1
Exhibit (c)(1)
================================================================================
AGREEMENT AND PLAN OF MERGER
dated as of June 23, 1999
among
COMPUWARE CORPORATION,
COMP ACQUISITION CO.
and
DATA PROCESSING RESOURCES CORPORATION
================================================================================
2
AGREEMENT AND PLAN OF MERGER, dated as of June 23, 1999, among Compuware
Corporation, a Michigan corporation ("Parent"), COMP Acquisition Co., a
California corporation and a wholly owned subsidiary of Parent ("Sub"), and Data
Processing Resources Corporation, a California corporation (the "Company").
WHEREAS, in furtherance of the acquisition of the Company by Parent on
the terms and subject to the conditions set forth in this Agreement, Parent
proposes to cause Sub to make a tender offer (as it may be amended from time to
time as permitted under this Agreement, the "Offer") to purchase all the issued
and outstanding shares of Common Stock, no par value, of the Company (the
"Company Common Stock"), at a price per share of the Company Common Stock (a
"Share") of not less than $24.00 net to the seller in cash and without interest
thereon (such price, as may hereafter be increased, the "Offer Price"), subject
to reduction for any applicable federal backup or other applicable withholding
or stock transfer taxes, upon the terms and subject to the conditions set forth
in this Agreement, and the Board of Directors of the Company has approved the
Offer and has resolved to recommend that the Company's shareholders accept the
Offer;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the Offer and the merger of Sub into the Company, as set
forth below (the "Merger"), upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding Share, other than
Shares owned directly or indirectly by Parent or the Company and Dissenting
Shares (as defined in Section 3.1(d)), will be converted into the right to
receive the Offer Price;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger;
WHEREAS, concurrently with the execution and delivery of this Agreement,
(i) Parent and certain shareholders of the Company have entered into a
Shareholder Tender and Voting Agreement, pursuant to which such shareholders
agree to tender their shares of Company Common Stock in the Offer and vote in
favor of the Merger, and (ii) Parent and certain shareholders of the Company
have entered into Employment and Noncompetition Agreements, pursuant to which
such shareholders agree to be employed by the Company or the Surviving
Corporation following the Effective Time, and be bound by certain covenants
regarding non-competition.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
3
ARTICLE I
THE OFFER
1.1 The Offer.
(a) Subject to the provisions of this Agreement, Sub shall, and
Parent shall cause Sub to, within five business days after the public
announcement (on the date hereof or the following business day) of the execution
of this Agreement, commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) the Offer. The
obligation of Sub to, and of Parent to cause Sub to, commence the Offer and
accept for payment, and pay for, any Shares tendered pursuant to the Offer shall
be subject to the conditions set forth in Exhibit A and to the terms and
conditions of this Agreement. Sub expressly reserves the right to waive any
conditions to the Offer, to increase the price per Share payable in the Offer,
to extend the duration of the Offer (subject to the limitations set forth in
this Section), or to make any other changes in the terms and conditions of the
Offer; provided, however, that without the Company's consent, no such change may
be made which (i) decreases the price per Share payable in the Offer, (ii)
reduces the minimum (including by waiver of the Minimum Tender Condition, as
defined in Exhibit A) or maximum number of Shares to be purchased in the Offer,
(iii) imposes conditions to the Offer in addition to those set forth in Exhibit
A, (iv) changes the form of consideration payable in the Offer, (v) extends the
expiration of the Offer (the "Expiration Date") (which will initially be twenty
business days following the commencement of the Offer) except (A) as required by
the Exchange Act or (B) in the case of any extension of the Offer beyond five
business days following the initial expiration of the Offer, unless in Sub's
reasonable judgment, it is reasonably likely that during any such extension, any
condition set forth in Exhibit A (including the Minimum Tender Condition) which
is not satisfied as of the date of such extension will be satisfied during such
extension; provided, that, without the Company's consent, the Expiration Date
may not be extended pursuant to clause (B) of this sentence beyond twenty
business days following the initial expiration of the Offer, or (vi) amends any
other material terms of the Offer in a manner materially adverse to the
Company's shareholders. Subject to the terms and conditions of this Agreement
and the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Sub shall, and Parent shall
cause Sub to, accept for payment, and pay for, all shares of the Company Common
Stock validly tendered and not withdrawn pursuant to the Offer that Sub becomes
obligated to accept for payment, and pay for, pursuant to the Offer as soon as
practicable after the expiration of the Offer. In the event that (i) the Offer
is not commenced due to the failure of a condition set forth in Exhibit A or
(ii) the Offer is not consummated upon its expiration due to the failure of a
condition set forth in Exhibit A, then, subject to the terms and conditions of
this Agreement (including Articles VII and VIII hereof), the parties agree to
take the actions set forth in this Agreement in order to obtain the Company
Shareholder Approval (as defined in Section 4.1(d)) and effectuate the Merger as
promptly as practicable.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain
an offer to purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and the documents included therein pursuant
to
-2-
4
which the Offer will be made, together with any supplements or amendments
thereto, the "Offer Documents") and shall mail the Offer Documents to the
shareholders of the Company. Parent and Sub agree that the Offer Documents shall
comply as to form in all material respects with the Exchange Act, and the rules
and regulations promulgated thereunder and the Offer Documents, on the date
first published, sent or given to the Company's shareholders, shall not 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
misleading, except that no representation is made by Parent or Sub with respect
to information supplied by the Company specifically for inclusion in the Offer
Documents. Each of Parent, Sub and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and each of Parent and Sub further agrees to take all steps necessary
to amend or supplement the Offer Documents and to cause the Offer Documents as
so amended or supplemented to be filed with the SEC and to be disseminated to
the Company's shareholders, in each case as and to the extent required by
applicable Federal securities laws. The Company and its counsel shall be given a
reasonable opportunity to review the Offer Documents and all amendments and
supplements thereto prior to their filing with the SEC or dissemination to
shareholders of the Company. Parent and Sub agree to provide the Company and its
counsel any comments Parent, Sub or their counsel may receive from the SEC or
its staff with respect to the Offer Documents promptly after the receipt of such
comments including a copy of such comments that are made in writing.
(c) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to accept for payment, and pay for, any shares
of the Company Common Stock that Sub becomes obligated to accept for payment,
and pay for, pursuant to the Offer.
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted resolutions approving this Agreement, the
Offer and the Merger, determining that the terms of the Offer and the Merger are
fair to, and in the best interests of, the Company's shareholders and
recommending that the Company's shareholders accept the Offer and tender their
shares pursuant to the Offer and approve and adopt this Agreement and approve
the Merger. The Company represents that its Board of Directors has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC that the proposed consideration to be
received by the holders of Shares pursuant to the Offer and the Merger is fair
to such holders from a financial point of view, and a complete and correct
signed copy of such opinion has been delivered by the Company to Parent. The
Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Company's Board of Directors described in the first
sentence of this Section 1.2(a) and has obtained the consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇
Partners LLC to the inclusion in the Schedule 14D-9 of a copy of the written
opinion referred to in the preceding sentence . The Company has been advised by
each of its directors and executive officers that each such person intends to
tender all Shares (other than Shares, if any, held by such person which if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Exchange Act) held by such person pursuant to the Offer.
-3-
5
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, together with all exhibits, amendments and supplements thereto as
well as the Information Statement required pursuant to Section 14(f) under the
Exchange Act, collectively the "Schedule 14D-9") containing the recommendation
described in paragraph (a) and shall mail the Schedule 14D-9 to the shareholders
of the Company. The Company agrees that the Schedule 14D-9 shall comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder and, on the date filed with the SEC
and on the date first published, sent or given to the Company's shareholders,
shall not 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 misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Sub specifically for inclusion in
the Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so
amended or supplemented to be filed with the SEC and disseminated to the
Company's shareholders, in each case as and to the extent required by applicable
Federal securities laws. Parent and its counsel shall be given a reasonable
opportunity to review the Schedule 14D-9 and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to shareholders of
the Company. The Company agrees to provide Parent and its counsel any comments
the Company or its counsel may receive from the SEC or its staff with respect to
the Schedule 14D-9 promptly after the receipt of such comments including a copy
of such comments that are made in writing.
(c) In connection with the Offer, the Company shall cause its
transfer agent promptly to furnish Sub with mailing labels containing the names
and addresses of the record holders of the Company Common Stock as of a record
date and of those persons becoming record holders subsequent to such date,
together with copies of all lists of shareholders, security position listings
and, to the extent reasonably requested, computer files and other information in
the Company's possession or control regarding the beneficial owners of the
Company Common Stock, and shall furnish to Sub such information and assistance
(including updated lists of shareholders, security position listings and
computer files) as Parent may reasonably request in communicating the Offer to
the Company's shareholders. Subject to the requirements of applicable law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Merger, Parent and Sub and their
agents shall hold in confidence the information contained in any such labels,
listings and files, will use such information only in connection with the Offer
and the Merger and, if this Agreement shall be terminated, will, upon request,
deliver, and will use their best efforts to cause their agents to deliver, to
the Company all copies of such information then in their possession or control.
-4-
6
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the California Corporations Code (the
"Code"), Sub shall be merged with and into the Company at the Effective Time (as
defined in Section 2.3). Following the Effective Time, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the Code. Notwithstanding
the foregoing, Parent may elect at any time prior to the Merger to merge the
Company with and into Sub instead of merging Sub into the Company as provided
above; provided, however, that the Company shall not be deemed to have breached
any of its representations, warranties, covenants or agreements set forth in
this Agreement solely by reason of such election. In such event, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
the foregoing and, where appropriate, to provide that Sub shall be the Surviving
Corporation and will continue under the name "Data Processing Resources
Corporation." At the election of Parent, any direct or indirect subsidiary (as
defined in Section 9.3) of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
2.2 Closing. The closing of the Merger will take place at 10:00 a.m. on
a date to be specified by the parties, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VII (the "Closing Date"), at the Palo Alto, California offices of Fenwick &
West, counsel to Parent and Sub, unless another date or place is agreed to in
writing by the parties hereto.
2.3 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable on or after the Closing Date, the parties shall file a
certificate of ownership or other appropriate documents (in any such case, the
"Certificate of Ownership") executed in accordance with the relevant provisions
of the Code and shall make all other filings or recordings required under the
Code. The Merger shall become effective at such time as the Certificate of
Ownership is duly filed with the California Secretary of State, or at such other
time as Sub and the Company shall agree should be specified in the Certificate
of Ownership (the time the Merger becomes effective being hereinafter referred
to as the "Effective Time").
2.4 Effects of the Merger. The Merger shall have the effects set forth
in Section 1107 of the Code.
2.5 Articles of Incorporation and By-laws. The articles of incorporation
and by-laws of the Sub as in effect at the Effective Time shall be the articles
of incorporation and by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law; provided, that at
the Effective Time, Article I of the articles of incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation is
Data Processing Resources Corporation.".
-5-
7
2.6 Directors. The directors of Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
2.7 Officers. The officers of the Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
2.8 Merger Without Shareholders Meeting. In the event that Sub (or any
other subsidiary of Parent) shall acquire, and shall maintain through the
effectiveness of the Merger, ownership of at least 90% of the outstanding Shares
sufficient to enable Sub (or such other subsidiary) and the Company to cause the
Merger to become effective without the Company Shareholder Approval in
accordance with Section 1110 of the Code (the "Short-Form Merger"), the parties
hereto shall, subject to the terms and conditions of this Agreement (including
Article VII) and applicable law, take all necessary and appropriate action to
cause the Short-Form Merger to become effective as promptly as practicable.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Shares or any
shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, no par value, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
Share that is owned by the Company or by any subsidiary of the Company and each
Share that is owned by Parent, Sub or any other subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of the Company Common Stock. Subject to Section
3.1(d), each issued and outstanding Share (other than Shares to be canceled in
accordance with Section 3.1(b)) shall be converted into the right to receive
from the Surviving Corporation in cash, without interest, the Offer Price (the
"Merger Consideration"). As of the Effective Time, all such Shares shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration, without interest.
