submits to the
stockholders of the Company for approval, an agreement with respect to, an
Acquisition Proposal, or an Acquisition Proposal is consummated, in each case
within 12 months after such termination of this Agreement, in addition to the
Expenses paid in accordance with Section 9.03(a), the Company shall pay Parent
promptly (but in no event later than two Business Days after receipt by the
Company of a request for payment from Parent following the first occurrence of
an event described in clause (ii) of this Section 9.03(b)), in immediately
available funds, a fee of $1,350,000 (the "Fee").
---
(c) In the event that this Agreement is terminated by the Company
pursuant to Section 9.01(d), the Company shall pay Parent (i) the Fee (which Fee
shall be paid concurrently with such termination), and (ii) the Expenses (which
Expenses shall be paid no later than two Business Days after receipt by the
Company of reasonable documentation thereof), in each case in immediately
available funds.
52
(d) Except as set forth in this Section 9.03, all costs and expenses
incurred in connection with this Agreement, the Stockholder Agreements and the
other Transactions shall be paid by the party incurring such expenses, whether
or not the Merger is consummated, except that the filing fee in connection with
the HSR Act and the expenses incurred in connection with the Tax Opinion and the
filing, printing and mailing of the Registration Statement and the Proxy
Statement shall be shared equally by the Company and Parent.
(e) In the event that the Company shall fail to pay the Fee when due,
the term "Fee" shall be deemed to include the costs and expenses actually
incurred or accrued by Parent and Merger Sub (including fees and expenses of
counsel) in connection with the collection under and enforcement of this Section
9.03, together with interest on such unpaid Fee, commencing on the date that the
Fee became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A., from time to time, in the City of New York, as such bank's Base
Rate plus 1%.
(f) The Company acknowledges that the agreements contained in this
Section 9.03 are an integral part of this Agreement and the Transactions, and
that, without these agreements, Parent and the Merger Sub would not enter into
this Agreement.
Section 9.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of Parent and the respective Boards of
Directors of Merger Sub and the Company at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement, the
Merger and the other Transactions by the stockholders of the Company, no
amendment may be made that would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
Section 9.05. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement of any other party
or any condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given upon
receipt by the receiving party at the address or facsimile number below for such
party:
53
if to Parent or Merger Sub:
chinadotcom corporation
00/X Xxxxxxxx Xxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx Xxx
Xxxx Xxxx
Telecopier No:011-852-2237-7227
Attention: General Counsel
with a copy to:
Milbank, Tweed, Xxxxxx & XxXxxx LLP
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No:(000) 000-0000
Attention: Xxxx X. Xxxxxxxx
if to the Company:
Xxxx Systems, Inc.
Xxx Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopier No:(000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
with a copy to:
King & Spalding LLP
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopier No:(000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Section 10.02. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
Section 10.03. Entire Agreement; Assignment. This Agreement and the
Disclosure Schedules, and the Stockholder Agreements constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation of
Law or otherwise), except that Parent and Merger Sub may assign all or any of
54
their rights and obligations hereunder to any affiliate of Parent, provided that
no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
Section 10.04. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 7.07 (which is intended to be for the
benefit of the Persons covered thereby and may be enforced by such Persons).
Section 10.05. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or equity.
Section 10.06. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware applicable to
Contracts executed in and to be performed in that State.
Section 10.07. Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other hereto have been induced to enter into
this Agreement and the Transactions, as applicable, by, among other things, the
mutual waivers and certifications in this Section 10.07.
Section 10.08. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 10.09. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
55
Merger Agreement IN WITNESS WHEREOF, Parent, Merger Sub and the Company
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
CHINADOTCOM CORPORATION
By: /s/ Xxxxxx Xxxxxxxxxx
-----------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title:Chief Financial Officer
CDC SOFTWARE HOLDINGS, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
-----------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Director
XXXX SYSTEMS, INC.
By: /s/ J. Xxxxxxx Xxxxxx
-----------------------------------------------
Name: J. Xxxxxxx Xxxxxx
Title: Chief Executive Officer
Schedule I
Principal Stockholders
Xxxxxxxx X. Xxxxxxxx III
J. Xxxxxxx Xxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxxx
Schedule II
Certain Officers of the Company
J. Xxxxxxx Xxxxxx
Xxxxxx X. Xxxxxxx