(d) Shares of Dissenting Shareholders. Notwithstanding anything
in this Agreement to the contrary, to the extent provided by the Code, any
issued and outstanding Shares
-6-
8
held by a person (a "Dissenting Shareholder") who objects to the Merger and
complies with all the provisions of the Code concerning the right of holders of
the Company Common Stock to dissent from the Merger and require appraisal of
their Shares ("Dissenting Shares") shall not be converted as described in
Section 3.1(c) but shall become the right to receive such consideration as may
be determined to be due to such Dissenting Shareholder pursuant to the laws of
the State of California. If, after the Effective Time, such Dissenting
Shareholder withdraws his demand for appraisal or fails to perfect or otherwise
loses his right of appraisal, in any case pursuant to the Code, his Shares shall
be deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i) prompt notice of any
demands for appraisal of Shares received by the Company and (ii) the opportunity
to participate in and direct all negotiations and proceedings with respect to
any such demands. The Company shall not, without the prior written consent of
Parent, make any payment with respect to, or enter into a binding settlement
agreement or make a written offer to settle, any such demands.
(e) Rights to Receive Shares. Each right to receive Shares, other
than pursuant to the terms of securities convertible into or exercisable for
Shares which otherwise provide, or as otherwise provided in this Agreement,
shall be converted into the right to receive from the Surviving Corporation in
cash, without interest, the Merger Consideration.
3.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
select a bank or trust company to act as paying agent (the "Paying Agent") for
the payment of the Merger Consideration upon surrender of certificates
representing the Company Common Stock.
(b) Parent To Provide Funds. Parent shall take all steps
necessary to enable and cause the Surviving Corporation to provide to the Paying
Agent on a timely basis, as and when needed after the Effective Time, funds
necessary to pay for the Shares as part of the Merger pursuant to Section 3.1.
(c) Exchange Procedure. As soon as reasonably practicable after
the Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") whose Shares were converted
into the right to receive the Merger Consideration pursuant to Section 3.1: (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of the Company Common Stock which is not registered in the
transfer records of the Company, payment may be
-7-
9
made to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate.
(d) No Further Ownership Rights in the Company Common Stock. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares previously represented by such Certificates, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be canceled and exchanged as provided in this Article III.
(e) Failure to Timely Surrender; No Liability. Promptly following
the date that is six months after the Effective Time, the Paying Agent shall
return to the Surviving Corporation all Merger Consideration and other cash,
property and instruments in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration (without interest thereon). Notwithstanding
the foregoing, the Surviving Corporation shall be entitled to receive from time
to time all interest or other amounts earned with respect to any cash deposited
with the Paying Agent as such amounts accrue or become available. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any payment
pursuant to this Article III would otherwise escheat to or become the property
of any Governmental Entity (as defined in Section 4.1(d)), the cash payment in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interests of any person previously entitled thereto. None of Parent, Sub, the
Company or the Paying Agent shall be liable to any person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) Withholding Taxes. The right of any person to receive any
payment or consideration pursuant to this Agreement and the transactions
contemplated herein shall be subject to any applicable requirements with respect
to the withholding of Taxes.
(g) Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing Shares shall have been lost, stolen or destroyed, the
Paying Agent shall pay to such holder the Merger Consideration required pursuant
to Section 3.1, in exchange for such lost, stolen or destroyed certificates,
upon the making of an affidavit of that fact by the holder thereof with such
assurances as the Paying Agent, in its discretion and as a condition precedent
to the payment of the
-8-
10
Merger Consideration, may reasonably require of the holder of such lost, stolen
or destroyed certificates.
(h) Supplementary Action. If at any time after the Effective
Time, any further assignments or assurances in law or any other things are
necessary or desirable to vest or to perfect or confirm of record in the
Surviving Corporation the title to any property or rights of either the Company
or Sub, or otherwise to carry out the provisions of this Agreement, the officers
and directors of the Surviving Corporation are hereby authorized and empowered,
in the name of and on behalf of the Company and Sub, to execute and deliver any
and all things necessary or proper to vest or to perfect or confirm title to
such property or rights in the Surviving Corporation, and otherwise to carry out
the purposes and provisions of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. Except as set forth
in the attachments to the disclosure letter delivered by the Company to Parent
prior to the execution of this Agreement (the "Company Disclosure Letter"), the
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company and
each of its subsidiaries is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or partnership power and authority to
carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed individually or in the aggregate would not have a Material Adverse
Effect on the Company. The Company has made available to Parent complete and
correct copies of its certificate of incorporation and by-laws and the articles
of incorporation and by-laws or other organizational documents of its
subsidiaries, in each case as amended to the date of this Agreement.
(b) Subsidiaries. Section 4.1(b) of the Company Disclosure Letter
lists each subsidiary of the Company. All the outstanding shares of capital
stock of each such subsidiary have been validly issued and are fully paid and
nonassessable and (except as may be required by foreign jurisdictions) are owned
by the Company, by another subsidiary of the Company or by the Company and
another such subsidiary, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever, other than
resale restrictions imposed by applicable securities laws (collectively,
"Liens"). Except for the capital stock of its subsidiaries, the Company does not
own, directly or indirectly, any capital stock or other ownership interest in
any corporation, partnership, joint venture or other entity.
-9-
11
(c) Capital Structure. The authorized capital stock of the
Company consists of 60,000,000 shares of Company Common Stock and 2,001,480
shares of preferred stock, no par value ("Company Preferred Stock"). At the
close of business on June 21, 1999, (i) 14,762,416 shares of Company Common
Stock and no shares of Company Preferred Stock were issued and outstanding, (ii)
no shares of Company Common Stock were held by the Company in its treasury,
(iii) 3,393,040 shares of the Company Common Stock were reserved for issuance
upon exercise of outstanding Options (as defined in Section 6.4). The only plans
or arrangements pursuant to which the Company is obligated to issue Shares or
pursuant to which Options are outstanding are the Company's 1994 Stock Option
Plan, as amended, and the Company Stock Option Plan for the Employees of Systems
& Programming Consultants, Inc. (together, the "Company Option Plans"), the
Company's Employee Stock Purchase Plan (the "Stock Purchase Plan"), and Shares
issuable upon conversion of the Company's 5 1/4% Convertible Subordinated Notes
due 2005 (the "Convertible Notes"). Except as set forth above, at the close of
business on June 21, 1999, no shares of capital stock or other voting securities
of the Company were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights. All outstanding shares of capital stock
of the Company are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by the Company's articles of
incorporation, bylaws or any agreement to which the Company is a party. Except
as set forth in Section 4.1(c) of the Company Disclosure Letter, there are no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote. Except as
set forth above or in Section 4.1(c) of the Company Disclosure Letter , as of
the date of this Agreement, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any of
its subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding contractual obligations (i) of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its subsidiaries or (ii) of the
Company to vote or to dispose of any shares of the capital stock of any of its
subsidiaries.
(d) Authority; Noncontravention. The Company has all the
requisite corporate power and authority to enter into this Agreement and,
subject to, if required by law, adoption and approval of the Merger Agreement
and approval of the Merger by an affirmative vote of the holders of a majority
of the outstanding shares of the Company Common Stock (the "Company Shareholder
Approval"), to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company, subject
to the Company Shareholder Approval, if such approval is required by law. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms (except as enforcement hereof may be limited by (i)
bankruptcy,
-10-
12
insolvency, reorganization, moratorium and similar laws, both state and federal,
affecting the enforcement of creditors' rights or remedies in general as from
time to time in effect or (ii) the exercise by courts of equity powers). The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under, or give rise to
a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of the Company or any of its subsidiaries under (i)
the articles of incorporation or by-laws of the Company or the comparable
charter or organizational documents of any of its subsidiaries, (ii) except as
set forth Section 4.1(d) of the Company Disclosure Letter (including change of
control or acceleration rights under the Company Option Plans or other
agreements disclosed therein), any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its subsidiaries or
their respective properties or assets or (iii) any governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Material Adverse Effect on the Company, (y) materially impair the ability of the
Company to perform its obligations under this Agreement, (z) prevent the
consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (1) the filing of a
pre merger notification and report form by the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (2) the
filing with the SEC and the National Association of Securities Dealers, Inc. of
(A) the Schedule 14D-9, (B) a proxy statement relating to the Company
Shareholder Approval, if such approval is required by law (as amended or
supplemented from time to time, the "Proxy Statement"), and (C) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, (3) the
filing of the Certificate of Ownership with the California Secretary of State
and appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business and (4) such other consents, approvals,
orders, authorizations, registrations, declarations and filings as would not
individually or in the aggregate (A) have a Material Adverse Effect on the
Company, (B) materially impair the ability of the Company to perform its
obligations under this Agreement or (C) prevent or have a material adverse
effect on the ability of the parties to consummate any of the transactions
contemplated by this Agreement. Section 4.1(d) of the Company Disclosure Letter
lists all consents, waivers and approvals under any of the Company's or any of
its subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby, which if, individually or in the aggregate, were not obtained, would
result in a Material Adverse Effect on the Company.
-11-
13
(e) SEC Documents; Financial Statements. The Company has filed in
a timely manner all required reports, schedules, forms, statements and other
documents with the SEC since December 31, 1996. All such required reports,
schedules, forms, statements and other documents filed by the Company with the
SEC (including those that the Company may file subsequent to the date hereof)
are referred to herein as the "SEC Documents". As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents, when
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any SEC
Document has been revised or superseded by a later Filed SEC Document (as
defined in Section 4.1(g)), none of the SEC Documents contains any untrue
statement of a material fact or omits 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 misleading. The financial
statements of the Company included in the SEC Documents, including those filed
after the date hereof until the Closing, comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the SEC Documents or as contemplated by
this Agreement, since the date of the most recent consolidated balance sheet
included in the SEC Documents neither the Company nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted accounting principles
("GAAP") to be set forth on a consolidated balance sheet of the Company and its
consolidated subsidiaries or in the related notes to the consolidated financial
statements prepared in accordance with GAAP which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of the Company and its subsidiaries taken as a whole, except
liabilities (i) provided for in the most recent consolidated balance sheet
included in the SEC Documents, or (ii) incurred since the date of such balance
sheet in the ordinary course of business consistent with past practices.
(f) Information Supplied. None of the information supplied or to
be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or
(iv) the Proxy Statement, will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's
-12-
14
shareholders, or, in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Shareholders Meeting (as defined in Section 6.1(a)), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Schedule 14D-9,
the Information Statement and the Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed SEC Documents"), since the date of the most recently
audited financial statements included in the Filed SEC Documents, the Company
has conducted its business only in the ordinary course, and there has not been
(i) any Material Adverse Change affecting the Company, (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's capital stock, (iii) any
split, combination or reclassification of any of its capital stock or any
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, (iv)(x) any
granting by the Company or any of its subsidiaries to any executive officer of
the Company or any of its subsidiaries of any increase in excess of $10,000 per
annum in compensation, except in the ordinary course of business consistent with
prior practice or as was required under employment agreements in effect as of
the date of the most recent audited financial statements included in the Filed
SEC Documents, (y) any granting by the Company or any of its subsidiaries to any
executive officer of any increase in excess of $10,000 per annum in severance or
termination pay, except as was required under any employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Filed SEC Documents, or (z) except as set
forth in Section 4.1(g)(iv) of the Company Disclosure Letter, any entry by the
Company or any of its subsidiaries into any employment, severance or termination
agreement with any executive officer, (v) any damage, destruction or loss,
whether or not covered by insurance, that has or could reasonably be expected to
have a Material Adverse Effect on the Company, (vi) any change in accounting
methods, principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles and SEC rules and regulations, (vii)
any material revaluation of any of the Company's assets, including, without
limitation, writing down the value of capitalized inventory or writing off
accounts receivable, other than in the ordinary course consistent with past
practice, or (viii) any executive officer or other key employee who has
terminated such person's employment with the Company, or threatened to do so,
nor has the Company been informed that any such person plans to do so because of
the pendency of the Offer or Merger.
-13-
15
(h) Intellectual Property.
(i) The Company and its subsidiaries own, or are licensed
or otherwise possess legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are material to the business of the Company and its subsidiaries as currently
conducted or as proposed to be conducted by the Company and its subsidiaries.
(ii) Section 4.1(h)(ii) of the Company Disclosure Letter
lists (i) all patents and patent applications and all registered and
unregistered trademarks, trade names and service marks, registered copyrights,
which the Company considers to be material to its business and included in the
Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all material
licenses, sublicenses, and other agreements as to which the Company is a party
and pursuant to which any person other than the Company is authorized to use any
Intellectual Property (other than end-user licenses in the Company's current
standard form provided to Parent's counsel), and (iii) all material licenses,
sublicenses and other agreements as to which the Company is a party and pursuant
to which the Company is authorized to use any third party patents, trademarks or
copyrights, including software ("Third Party Intellectual Property Rights")
which are incorporated in, are, or form a part of any Company product that is
material to its business.
(iii) To the Company's knowledge, there is no material
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of the Company or any of its subsidiaries, any
trade secret material to the Company or any of its subsidiaries, or any
Intellectual Property right of any third party to the extent licensed by or
through the Company or any of its subsidiaries, by any third party, including
any employee or former employee of the Company or any of its subsidiaries. To
the Company's knowledge, no Company Intellectual Property or product or service
of the Company is subject to any proceeding or outstanding decree, order,
judgment, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by the Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property. Neither the Company nor
any of its subsidiaries has entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property, other
than indemnification provisions contained in purchase, service or work orders or
other agreements arising in the ordinary course of business.
(iv) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in material breach of any license, sublicense or other
agreement relating to Company Intellectual Property or Third Party Intellectual
Property Rights, the Company's service offerings or its ability to exploit its
products which could reasonably be expected to result in a material loss or
liability to the Company.
-14-
16
(v) No suit, action or proceeding involving the Company
which involves a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right,
or breach of any license or agreement involving Intellectual Property is
currently pending or, to the knowledge of the Company, is threatened, nor, to
the knowledge of the Company, is there any reasonable basis therefor. The
manufacture, marketing, licensing or sale of the Company's products and the
provision of the Company's services does not, to the Company's knowledge after
due inquiry of each of the Company's executive officers, directors and officers
in charge of the Company's corporate functions, infringe any patent, trademark,
service ▇▇▇▇, copyright, trade secret or other proprietary right of any third
party.
(vi) The Company has not received notice from any third
party that the operation of the business of the Company or any act, product or
service of the Company, infringes or misappropriates any Third Party
Intellectual Property Rights or constitutes unfair competition or trade
practices under the laws of any jurisdiction.
(vii) Except as set forth in Section 4.1(h)(vii) of the
Company Disclosure Letter, to the knowledge of the Company, no Person has
previously infringed or misappropriated or is infringing or misappropriating any
Intellectual Property material to the Company.
(viii) Except as set forth in Section 4.1(h)(viii) of the
Company Disclosure Letter, all current and former employees and consultants of
the Company have signed a confidentiality/nondisclosure agreement in the form
attached to the Company Disclosure Letter. All current and former employees and
consultants of the Company involved in product development work have signed an
invention assignment agreement in the form attached to the Company Disclosure
Letter. To the Company's knowledge, no such current or former employees or
consultants of the Company have violated any such agreement or otherwise
misappropriated any trade secrets of the Company or of any third party. The
Company does not believe it is or will be necessary to utilize any inventions,
trade secrets or proprietary information of any of its employees made prior to
their employment by the Company, except for inventions, trade secrets or
proprietary information that have been assigned to the Company.
(ix) The Company has taken all reasonable and appropriate
steps to protect and preserve the confidentiality of all Intellectual Property
not otherwise protected by patents, or patent applications or copyright
("Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by the Company by or to a third party has been
pursuant to the terms of a written agreement between the Company and such third
party. All use, disclosure or appropriation of the Company of Confidential
Information not owned by the Company has been pursuant to the terms of a written
agreement between the Company and the owner of such Confidential Information, or
is otherwise lawful.
(x) None of the Company's operating codes, programs,
utilities, development tools and other software, as well as all hardware and
systems, utilized by the Company or any of its subsidiaries internally or to
develop products or to provide services to customers, as well as all products of
the Company or any of its subsidiaries sold to customers (collectively,
-15-
17
"Systems") will, as a result of processing data containing dates in the year
2000 and any preceding or following years, fail to initiate or operate, or to
correctly store, represent and process all dates or abnormally terminate such
processing. The Company's Systems operate and will operate substantially in
accordance with their specifications prior to, during and after the calendar
year 2000 or any leap years. Since January 1, 1998, neither Company nor any of
its subsidiaries has given to customers any written representations or
warranties or indemnities with respect to year 2000 compliance or conformity,
except (A) where the Company's liability is limited to amounts paid to the
Company pursuant to the contract in which such representation, warranty or
indemnity appears and lost profits and consequential damages are expressly
excluded, (B) pursuant to the Company's standard form services agreement
attached as Exhibit 4.1(h)(x) to the Company Disclosure Letter or (C) as
disclosed in Section 4.1(h)(x) of the Company Disclosure Letter.
(i) Litigation. Except as disclosed in the Filed SEC Documents,
as of the date of this Agreement, there is no suit, action or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries, nor, to the knowledge of the Company, is their any reasonable
basis therefor, that individually or in the aggregate could reasonably be
expected to (i) have a Material Adverse Effect on the Company, (ii) challenge or
seek to enjoin or seek damages with respect to the Company's entering into and
performing this Agreement or that impair the ability of the Company to perform
its obligations under this Agreement or (iii) prevent the consummation of any of
the transactions contemplated by this Agreement, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries having, or which is
reasonably likely to have, any effect referred to in the foregoing clause (i),
(ii) or (iii) above.
(j) Absence of Changes in Benefit Plans. Except as disclosed in
the Filed SEC Documents or Section 4.1(j) of the Company Disclosure Letter,
since the date of the most recent audited financial statements included in the
Filed SEC Documents, there has not been any adoption or amendment in any
material respect by the Company or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its subsidiaries. Except
as disclosed in the Filed SEC Documents or Section 4.1(j) of the Company
Disclosure Letter, there exist no employment, consulting, severance, termination
or indemnification agreements, arrangements or understandings between the
Company or any of its subsidiaries and any current or former employee, officer
or director of the Company or any of its subsidiaries as to which there is or
could be aggregate liability on the part of the Company or any of its
subsidiaries in excess of $100,000.
(k) ERISA Compliance.
(i) The Company is in compliance in all material respects with
all applicable laws, agreements and contracts relating to employment, employment
practices, wages, hours, and terms and conditions of employment, including, but
not limited to, employee compensation matters.
-16-
18
Except as set forth in Section 4.1(k) of the Company Disclosure Letter, the
Company does not have any employment contracts or consulting agreements
currently in effect that are not terminable at will (other than agreements with
the sole purpose of providing for the confidentiality of proprietary information
or assignment of inventions).
(ii) The Company (a) has never been and is not now subject to a
union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization and (d) does not have any current labor disputes. The
Company has good labor relations, has not been informed of any facts indicating
that the consummation of the transactions contemplated hereby will have a
material adverse effect on such labor relations, and has not been informed that
any of its key employees intends to leave its employ.
(iii) Neither the Company nor any trade or business (a "Company
Affiliate") which is under common control with the Company within the meaning of
Section 414 of the Internal Revenue Code of 1986, as amended (the "Revenue
Code") has a pension plan which is subject to Section 412 of the Revenue Code or
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and does not maintain a "multiemployer plan" as defined in
Section 3(37) of ERISA. The Company has made available to Parent a true and
complete copy of, to the extent applicable, (i) such Company Employee Plan (as
defined below), (ii) the most recent annual report (Form 5500), (iii) each trust
agreement related to such Company Employee Plan (as defined below), (iv) the
most recent summary plan description for each Company Employee Plan (as defined
below) for which such a description is required and (v) the most recent United
States Internal Revenue Service ("IRS") determination letter issued with respect
to any Company Employee Plan (as defined below).
(iv) Each employment, severance or other similar contract,
arrangement or policy, each "employee benefit plan" as defined in Section 3(3)
of ERISA and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors
which is entered into, maintained or contributed to by the Company or any
Company Affiliate and covers any employee or former employee of the Company or
any Company Affiliate. Such contracts are hereinafter collectively referred to
as "Company Employee Plans." Each Company Employee Plan has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Company Employee Plan. All contributions to any Company
Employee Plan for all periods prior to the Effective Time have been timely made
or are accrued on the Company's financial statements.
(v) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company relating to, or change in
employee participation or coverage under, any Company Employee Plan that would
increase materially the expense of
-17-
19
maintaining such Company Employee Plan above the level of the expense incurred
in respect thereof for the Company's fiscal year ended December 31, 1998.
(vi) All of the Company Employee Plans, to the extent applicable,
are in compliance, in all material respects, with (a) the continuation coverage
requirements of Section 4980B of the Code and Sections 601 through 608 of ERISA,
(b) the Americans with Disabilities Act of 1990, as amended, and (c) the Family
Medical and Leave Act of 1993, as amended, and the regulations thereunder.
(vii) No benefit payable or which may become payable by the
Company or any of its subsidiaries pursuant to any Company Employee Plan or as a
result of or arising under this Agreement or the Agreement of Merger will
constitute an "excess parachute payment" (as defined in Section 280G(b)(1) of
the Revenue Code) which is subject to the imposition of an excise Tax under
Section 4999 of the Revenue Code or which would not be deductible by reason of
Section 280G of the Revenue Code. Except as set forth in Section 4.1(k)(vii) of
the Company Disclosure Letter, neither the Company nor its subsidiaries is a
party to any: (a) agreement (other than as described in (b) below) with any
executive officer or other key employee thereof (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company or its subsidiaries in the nature of any of
the transactions contemplated by this Agreement or the consummation of the
transactions contemplated hereby, (ii) providing any term of employment or
compensation guarantee, or (iii) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment, or (b) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(viii) The Company has made available to Parent a list of the
names of all employees of the Company and of any of its subsidiaries and their
salaries as of the most recent practicable date.
(l) Taxes.
(i) The Company and each of its subsidiaries has duly
filed on a timely basis all material Tax Returns required to be filed by it. All
such Returns are true, complete and correct in all material respects. Neither
the Company nor any of its subsidiaries has been delinquent in the payment of
any material Tax nor is there any material Tax deficiency outstanding, proposed
or assessed against Parent or any of its subsidiaries, nor has Company or any of
its subsidiaries executed any unexpired waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax. Neither the
Company nor any of its subsidiaries has any liability for any material unpaid
Taxes which has not been accrued for or reserved on the balance sheet of the
Company contained in the most recent financial statements contained in the Filed
SEC Documents (the "Company Balance Sheet") in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise, which is material to Company,
other than any liability for
-18-
20
unpaid Taxes that may have accrued since the date of the Company Balance Sheet
in connection with the operation of the business of Company and its subsidiaries
in the ordinary course. The most recent financial statements contained in the
Filed SEC Documents properly reflect in accordance with generally accepted
accounting principles all Taxes payable by or properly accruable by the Company
and its subsidiaries for all taxable periods and portions thereof through the
date of such financial statements.
(ii) No deficiencies for any Taxes have been proposed,
asserted or assessed against the Company or any of its subsidiaries that are not
properly reflected in accordance with generally accepted accounting principles
in the most recent financial statements contained in the Filed SEC Documents,
and no requests for waivers of the time to assess any such Taxes are pending.
The Company and/or any of its subsidiaries have not agreed with any Tax
authority to extend the time to assess any Taxes beyond the date of this
Agreement. None of the Federal income tax returns of the Company and each of its
subsidiaries consolidated in such returns have been examined by the Internal
Revenue Service for any taxable period. The Company and/or any of its
subsidiaries have not entered into any closing agreement with respect to any
taxable year. The Company and/or any of its subsidiaries is neither a party to
any action or proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened in writing against the Company or any of its
subsidiaries or any of their assets. The Company and each of its subsidiaries
have disclosed on their federal income tax returns all positions taken therein
that could give rise to a substantial understatement penalty within the meaning
of Revenue Code Section 6662. Neither the Company nor any of its subsidiaries is
(nor has ever been) a party to any Tax sharing agreement with any party other
than the Company or its subsidiaries.
(iii) Neither the Company nor any subsidiary is a party
to any safe harbor lease within the meaning of Section 168(f)(8) of the Revenue
Code, as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982. The Company is not and has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Revenue Code during the applicable period specified in Section 897(c)(l)(A)(ii)
of the Code. Neither the Company nor any subsidiary has participated in an
international boycott as defined in Revenue Code Section 999. Neither the
Company nor any subsidiary is a member of, a partner in, or otherwise owns an
interest in a partnership, limited liability or other "pass through" entity.
Neither the Company nor any subsidiary has agreed, nor is it required to make,
any adjustment under Revenue Code Section 481(a) by reason of a change in
accounting method or otherwise. Neither the Company nor any of its subsidiaries
own any interest in any controlled foreign corporation (as defined in Section
957 of the Revenue Code), passive foreign investment company (as defined in
Section 1296 of the Revenue Code) or other entity, the income of which is
required to be included in the income of the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries has been a "distributing" or
"controlled" corporation as defined in Section 355 of the Revenue Code in a
transaction intended to qualify under Section 355 and Section 368(a)(1)(D) of
the Revenue Code within the two years immediately prior to the signing of this
Agreement.
(iv) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Revenue Code or agreed
to have Section 341(f)(2) of the
-19-
21
Revenue Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Revenue Code) owned by Company or any of its
subsidiaries.
(v) As used in this Agreement, "Tax" or "Taxes" shall mean
all taxes, however, denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state income taxes),
payroll and employee withholding taxes, unemployment insurance, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes,
gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which the Company or any of its subsidiaries is
required to pay, withhold or collect. As used in this Agreement, "Returns" shall
mean all reports, estimates, declarations of estimated tax, information
statements and returns relating to, or required to be filed in connection with,
any Taxes, including information returns or reports with respect to withholding
and other payments to third parties.
(m) No Excess Parachute Payments. Any amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement by any employee, officer
or director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Revenue Code). There is no agreement, contract or
arrangement to which the Company or any of its subsidiaries is a party that may
result in the payment of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Revenue Code.
(n) Compliance with Applicable Laws.
(i) The Company and each of its subsidiaries has in effect
all Federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary for it to own, lease or operate its properties and assets
and to carry on its business as now conducted, and there has occurred no default
under any such Permit, except for the lack of Permits and for defaults under
Permits which individually or in the aggregate would not have a Material Adverse
Effect on the Company. Except as disclosed in Section 4.1(n) of the Company
Disclosure Letter, the Company and its subsidiaries are in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for noncompliance which individually or in the
aggregate would not have a Material Adverse Effect on the Company.
-20-
22
(ii) The Company and its subsidiaries are, and have been,
and each of the Company's former subsidiaries, while subsidiaries of the
Company, was in compliance with all applicable Environmental Laws except for
noncompliance which individually or in the aggregate would not have a Material
Adverse Effect on the Company. The term "Environmental Laws" means any Federal,
state or local statute, code, ordinance, rule, regulation, policy, guideline,
permit, consent, approval, license, judgment, order, writ, decree, directive,
injunction or other authorization, including the requirement to register
underground storage tanks, relating to: (A) Releases (as defined below) or
threatened Releases of Hazardous Material (as defined below) into the
environment, including into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, ground water, publicly-owned
treatment works, septic systems or land; or (B) the generation, treatment,
storage, disposal, use, handling, manufacturing, transportation or shipment of
Hazardous Material.
(iii) During the period of ownership or operation by the
Company and its subsidiaries of any of their respective current or previously
owned or leased properties, there have been no Releases of Hazardous Material by
the Company or its subsidiaries, or, to the Company's knowledge, any other
party, in violation of Environmental Laws in, on, under or affecting such
properties or, to the knowledge of the Company, any surrounding site, and none
of the Company or its subsidiaries have disposed of any Hazardous Material or
any other substance in a manner that could reasonably be anticipated to lead to
a Release in violation of Environmental Laws, except in each case for those
which individually or in the aggregate would not have a Material Adverse Effect
on the Company. Prior to the period of ownership or operation by the Company and
its subsidiaries of any of their respective currently or previously owned or
leased properties, to the knowledge of the Company, there were no Releases of
Hazardous Material in, on, under or affecting any such property or any
surrounding site, except in each case for those which individually or in the
aggregate would not have a Material Adverse Effect on the Company. The term
"Release" has the meaning set forth in 42 U.S.C. Section 9601(22). The term
"Hazardous Material" means (1) hazardous materials, pollutants, contaminants,
constituents, medical or infectious wastes, hazardous wastes and hazardous
substances as those terms are defined in the following statutes and their
implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. Section 9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and the
Clean Air Act, 42 U.S.C. Section 7401 et seq., (2) petroleum, including crude
oil and any fractions thereof, (3) natural gas, synthetic gas and any mixtures
thereof, (4) asbestos and/or asbestos containing material, (5) radon and (6)
PCBs, or materials or fluids containing PCBs.
(o) State Takeover Statutes; Rights Agreement. Except for
Sections 1101 and 1203 of the Code (which will not apply if the Merger is a
short form merger), no California takeover statute or similar statute or
regulation applies to the Offer, the Merger, this Agreement, or any of the
transactions contemplated by this Agreement. The Company is not a party to, nor
affected by, any "rights agreement", "poison pill" or similar plan, agreement or
arrangement (a "Rights Plan")
-21-
23
affecting the capitalization of, or issuance of capital stock by, the Company,
which would be triggered by the Offer, the Merger, this Agreement or any other
transaction contemplated hereby.
(p) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners
LLC, the fees and expenses of which will be paid by the Company (and a copy of
whose engagement letter has been provided to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission, nor
to any fee that is contingent on closing of the transactions contemplated hereby
or that is based on a percentage of the transaction value, in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company. Assuming consummation of the Merger, no such
engagement letter obligates the Company to continue to use their services or pay
fees or expenses in connection with any future transaction.
(q) Opinion of Financial Advisor. The Company has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC, dated the date of this Agreement, to the
effect that, as of such date, the consideration to be received in the Offer and
the Merger by the Company's shareholders is fair to the Company's shareholders
(other than Parent and Sub) from a financial point of view, and a signed copy of
such opinion has been delivered to Parent.
(r) Contracts, Debt Instruments.
(i) Set forth on the Company Disclosure Letter is (x) a
list of all loan or credit agreements, notes, bonds, mortgages, indentures and
other agreements and instruments pursuant to which any indebtedness of the
Company or any of its subsidiaries in an aggregate principal amount in excess of
$250,000 is outstanding or may be incurred and (y) the respective principal
amounts currently outstanding thereunder. For purposes of this Agreement,
"indebtedness" shall mean, with respect to any person, without duplication, (A)
all obligations of such person for borrowed money, or with respect to deposits
or advances of any kind to such person, (B) all obligations of such person
evidenced by bonds, debentures, notes or similar instruments, (C) all
obligations of such person upon which interest charges are customarily paid, (D)
all obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person, (E) all obligations of
such person issued or assumed as the deferred purchase price of property or
services (excluding obligations of such person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
person's business), (F) all capitalized lease obligations of such person, (G)
all obligations of others secured by any lien on property or assets owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (H) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof), (I) all letters
of credit issued for the account of such person (excluding letters of credit
issued for the benefit of suppliers to support accounts payable to suppliers
incurred in the ordinary course of business) and (J) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
-22-
24
(ii) Neither the Company nor any of its subsidiaries is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice would cause such a violation of or
default under): (i) its articles of incorporation or bylaws, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding to which it is a party or by which it or any of its properties or
assets is bound, (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries, except for
violations or defaults that individually or in the aggregate would not have a
Material Adverse Effect on the Company.
(iii) Neither the Company nor any of its subsidiaries is
a party to or is bound by: (A) any agreement of indemnification or guaranty not
entered into in the ordinary course of business other than indemnification
agreements between the Company or any of its subsidiaries and any of its
officers or directors; (B) any agreement, contract or commitment currently in
force relating to the disposition or acquisition of assets not in the ordinary
course of business or any ownership interest in any corporation, partnership,
joint venture or other business enterprise; or (C) any material joint marketing
or development agreement.
(s) Certain Agreements. Except as set forth in Section 4.1(s) of
the Company Disclosure Letter, the Company and its subsidiaries are not parties
to or subject to any agreement which falls within any of the following
classifications:
(i) any employment, deferred compensation, bonus or
consulting contract (other than with a technical consultant) requiring payments
in excess of $125,000 by the Company or any subsidiary;
(ii) any distributorship, sales, marketing, advertising,
brokerage, licensing, dealership, representative or agency relationship
requiring payment by the Company or any subsidiary;
(iii) any contract or agreement that materially restricts
or materially impairs the Company or any of its subsidiaries or employees from
carrying on such person's business as now conducted or any part thereof or from
competing in any line of business with any person, corporation or other entity
or that grants any exclusive license or distribution rights;
(iv) any collective bargaining agreement or other such
contract or agreement with any labor organization;
(v) any lease of personal property requiring rental
payments of $250,000 or more throughout its term and having a term of one year
or more, whether as lessor or lessee;
(vi) any mortgage, pledge, conditional sales contract,
security agreement, option, or any other similar agreement with respect to any
interest of the Company or any subsidiary in personal property;
-23-
25
(vii) any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, change in
control, welfare or employee plan or material agreement providing benefits to
any present or former employees, officers or directors of the Company or any of
its subsidiaries;
(viii) any agreement to acquire equipment or commitment to
make capital expenditures by the Company or any subsidiary of $100,000 or more;
(ix) any agreement for the sale of any material properties
or assets, or for the grant of any preferential right to purchase any such
material properties or assets or which requires the consent of any third party
to the transfer and assignment of any such material properties or assets, other
than in the ordinary course of business in connection with the Company sale of
properties or assets;
(x) any agreement requiring the Company to indemnify any
current or former officer, director, employee or agent;
(xi) except in the ordinary course of business, any other
agreement of any other kind which involves future payments or receipts or
performance of services or delivery of items, requiring payments of $100,000 or
more to or by the Company or any subsidiary; or
(xii) any agreement with a customer of the Company
providing for services to be performed for such customer for a fixed or capped
fee or payment structure.
Neither the Company nor any subsidiary is in default under
any contract or agreement, nor, to the knowledge of the Company, are any other
parties to such agreements in default, and to the Company's knowledge, no act or
omission has occurred which, with notice or lapse of time or both, would
constitute a default under any term or provision of any contract or agreement,
except for such defaults which, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. Each agreement disclosed in items (i)
through (xii) of this Section is in full force and effect and true and correct
copies of all such agreements have been provided to Parent or its
representatives.
(t) Title to Properties.
(i) Section 4.1(t) of the Company Disclosure Letter lists
all real property interests owned or leased by the Company or its subsidiaries.
The Company and each of its subsidiaries has good and marketable title to, or
valid leasehold interests in, all its material properties and assets except for
such as are no longer used or useful in the conduct of its businesses or as have
been disposed of in the ordinary course of business and except for defects in
title, easements, restrictive covenants and similar encumbrances or impediments
that individually or in the aggregate would not materially interfere with its
ability to conduct its business as currently conducted. All
-24-
26
such material properties and assets, other than properties and assets in which
the Company or any of its subsidiaries has leasehold interests, are free and
clear of all Liens, except for Liens that individually or in the aggregate would
not materially interfere with the ability of the Company and its subsidiaries to
conduct business as currently conducted.
(ii) The Company and each of its subsidiaries has complied
in all material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full force
and effect. The Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such material leases.
(u) Labor Matters. Except as set forth in the Company Disclosure
Letter, or as would not have a Material Adverse Effect on the Company (a) the
Company and its subsidiaries are operating and have operated the business in
compliance in all material respects with all applicable laws relating to the
business respecting employment and employment practices, terms and conditions of
employment and wages and hours, including the Immigration Reform and Control Act
("IRCA"), the Worker Adjustment and Retraining Notification Act of 1988 ("WARN
Act"), any such applicable laws respecting employment of foreign nationals,
employment discrimination, equal opportunity, affirmative action, employee
privacy, wrongful or unlawful termination, workers' compensation, occupational
safety and health requirements, labor/management relations and unemployment
insurance, the Family and Medical Leave Act or related matters, and the Company
and its subsidiaries are not engaged in and have not engaged in any unlawful
practice relating to the business under such applicable laws, or in any unfair
labor practice relating to the business; (b) no Governmental Entity has given
the Company or any of its subsidiaries written notice regarding any pending
charge, audit, claim, complaint, investigation or review by or before any
Governmental Entity concerning or requesting in writing to explain any conflicts
with or violations of any such laws relating to the business by the Company or
such subsidiary or in connection with the operation of the business, nor, to the
knowledge of the Company, is any such investigation threatened or
pending, nor, to the knowledge of the Company, has any such investigation
occurred during the last two years; (c) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to the knowledge of Company,
threatened against or affecting the business, and neither the Company nor any
subsidiary has experienced any work stoppage or other material labor difficulty
relating to the business in the last two years; (d) to the knowledge of the
Company, no union representation question or union organizational activity
exists respecting employees and, to the Company's knowledge, no one has
petitioned within the last two years, and no one is now petitioning, for union
representation of any employees; (e) there exists no collective bargaining
agreement or other contract or agreement relating to the business with any labor
union or association representing any employee, and no collective bargaining
agreement affecting employees is currently being negotiated; and (f) the Company
and its subsidiaries are in material compliance with all obligations under all
Company Employee Plans and all employment contracts and are not delinquent in
payments to any employees for any wages, salaries, commissions, bonuses or other
compensation for any services performed by them relating to the business or
amounts required to be reimbursed to such employees. Except as set forth in the
Company Disclosure Letter, there are no pending or, to the knowledge of the
Company, threatened proceedings, actions or suits of any nature (i) under or
alleging violation of IRCA, WARN or any law respecting employment of foreign
nationals, employment discrimination, equal
-25-
27
opportunity, affirmative action, employee privacy, wrongful or unlawful
termination or demotion, sexual and other harassment, workers' compensation,
occupational safety and health requirements, labor/management relations
(including any grievances or arbitration proceeding arising out of or under any
collective bargaining agreements) and unemployment insurance, or matters
involving any employee; (ii) relating to alleged unlawful employment practices
or unfair labor practices involving any employee (or the equivalent thereof
under any law); or (iii) relating to alleged breaches of any of the Company
Employee Plans. To the Company's knowledge, no employee of the Company has in
any material respect violated any employment contract, confidentiality
agreement, patent disclosure agreement or noncompetition agreement between such
employee and any former employer of such employee due to such employee being
employed by the Company or any of its subsidiaries or disclosing to the Company
or any of its subsidiaries trade secrets or proprietary information of any such
employer. No employee of the Company or any of its subsidiaries has given notice
to the Company or any of its subsidiaries, nor is the Company otherwise aware,
that any employee intends to terminate his or her employment with the Company or
any of its subsidiaries.
(v) Government Contracts. All representations, certifications and
disclosures made by the Company or any subsidiary to any Government Contract
Party (as defined below) have been in all material respects current, complete
and accurate at the times they were made. There have been no acts, omissions or
noncompliance with regard to any applicable public contracting statute,
regulation or contract requirement (whether express or incorporated by
reference) relating to any contracts of Company or any subsidiary with any
Government Contract Party (as defined below) in either case that have led to or
is reasonably likely to lead to, either before or after the Closing Date, (a)
any material claim or dispute involving Company or any subsidiary and/or Parent
or Sub as successor in interest to Company and any Government Contract Party or
(b) any suspension, debarment or contract termination, or proceeding related
thereto. There has been no act or omission that relates to the marketing,
licensing or selling to any Government Contract Party (as defined below) of any
of the Company's technical data, computer software, products and services and
that has led to or is reasonably likely to lead to, either before or after the
Closing Date, any cloud on any of the Company's or its subsidiaries' rights in
and to its technical data, computer software, products and services. There is
currently no dispute between the Company or any of its subsidiaries and any
Government Contract Party. For purposes of this Section, the term "Government
Contract Party" means any independent or executive agency, division,
subdivision, audit group or procuring office of the federal, state, county,
local or municipal government, including any prime contractor of the federal
government and any higher level subcontractor of a prime contractor of the
federal government, and including any employees or agents thereof, in each case
acting in such capacity.
(w) Warranties, Guarantees and Indemnities. Except as disclosed
in Section 4.1(w) of the Company Disclosure Letter, neither the Company nor any
of its subsidiaries has provided to its customers rights to obtain refunds or
made any other warranties, guarantees or indemnities with respect to the
services it provides to such customers except where the Company's liability is
limited to (1) amounts paid to the Company pursuant to the contract in which
such right, warranty, guaranty or indemnity appears and lost profits and
consequential damages are expressly excluded, and (2) the Company's obligation
to remedy a deficiency under such contract without further charge to the
customer.
-26-
28
(x) Customer Relationships. Each of the Company and each of its
subsidiaries has reasonably good commercial working relationships with its
customers and suppliers. None of the Company's top twenty-five customers (based
on the Company's consolidated revenues for the fiscal year ended July 31, 1998
(each, a "Material Customer") has, from August 1, 1998 to the date of this
Agreement, canceled or otherwise terminated its relationship with the Company or
any subsidiary thereof, decreased or limited materially the amount of product or
services ordered from the Company or any subsidiary thereof, or threatened to
take any such action other than in the ordinary course upon completion of
customer projects.
(y) Product and Service Quality. All products manufactured, sold,
licensed, leased or delivered by the Company and its subsidiaries and all
services provided by the Company and its subsidiaries, to customers on or prior
to the Closing Date conform to applicable contractual commitments, express and
implied warranties, product specifications and quality standards in all material
respects, and none of the Company or its subsidiaries has any material liability
(and there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the Company
or its subsidiaries giving rise to any liability) for replacement or repair
thereof or other damages in connection therewith. Neither the Company nor its
subsidiaries has received a complaint from a Material Customer regarding the
Company's or its subsidiaries' services pursuant to which such Material Customer
is withholding payment of any material amounts payable to the Company or such
subsidiary, or which is the subject of an ongoing dispute or correspondence
between the Company and such customer.
(z) Disclosure. Nothing in the Company Disclosure Letter shall be
deemed adequate to disclose an exception to a representation or warranty made
herein unless the disclosure identifies the exception with particularity and
describes the relevant facts in reasonable detail; provided, that a particular
matter need only be disclosed once in such manner so long as it is
cross-referenced wherever else applicable in the Company Disclosure Letter in a
manner sufficiently clear to identify to which representation or warranty an
exception is being made.
4.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Parent and Sub is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate would not have a material
adverse effect on Parent.
(b) Authority; Noncontravention. Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated
-27-
29
by this Agreement. The execution and delivery of this Agreement by Parent and
Sub and the consummation by Parent and Sub of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate action on
the part of Parent and Sub. This Agreement has been duly executed and delivered
by Parent and Sub and constitutes a valid and binding obligation of each such
party, enforceable against each such party in accordance with its terms (except
as enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors' rights or remedies in general as from time to time
in effect or (ii) the exercise by courts of equity powers). The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Sub under (i) the articles of incorporation or
by-laws of Parent or Sub, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or Sub or their respective properties
or assets or (iii) any governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or Sub or their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not (x) have a material adverse effect on Parent and its subsidiaries,
taken as a whole, (y) materially impair the ability of Parent or Sub to perform
their obligations under this Agreement, (z) prevent the consummation of any of
the transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement or the consummation by Parent or Sub,
as the case may be, of any of the transactions contemplated by this Agreement,
except for (1) the filing of a pre-merger notification and report form under the
HSR Act, (2) the filing with the SEC and the National Association of Securities
Dealers of (A) the Offer Documents and (B) such reports under Sections 13(a),
13(d) and 16(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (3) the filing of
the Certificate of Ownership or an agreement of merger with the California
Secretary of State and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business and (4) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as would not individually or in the aggregate (A) have a material
adverse effect on Parent and its subsidiaries, taken as a whole, (B) impair the
ability of Parent and Sub to perform their respective obligations under this
Agreement or (C) prevent the consummation of any of the transactions
contemplated by this Agreement.
(c) Information Supplied. None of the information supplied or to
be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the Information Statement
or the Proxy Statement will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's shareholders, or, in the
case of the Proxy Statement, at the
-28-
30
date the Proxy Statement is first mailed to the Company's shareholders or at the
time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Offer Documents will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation or
warranty is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference therein.
(d) Brokers. No broker, investment banker, financial advisor or
other person, other than Updata Capital, the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent or Sub.
(e) Financing. At the expiration of the Offer and the Effective
Time, Parent and Sub will have available all the funds necessary for the
acquisition of all Shares pursuant to the Offer or Merger and to perform their
respective obligations under this Agreement, including without limitation
payment in full for all Shares validly tendered or outstanding at the Effective
Time.
(f) Litigation. Except as disclosed in documents filed with the
SEC by Parent, as of the date of this Agreement, there is no suit, action or
proceeding pending or, to the knowledge of Parent, threatened against Parent or
any of its subsidiaries that individually or in the aggregate could reasonably
be expected to (i) impair the ability of Parent or Sub to perform their
obligations under this Agreement or (ii) prevent the consummation of any of the
transactions contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any of its subsidiaries having, or which is reasonably likely
to have, any effect referred to in the foregoing clause (i) or (ii) above.
(g) Financial Statements. The financial statements of Parent
included in the required reports, schedules, forms, statements and other
documents filed with the SEC since December 31, 1996, including those filed
after the date hereof until the Closing, comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
-29-
31
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Business.
(a) Conduct of Business by the Company. The Company shall, and
shall cause its subsidiaries to, carry on its and their respective businesses in
the ordinary course consistent with past practice and use all reasonable efforts
to preserve intact their current business organizations, to keep available the
services of their current officers and employees and to preserve their
relationships with distributors, licensors, contractors, customers, suppliers,
lenders and others having business dealings with any of them. Without limiting
the generality of the foregoing, except as may be expressly permitted by other
provisions of this Agreement, as set forth in Section 5.1 of the Company
Disclosure Letter cross-referenced to a subsection of this Section 5.1, or as
may be agreed to in writing by Parent, the Company shall not, and shall not
permit any of its subsidiaries to:
(i)(x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent, in the case of less than wholly owned subsidiaries,
as required by agreements existing on the date of this Agreement, (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
the Company Common Stock upon the exercise of Options (as defined in Section
6.4) or upon the conversion of the Convertible Notes outstanding on the date of
this Agreement and in accordance with their present terms) and pursuant to the
Stock Purchase Plan; provided, that, without the prior written consent of Parent
(such consent not to be unreasonably withheld), in no event shall the Company
issue any shares of its capital stock during the period commencing with the
consummation of the Offer and ending at the Effective Time;
(iii) amend its articles of incorporation, by-laws or
other comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or (y)
any assets that individually or in the aggregate are material to the Company and
its subsidiaries taken as a whole, except in the ordinary course of business
consistent with past practice;
-30-
32
(v) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or assets
(including Intellectual Property), except for sales, leases, licenses, or
encumbrances of its properties or assets in the ordinary course of business
consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or draw
down on any credit facility or arrangement (except in the ordinary course of
business under agreements in effect on the date hereof, not to exceed $1,000,000
in aggregate amount; provided, that such amount may be exceeded with the prior
written consent of Parent, such consent not to be unreasonably withheld) or
guarantee any indebtedness of another person (other than a subsidiary), issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (y) make any
loans or advances to, or investments in, any other person, other than any
subsidiary of the Company;
(vii) make or agree to make any new capital expenditure or
expenditures which individually is in excess of $100,000 or which in the
aggregate are in excess of $500,000;
(viii) make any material tax election or settle or
compromise any material income or franchise tax liability;
(ix) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Filed SEC Documents or
incurred since the date of such financial statements in the ordinary course of
business consistent with past practice in accordance with the terms of this
Section 5.1;
(x) except as expressly contemplated hereby, waive,
release or assign any rights or claims under any contract or agreement binding
on the Company or any subsidiary; or, except as expressly contemplated hereby or
in the ordinary course of business consistent with past practice, enter into,
modify, amend or terminate any contract or agreement binding on the Company
or any subsidiary; or, in any event, enter into any contract or agreement
binding on the Company or any subsidiary which would be required to be disclosed
in Section 4.1(d) of the Company Disclosure Letter;
(xi) terminate or lay off more than ten employees, except
for cause consistent with past practice and Company policy;
(xii) adopt or amend in any material respect any employee
benefit or employee stock purchase or employee option plan, or enter into any
employment contract, pay any
-31-
33
special bonus or special remuneration to any director or employee, or increase
the salaries or wage rates of its officers or employees other than in the
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures, waive any stock
repurchase rights, accelerate, amend or change the period of exercisability of
any Options (as defined in Section 6.4), or authorize cash payments in exchange
for any Options, or otherwise alter or commit to any compensation, benefit or
severance arrangement for or with any officer or employee of the Company or
enter into any related or interested party transaction;
(xiii) grant or provide any severance or termination pay
to any officer or employee except payments pursuant to written plans or
agreements outstanding on the date hereof and described in the Company
Disclosure Letter;
(xiv) take any actions (including seeking or soliciting
corporate approvals) directed towards seeking to liquidate or dissolve the
Company or to take advantage of bankruptcy or other creditor protection laws or
that would or are reasonably likely to render the Company insolvent or to cause
the Company to become involved in bankruptcy proceedings, including soliciting
creditor arrangements or moratoria;
(xv) except as described in Section 5.1(a)(xv) of the
Company Disclosure Letter, institute any litigation or other proceeding;
(xvi) take any action that might cause or constitute a
breach of any representation or warranty made by the Company in this Agreement;
or
(xvii) enter into any Rights Plan, or take or permit any
other action which could have the effect of causing the representation made in
Section 4.1(o) to be untrue in any respect;
(xviii)authorize any of, or commit or agree to take any
of, the foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall
not permit any of their respective subsidiaries to, knowingly and willfully,
take deliberate action that would cause (i) any of the representations and
warranties of such party set forth in this Agreement to become untrue in (x)
such a manner as would have a Material Adverse Effect on the Company (in the
case of the Company) or (y) any material respect (in the case of Parent) as of
the date when made or (ii) any of the conditions to the Offer set forth in
Exhibit A or any of the conditions to the Merger not being satisfied (subject to
the Company's right to take action consistent with Section 5.2).
5.2 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement in accordance with its terms,
the Company shall not, nor shall it permit any of its subsidiaries to, nor shall
it authorize or permit any officer, director or employee of,
-32-
34
or any investment banker, attorney or other advisor or representative of, the
Company or any of its subsidiaries to, directly or indirectly, (i) solicit,
initiate or encourage the making, announcement or submission of any takeover
proposal or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any non-public information with respect to, or enter into
any agreement with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any takeover proposal; provided, however, that this Section
5.2 shall not prohibit the Company from furnishing non-public information
regarding the Company and its subsidiaries to, or entering into discussions or
negotiations with, any person or group who has submitted (and not withdrawn) to
the Company an unsolicited, written, bona fide takeover proposal (as defined in
this Section 5.2) that the Company's Board of Directors reasonably concludes
(after consultation with its financial adviser) may constitute a superior
proposal (as defined in Section 6.1) if (1) neither Company nor any
representative of Company and its subsidiaries shall have violated any of the
restrictions set forth in this Section 5.2, (2) the Company's Board of Directors
concludes in good faith, after consultation with its outside legal counsel, that
such action is required in order for the Company's Board of Directors to comply
with its fiduciary obligations to Company's shareholders under applicable law,
and (3) prior to furnishing any such nonpublic information to, or entering into
any such discussions with, such person or group, the Company gives Parent
written notice of the identity of such person or group and all of the material
terms and conditions of such takeover proposal and of the Company's intention to
furnish information to, or enter into discussions with, such person or group,
the Company receives from such person or group an executed confidentiality
agreement containing terms at least as restrictive with regard to the Company's
confidential information as the Confidentiality Agreement, and contemporaneously
with furnishing any such information to such person or group, the Company
furnishes such information to Parent (to the extent such information has not
been previously furnished by the Company to Parent). Upon execution of this
Agreement, the Company, its subsidiaries, officers, directors, employees,
investment bankers, attorneys and other agents and representatives will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted previously regarding a takeover proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding two sentences by any officer or director of the
Company or any investment banker or attorney of the Company or any of its
subsidiaries, shall be deemed to be a breach of this Section 5.2(a) by the
Company. For purposes of this Agreement, "takeover proposal" means any offer or
proposal relating to any transaction or series of related transactions (other
than the transactions contemplated by this Agreement) involving: (A) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 10% interest in the total outstanding voting
securities of the Company or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 10% or more of the total outstanding voting
securities of the Company or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the Company
pursuant to which the shareholders of the Company immediately preceding such
transaction hold less than 90% of the equity interests in the surviving or
resulting entity of such transaction; (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition
-33-
35
of more than 10% of the assets of the Company; or (C) any liquidation or
dissolution of the Company.
(b) In addition to the obligations of the Company set forth in
paragraph (a) above, the Company shall promptly advise Parent orally and in
writing of any request for information or of any takeover proposal, or any
inquiry with respect to or which is expected to lead to any takeover proposal,
the material terms and conditions of such request, takeover proposal or inquiry,
and the identity of the person making any such takeover proposal or inquiry. The
Company will keep Parent fully informed of the status and details of any such
request, takeover proposal or inquiry.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Shareholder Approval; Preparation of Proxy Statement.
(a) If the Company Shareholder Approval is required by law in
order to effect the Merger, the Company will, as soon as practicable following
the expiration of the Offer, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Shareholders Meeting") for the purpose of
obtaining the Company Shareholder Approval. Subject to the provisions of Section
6.1(c): (i) the Company will, through its Board of Directors, recommend to its
shareholders that the Company Shareholder Approval be given; (ii) the Proxy
Statement shall include a statement to the effect that the Company's Board of
Directors recommends that the Company Shareholder Approval be given at the
Shareholders Meeting; and (iii) neither the Company's Board of Directors nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, the recommendation of
the Company's Board of Directors that the Company Shareholder Approval be given
at the Shareholders Meeting. Notwithstanding the foregoing, if Sub (or any other
subsidiary of Parent) shall acquire and shall maintain through the effectiveness
of the Short-Form Merger, ownership of at least 90% of the outstanding Shares
sufficient to enable Sub (or such other subsidiary) to effect the Short-Form
Merger, the parties shall, at the request of Parent, take all necessary and
appropriate action to cause the Short-Form Merger to become effective as soon as
practicable after the expiration of the Offer without a Shareholders Meeting in
accordance with Section 1110 of the Code, including by filing the Certificate of
Ownership and by the Company's Board giving the approval contemplated by Code
Section 1110(b). Without limiting the generality of the foregoing, the Company
agrees that its obligations pursuant to the first sentence of this Section
6.1(a) shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any takeover proposal (including a
superior proposal) or (ii) the withdrawal or modification by the Company's Board
of Directors of its approval or recommendation of the Offer, this Agreement, the
Merger or the Company Shareholder Approval.
(b) If the Company Shareholder Approval is required by law in
order to effect the Merger, the Company will, as soon as practicable following
the expiration of the Offer, prepare and
-34-
36
file a preliminary Proxy Statement with the SEC and will use its best efforts to
respond to any comments of the SEC or its staff and to cause the Proxy Statement
to be mailed to the Company's shareholders as promptly as practicable after
responding to all such comments to the satisfaction of the staff. The Company
will notify Parent promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and will supply Parent with
copies of all correspondence between the Company or any of its representatives,
on the one hand, and the SEC or its staff, on the other hand, with respect to
the Proxy Statement or the Merger. If at any time prior to the Shareholders
Meeting there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly prepare and mail to
its shareholders such an amendment or supplement. The Company will not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects.
(c) Nothing in this Agreement shall prevent the Company's Board
of Directors from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a superior proposal (as defined
below) is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "Notice of Superior Proposal") advising
Parent that the Company has received a superior proposal, specifying all of the
material terms and conditions of such superior proposal and identifying the
person or entity making such superior proposal, (iii) Parent shall not have,
within three business days of Parent's receipt of the Notice of Superior
Proposal, made an offer that the Company's Board by a majority vote determines
in its good faith judgment, after consultation with its financial adviser, to be
at least as favorable to the Company's shareholders as such superior proposal
(it being agreed that the Company's Board of Directors shall convene a meeting
to consider any such offer by Parent promptly following the receipt thereof),
(iv) the Company's Board of Directors concludes in good faith, after
consultation with its outside counsel, that, in light of such superior proposal,
the withholding, withdrawal, amendment or modification of such recommendation is
required in order for the Company's Board of Directors to comply with its
fiduciary obligations to the Company's shareholders under applicable law and (v)
the Company shall not have violated any of the restrictions set forth in Section
5.2 or this Section 6.1. The Company shall provide Parent with at least three
business days prior notice (or such lesser prior notice as provided to the
members of the Company's Board of Directors but in no event less than
twenty-four hours) of any meeting of the Company's Board of Directors at which
the Company's Board of Directors is reasonably expected to consider any takeover
proposal to determine whether such takeover proposal is a superior proposal. For
purposes of this Agreement, "superior proposal" shall mean an unsolicited, bona
fide written offer made by a third party to consummate any of the following
transactions: (i) a merger or consolidation involving the Company pursuant to
which the Shares outstanding immediately preceding such transaction will
represent less than 50% of the equity interest in the surviving or resulting
entity of such transaction or (ii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or a two step
transaction involving a tender offer followed with reasonable promptness by a
merger involving the Company), directly or indirectly, of ownership of 100% of
the then outstanding shares of capital stock of the Company, on terms that the
Company's Board of Directors determines, in its reasonable judgment (based on
the written advice of its financial adviser) to be more favorable to the Company
shareholders than the terms of the Merger; provided, however, that any such
offer shall not be
-35-
37
deemed to be a "superior proposal" if any financing required to consummate the
transaction contemplated by such offer is not committed and is not likely in the
reasonable judgment of the Company's Board of Directors (after consultation with
its financial adviser) to be obtained by such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and disclosing to its shareholders
a position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act.
(e) Parent agrees to cause all shares of the Company Common Stock
purchased pursuant to the Offer and all other shares of the Company Common Stock
owned by Sub or any other subsidiary of Parent to be voted in favor of the
Company Shareholder Approval.
6.2 Access to Information; Confidentiality. The Company shall, and shall
cause each of its subsidiaries to, afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisers and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its subsidiaries to, furnish or make available promptly
to Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Any disclosure that
may be required by law, regulation or rule shall be coordinated by and between
the parties and their advisors prior to such disclosure. Except as required by
law or the rules and regulations of the Nasdaq National Market, Parent will
hold, and will cause its officers, employees, accountants, counsel, financial
advisers and other representatives and affiliates to hold, in confidence any
confidential information in accordance with the Confidentiality Agreement dated
May 17, 1999, between Parent and the Company (the "Confidentiality Agreement").
6.3 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
use its reasonable efforts to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or non actions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, including but not limited to those set forth in Section 4.1(d) of the
Company Disclosure Letter, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order
-36-
38
entered by any court or other Governmental Entity vacated or reversed and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In connection with and without limiting the foregoing, the Company
and its Board of Directors shall (A) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, this Agreement or any of the other transactions
contemplated by this Agreement and (B) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement, or any other transaction contemplated by this Agreement, take all
action necessary to ensure that the Offer, the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Offer, the Merger and the other transactions
contemplated by this Agreement.
(b) The Company shall give prompt notice to Parent, and Parent
shall give prompt notice to the Company, of: (i) the breach of any material
representation or warranty made by it contained in this Agreement or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants, or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.4 Stock Plans.
(a) Stock Option Plans. Pursuant to the Company Option Plans,
following the Effective Time, each option to purchase Shares granted pursuant to
the Company Option Plans ("Options") shall, upon vesting, due exercise and
payment of the exercise price of such Option, entitle the optionee to receive
the Merger Consideration per Share subject to such Option. Each Option will
continue the same vesting schedule following the Effective Time, with the
optionee receiving credit for continuous service with the Company prior to the
Effective Time.
(b) Employee Stock Purchase Plan. Unless terminated prior to the
Effective Time in accordance with its terms, the Stock Purchase Plan shall be
terminated as of the Effective Time. Unless the Stock Purchase Plan is
terminated prior to the Effective Time in accordance with its terms, the Company
shall take such actions as are necessary to cause the last day of the then
current "Purchase Right Period" (as such term is used in the Stock Purchase
Plan) to be the last trading day on which the Company Common Stock is traded on
the Nasdaq National Market immediately prior to the Effective Time (the "Final
Company Exercise Date"); provided that such change shall be conditioned on the
consummation of the Merger. On the Final Company Exercise Date, the Company
shall apply the funds credited as of such date under the Stock Purchase Plan
within each participant's payroll withholdings account to the purchase of whole
shares of the Company Common Stock in accordance with the terms of the Stock
Purchase Plan.
-37-
39
6.5 Post Merger Employment Benefits; Employment and Noncompetition
Agreements.
(a) Employees of the Company who become employed by Parent or any
controlled subsidiary thereof after the Effective Time will become eligible to
participate in the same standard employee benefit plans as are generally
available to similarly situated employees of Parent, and such employees shall
receive credit for all service with the Company for purposes of any "employee
benefit plan" as such term is defined in Section 3(3) of ERISA. Upon the request
of Parent, any Company Employee Plans shall be terminated immediately prior to
the Effective Time.
(b) Concurrently with the execution of this Agreement, (i) Parent
and the Company shall have entered into amendments to the employment agreements
between the Company and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇,
respectively, which amendments shall become effective at the Effective Time, and
(ii) Parent and the Company shall have entered into noncompetition agreements
with ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, respectively, which agreements shall
become effective at the Effective Time (collectively, "Employment and
Noncompetition Agreements").
(c) Promptly following the Effective Time, Parent will evaluate
the equity incentive compensation of the employees of the Company who become
employed by Parent or its subsidiaries after the Effective Time, and, if deemed
appropriate in Parent's sole discretion, in light of the equity incentive
compensation provided to similarly situated employees of Parent, Parent will
make grants of equity incentive compensation to such employees.
6.6 Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time, the Parent will fulfill
and honor and will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
agreements between the Company and any of its subsidiaries and their respective
directors and officers (each, an "Indemnified Party") existing prior to the date
hereof; provided, that Parent and the Surviving Corporation shall have no
obligation to indemnify an Indemnified Party thereunder in respect of claims,
liabilities or damages arising out of a knowing and willful breach of a
representation or covenant made by the Company in this Agreement caused by such
Indemnified Party. From and after the Effective Time, such obligations shall be
the joint and several obligations of Parent and the Surviving Corporation and,
by executing this Agreement, Parent hereby assumes such obligations. The
Articles of Incorporation and Bylaws of the Surviving Corporation will contain
the same provisions with respect to indemnification and elimination of liability
for monetary damages as are set forth in the Articles of Incorporation and
Bylaws of the Company, which provisions will not be amended, repealed or
otherwise modified from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, as of the date hereof or any
time after the date hereof and prior to the Effective Time, were directors,
officers, employees or agents of the Company or its subsidiaries, unless such
modification is required by law.
(b) This Section 6.6 will survive any termination of this
Agreement and the consummation of the Merger at the Effective Time and will be
binding on all successors and assigns
-38-
40
of the Parent or the Surviving Corporation. In the event that Parent or the
Surviving Corporation or any of their successors or assigns consolidates with or
merges into any other person and shall not be the continuing or surviving
corporations or entities of such consolidation or merger, then and in each such
case, proper provisions shall be made so that the successors and assigns of the
Parent or the Surviving Corporation shall assume the obligations of the Parent
or the Surviving Corporation, as the case may be, set forth in this Section 6.6.
6.7 Directors. Promptly upon the acceptance for payment of, and payment
for, any shares of the Company Common Stock by Sub pursuant to the Offer, and
provided that the Minimum Tender Condition has been satisfied, Sub shall be
entitled to designate for appointment or election to the Company's Board of
Directors, upon written notice to Company, such number of persons so that the
designees of Sub constitute the same percentage (but in no event less than a
majority) of the Company's Board of Directors (rounded up to the next whole
number) as the percentage of Shares acquired in connection with the Offer. The
Company shall, upon Sub's request, promptly increase the size of the Board of
Directors and/or secure the resignations of such number of directors as is
necessary to enable Sub's designees to be elected to the Board of Directors and
shall cause Sub's designees to be so elected. Subject to applicable law, the
Company shall take all action requested by Parent necessary to effect any such
election, including mailing to its shareholders the Information Statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). Following the election
or appointment of Sub's designees pursuant to this Section 6.7, and prior to the
Effective Time, any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or Sub or
waiver of the Company's rights hereunder, shall require the concurrence of a
majority of the Company's directors (including, if Parent so elects, a majority
of the Company's non-employee directors) (or the concurrence of the sole
remaining director, if there is only one remaining) then in office who are
directors of the Company on the date hereof, or are directors (other than
directors designated by Sub in accordance with this Section 6.7) designated by
such persons or person to fill any vacancy (the "Continuing Directors").
6.8 Fees and Expenses. All fees and expenses incurred in connection with
the Offer, the Merger, this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Offer or the Merger is consummated; provided, however, that (i) the
Company agrees to promptly assume and pay, or reimburse Parent for, all
reasonable legal, accounting and investment banking fees payable and expenses
incurred by Parent in connection with this Agreement and the transactions
contemplated hereby, up to a maximum of $1,000,000, following termination of
this Agreement pursuant to Sections 8.1(c) or 8.1(d) hereof, and (ii) Parent
agrees to promptly assume and pay, or reimburse the Company for, all reasonable
legal, accounting and investment banking fees payable and expenses incurred by
the Company in connection with this Agreement and the transactions contemplated
hereby, up to a maximum of $1,000,000, following termination of this Agreement
pursuant to Section 8.1(e) hereof.
-39-
41
6.9 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review, comment upon and concur with, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with the Nasdaq National Market.
The parties agree that the initial press release to be issued with respect to
the transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
6.10 Shareholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement until the purchase of the Company
Common Stock pursuant to the Offer or the prior termination of this Agreement in
accordance with its terms, and thereafter, shall give Parent the opportunity to
direct the defense of such litigation and, if Parent so chooses to direct such
litigation, Parent shall give the Company and its directors an opportunity to
participate in such litigation; provided, however, that no settlement thereof
shall be agreed to without Parent's consent, which consent shall not be
unreasonably withheld, and provided, further that no settlement requiring a
payment by a director shall be agreed to without such director's consent.
6.11 Retention. The Company shall take all commercially reasonable
efforts to induce each manager and the employees and consultants of the Company
and its subsidiaries generally to continue to remain employees of the Company
following the Effective Time.
6.12 Grant of Option. The Company hereby grants an option to Sub (or any
other subsidiary of Parent) to purchase such number of Shares, at an aggregate
exercise price of one dollar (or, if greater, the minimum consideration required
under applicable law) as is necessary following consummation of an Offer in
which the Minimum Tender Condition is satisfied in order for Sub (or such other
subsidiary) to own 90% of the outstanding Shares immediately prior to the
Effective Time so that the Short-Form Merger may be effected.
6.13 Convertible Notes. The Company agrees to take all actions required
by the Indenture of the Convertible Notes, dated as of March 24, 1998, between
the Company and State Street Bank and Trust Company of California, N.A., as
Trustee, in connection with the Merger, including under Sections 5.1, 11.1,
13.6, 13.7 and 13.8 thereof.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Time of the following
conditions:
-40-
42
(a) Company Shareholder Approval. If required by applicable law,
the Company Shareholder Approval shall have been obtained.
(b) HSR Act. All waiting periods, if any, under the HSR Act
relating to the transactions contemplated hereby will have expired or terminated
early and all material foreign antitrust approvals required to be obtained prior
to the Merger in connection with the transactions contemplated hereby shall have
been obtained.
(c) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction, judgment or other order or ruling issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition shall be in effect which would (i) make the Merger or the
acquisition or holding by Parent or its affiliates of Company Common Stock or
Common Stock of the Surviving Corporation illegal or otherwise prevent the
consummation of the Merger, (ii) prohibit Parent's or Sub's ownership or
operation of, or compel Parent or Sub to dispose of or hold separate, all or a
material portion of the business or assets of Purchaser, the Company or any
subsidiary thereof, (iii) compel Parent, Sub or the Company to dispose of or
hold separate all or a material portion of the business or assets of Parent or
any of its subsidiaries or the Company or any of its subsidiaries, or (iv)
impose material limitations on the ability of Parent or Sub or their affiliates
effectively to exercise full ownership and financial benefits of the Surviving
Corporation, or impose any material condition to the Offer, this Agreement or
the Merger which would be adverse to Parent.
7.2 Conditions to Parent's and Sub's Obligation to Effect the Merger.
The respective obligations of Parent and Sub to effect the Merger are subject to
the satisfaction or waiver on or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company set forth
in this Agreement shall be true and correct in all material respects on the
Closing Date as if made on and as of the Closing Date, and Parent shall have
received a certificate with respect to the foregoing signed by a duly authorized
officer of the Company;
(b) the Company shall have performed in all material respects
each of its covenants and obligations under this Agreement required to be
performed by it at or prior to the Effective Time pursuant to the terms hereof,
and Parent shall have received a certificate with respect to the foregoing
signed by a duly authorized officer of the Company;
(c) there shall not have occurred any Material Adverse Change in
the Company or any event that is reasonably likely to result in a Material
Adverse Effect to the Company and its subsidiaries taken as a whole;
(d) there shall not be pending or overtly threatened any suit,
action or proceeding brought by or on behalf of any Governmental Entity (or the
staff of the Federal Trade Commission or the staff of the Antitrust Division of
the Department of Justice shall have recommended the
-41-
43
commencement of such), any shareholder of Company or any other person or party
(but only if such shareholder suit, action or proceeding is deemed by Parent to
have a reasonable likelihood of success) directly or indirectly (i) challenging
the acquisition by Parent or Sub of any shares of the Company Common Stock,
seeking to restrain or prohibit the making or consummation of the Offer or the
Merger or the performance of any of the other transactions contemplated by this
Agreement, or alleging that any such acquisition or other transaction relates
to, involves or constitutes a breach of fiduciary duty by the Company's
directors or a violation of federal securities law or applicable corporate law,
(ii) seeking to prohibit or limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of a material portion of the
business or assets of the Company and its subsidiaries, taken as a whole, or
Parent and its subsidiaries, taken as a whole, or to compel the Company or
Parent to dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Offer or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose material
limitations on the ability of Parent or Sub to acquire or hold, or exercise full
rights of ownership of, any shares of the Company Common Stock accepted for
payment pursuant to the Offer including without limitation the right to vote the
Company Common Stock accepted for payment by it on all matters properly
presented to the shareholders of the Company, (iv) seeking to prohibit Parent or
any of its subsidiaries from effectively managing or controlling in any material
respect the business or operations of the Company and its subsidiaries taken as
a whole, or (v) seeking to impose a material condition to the Offer, Merger or
Agreement which would be adverse to Parent; and
(e) All third party consents, the failure of which to obtain
would have a Material Adverse Effect on the Company, shall have been obtained.
7.3 Conditions to the Company's Obligation to Effect the Merger. The
obligation of the Company to effect the Merger are subject to the satisfaction
or waiver on or prior to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Sub set
forth in this Agreement shall be true and correct in all material respects on
the Closing Date as if made on and as of the Closing Date, and the Company shall
have received a certificate with respect to the foregoing signed by duly
authorized officers of Parent and Sub; and
(b) Parent and Sub shall have performed in all material respects
each of its covenants and obligations under this Agreement required to be
performed by it at or prior to the Effective Time pursuant to the terms hereof,
and the Company shall have received a certificate with respect to the foregoing
signed by duly authorized officers of Parent and Sub.
7.4 Conditions to the Short-Form Merger. Notwithstanding the foregoing
provisions of this Article VII, the only conditions to Parent's and Sub's
obligation to effect the Short-Form Merger, if the Short-Form Merger may be
effected pursuant to applicable law, shall be the conditions set forth in
Section 7.1 (b) and (c).
-42-
44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company,
(i) if the Merger shall not have been consummated on or
prior to January 31, 2000; provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree or ruling
or other action shall have become final and nonappealable; or
(iii) if the required approval of the Company's
shareholders contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at the Shareholders Meeting
duly convened therefor and at any adjournment thereof; provided, however, that
the right to terminate this Agreement pursuant to this Section 8.1(b)(iii) shall
not be available to the Company where the failure to obtain the Company
Shareholder Approval shall have been caused by (i) the action or failure to act
of the Company and such action or failure to act constitutes a material breach
by the Company of this Agreement or (ii) a breach of the Shareholder Tender and
Voting Agreement by any party thereto other than Parent;
(c) by Parent, in the event that (i) the Company's Board of
Directors or any committee thereof shall have failed to recommend the Offer, the
Merger, this Agreement, or the Company Shareholder Approval, including any
failure to include such recommendation in the Schedule 14D-9 or the Proxy
Statement, or shall have so resolved; (ii) the Company's Board of Directors or
any committee thereof shall have withdrawn or modified (including by amendment
of the Schedule 14D-9 or Proxy Statement) in a manner adverse to Parent or Sub
its approval or recommendation of the Offer, the Merger, this Agreement, or the
Company Shareholder Approval, shall have approved or recommended any takeover
proposal (including a superior proposal), or shall have resolved to do any of
the foregoing; (iii) the Company shall have entered into any letter of intent or
similar document, agreement or commitment with respect to any takeover proposal
(including a superior proposal) or the Company's Board of Directors or any
committee thereof shall have resolved to do so; (iv) the Company's Board of
Directors or any committee thereof upon a
-43-
45
request to reaffirm the Company's approval or recommendation of the Offer, the
Merger or this Agreement, shall have failed to do so within two business days
after such request is made or shall have so resolved; or (v) a tender or
exchange offer relating to securities of Company shall have been commenced by a
person unaffiliated with Parent, and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Exchange Act,
within 10 business days after such tender or exchange offer is first published
sent or given, a statement disclosing that Company recommends rejection of such
tender or exchange offer;
(d) by Parent, if any of the representations and warranties of
the Company set forth in this Agreement shall have failed to be true and correct
in any material respect as of the date of the Agreement or shall have ceased to
be true and correct in any material respect at any time thereafter, or if the
Company shall have breached or failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of the Company to be performed or complied with by it; provided, that if any
such breach or failure (other than a breach of Sections 5.2 or 6.1 or any other
breach that has caused irreparable harm, which may not be cured) is curable by
the Company through the exercise of its reasonable efforts, then Parent may not
terminate this Agreement under this subsection (d) until ten business days after
written notice thereof has been given to the Company by Parent and unless at
such time the matter has not been cured; or
(e) by the Company, if any of the representations and warranties
of Parent or Sub set forth in this Agreement shall have failed to be true and
correct in any material respect as of the date of the Agreement or shall have
ceased to be true and correct in any material respect at any time thereafter, or
if Parent or Sub shall have breached or failed to perform in any material
respect any obligation or to comply in any material respect with any agreement
or covenant of Parent or Sub to be performed or complied with by it; provided,
that if any such breach or failure (other than a breach that has caused
irreparable harm, which may not be cured) is curable by Parent or Sub through
the exercise of its reasonable efforts, then the Company may not terminate this
Agreement under this subsection (e) until ten business days after written notice
thereof has been given to Parent and Sub by the Company and unless at such time
the matter has not been cured.
8.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, other than the provisions of the last
sentence of Section 6.2, Section 6.8, this Section 8.2 and Article IX; provided,
however, to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement, such breaching party may be held
liable for damages for such breach; and, provided, further, that (x) in the
event this Agreement is terminated by Parent pursuant to Section 8.1(c), the
Company shall pay or cause to be paid a fee equal to $15,000,000 in immediately
available funds within two business days of such termination, and (y) in the
event this Agreement is terminated by Parent pursuant to Sections 8.1(b)(i) or
8.1(d), or by Parent or the Company pursuant to Section 8.1(b)(iii), and, prior
to such termination, a third party has publicly announced a takeover proposal,
the consummation of which would constitute an Acquisition Event (as defined
below), and within 12 months following the termination of this Agreement, an
Acquisition Event is consummated or the
-44-
46
Company enters into an agreement providing for an Acquisition Event, the Company
shall pay or cause to be paid to Parent a fee equal to $15,000,000 in
immediately available funds within two business days after the consummation of
such Acquisition Event or the entry by the Company into such agreement;
provided, that if such Acquisition Event provides for a consideration per Share
less than the Offer Price but greater than the closing price per Share on the
Nasdaq National Market on the trading day immediately prior to the public
announcement of the execution of this Agreement (the "Pre-Offer Price"), the fee
payable by the Company pursuant to this clause (y) shall be $10,000,000, and if
such Acquisition Event provides for a consideration per Share less than or equal
to the Pre-Offer Price, no fee shall be payable by the Company pursuant to this
clause (y). For the purposes of this Agreement, "Acquisition Event" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the shareholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of assets representing in excess of 50% of the
aggregate fair market value of the Company's business immediately prior to such
sale, or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by the Company), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of the Company. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
8.3 Amendment. This Agreement may be amended by the parties at any time
before or after obtaining the Company Shareholder Approval, if Company
Shareholder Approval is required by law; provided, however, that after any
required Company Shareholder Approval, there shall not be made any amendment
that by law requires further approval by such shareholders without the further
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
8.3, waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors; provided, however, that in the event that Sub's designees
are appointed or
-45-
47
elected to the Board of Directors of the Company as provided in Section 6.7,
after the acceptance for payment of shares of the Company Common Stock pursuant
to the Offer and prior to the Effective Time, the affirmative vote of the
Continuing Directors shall be required by the Company to (i) materially amend or
terminate this Agreement by the Company, (ii) exercise or waive any of the
Company's rights or remedies under this Agreement or (iii) extend the time for
performance of Parent's and Sub's respective obligations under this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
9.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Compuware Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
Compuware Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Company, to
Data Processing Resources Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
-46-
48
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Loss, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
9.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company, any change or effect that is or would
be materially adverse to the Company and its subsidiaries, taken as a whole,
taking into account the business, properties, assets, employees, financial
condition or results of operations of the Company and its subsidiaries,
excluding those changes, effects and developments that directly result from (i)
the announcement of the Offer or the Merger, (ii) general economic conditions,
or (iii) conditions generally affecting the industry in which the Company
competes (provided, that such conditions do not adversely affect the Company
disproportionately); provided, that in any litigation regarding this definition
where the principal change or effect at issue involves the termination for any
reason of the employment of the Company's or its subsidiaries' employees, the
Company shall be required to sustain the burden of proving by clear and
convincing evidence that the exclusion set forth in clause (i) of this sentence
is applicable.
(c) "person" means an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity;
(d) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person;
(e) "superior proposal" has the meaning assigned thereto in
Section 6.1; and
(f) "takeover proposal" has the meaning assigned thereto in
Section 5.2.
9.4 Interpretation. When a reference is made in this Agreement to an
Article, a Section, Exhibit or Schedule, such reference shall be to an Article
or a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this
-47-
49
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined herein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. References
to a person are also to its permitted successors and assigns. References to a
law or statute in this Agreement include all amendments and modifications to
such law or statute, and all rules and regulations promulgated thereunder.
References to the Company in this Agreement refer also to the Company's
subsidiaries unless the context would clearly indicate otherwise.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the
exhibits and schedules hereto, the Shareholder Tender and Voting Agreement, the
Employment and Noncompetition Agreements, and the Confidentiality Agreement
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and, other than Section 6.6, are not intended
to confer upon any person other than the parties any rights or remedies
hereunder.
9.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of California, regardless of the laws that might
otherwise govern under applicable principles of conflict of laws thereof.
9.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub and Parent of any of its
obligations under this Agreement. This Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
9.9 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Michigan or in the State of California or in Michigan or
California state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
-48-
50
consents to submit itself to the personal jurisdiction and venue of any Federal
court located in the State of Michigan or the State of California or any
Michigan or California state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction or choice
of venue by motion or other request for leave from any such court and (c) agrees
that it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than a Federal or
state court sitting in the State of Michigan or in the State of California.
REST OF THIS PAGE INTENTIONALLY LEFT BLANK
-49-
51
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
COMPUWARE CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
Title: Chairman of the Board and Chief
Executive Officer
COMP ACQUISITION CO.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
Title: Vice President
DATA PROCESSING RESOURCES CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman of the Board and Chief
Executive Officer
-50-
52
EXHIBIT A
Offer
Notwithstanding any other term of the Offer or this Agreement, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Sub's obligation to pay for or return tendered shares of the Company Common
Stock after the termination or withdrawal of the Offer), to pay for any shares
of the Company Common Stock tendered pursuant to the Offer unless (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer that number of shares of the Company Common Stock which would
represent at least 91% of the shares of Company Common Stock outstanding at the
close of business on the business day immediately preceding the day on which the
Offer will expire or terminate (the "Minimum Tender Condition") and (ii) any
waiting period under the HSR Act applicable to the purchase of shares of the
Company Common Stock pursuant to the Offer shall have expired or been
terminated. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of the Company Common Stock not theretofore
accepted for payment or paid for, and may terminate or amend the Offer, or if,
upon the scheduled expiration date of the Offer (as extended) and before the
acceptance of such shares for payment or the payment therefor, any of the
following conditions exists and is continuing:
(a) there shall be pending or overtly threatened any suit, action
or proceeding brought by or on behalf of any Governmental Entity (or the staff
of the Federal Trade Commission or the staff of the Antitrust Division of the
Department of Justice shall have recommended the commencement of such), any
shareholder of Company or any other person or party (but only if such
shareholder suit, action or proceeding is deemed by Parent to have a reasonable
likelihood of success) directly or indirectly (i) challenging the acquisition by
Parent or Sub of any shares of the Company Common Stock, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by this Agreement, or
alleging that any such acquisition or other transaction relates to, involves or
constitutes a breach of fiduciary duty by the Company's directors or a violation
of federal securities law or applicable corporate law, (ii) seeking to prohibit
or limit the ownership or operation by the Company, Parent or any of their
respective subsidiaries of a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries,
taken as a whole, or to compel the Company or Parent to dispose of or hold
separate any material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, as a result of the Offer or any of the other transactions contemplated by
this Agreement, (iii) seeking to impose material limitations on the ability of
Parent or Sub to acquire or hold, or exercise full rights of ownership of, any
shares of the Company Common Stock accepted for payment pursuant to the Offer
including without limitation the right to vote the Company Common Stock accepted
for payment by it on all matters properly presented to the shareholders of the
Company, (iv) seeking to prohibit Parent or any of its subsidiaries from
effectively managing or controlling in any material respect the business or
operations of the Company and its subsidiaries taken as a whole, or (v)
-51-
53
seeking to impose a material condition to the Offer, Merger or Agreement which
would be adverse to Parent.
(b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any Governmental
Entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) there shall have occurred any Material Adverse Change in the
Company and its subsidiaries taken as a whole or any event that is reasonably
likely to result in a Material Adverse Change in the Company and its
subsidiaries taken as a whole;
(d) (i) the Company's Board of Directors or any committee thereof
shall have failed to recommend the Offer, the Merger, this Agreement, or the
Company Shareholder Approval, including any failure to include such
recommendation in the Schedule 14D-9 or the Proxy Statement, or shall have so
resolved; (ii) the Company's Board of Directors or any committee thereof shall
have withdrawn or modified (including by amendment of the Schedule 14D-9 or
Proxy Statement) in a manner adverse to Parent or Sub its approval or
recommendation of the Offer, the Merger, this Agreement, or the Company
Shareholder Approval, shall have approved or recommended any takeover proposal
(including a superior proposal), or shall have resolved to do any of the
foregoing; (iii) the Company shall have entered into any letter of intent or
similar document, agreement or commitment with respect to any takeover proposal
(including a superior proposal) or the Company's Board of Directors or any
committee thereof shall have resolved to do so; (iv) the Company's Board of
Directors or any committee thereof upon a request to reaffirm the Company's
approval or recommendation of the Offer, the Merger or this Agreement, shall
have failed to do so within two business days after such request is made or
shall have so resolved; or (v) a tender or exchange offer relating to securities
of Company shall have been commenced by a person unaffiliated with Parent, and
the Company shall not have sent to its securityholders pursuant to Rule 14e-2
promulgated under the Exchange Act, within 10 business days after such tender or
exchange offer is first published sent or given, a statement disclosing that
Company recommends rejection of such tender or exchange offer;
(e) any of the representations and warranties of the Company set
forth in this Agreement shall have failed to be true and correct in any material
respect as of the date of the Agreement or shall have ceased to be true and
correct in any material respect at any time thereafter;
(f) the Company shall have breached or failed to perform in any
material respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by it;
provided that if any such breach or failure (other than a breach of Sections 5.2
or 6.1 or any other breach that has caused irreparable harm, which may not be
cured) is curable by the Company through the exercise of its reasonable efforts,
then Parent may not terminate the Offer under this subsection (f) until ten
business days after written notice thereof has been given to the Company by
Parent or Sub and unless at such time the matter has not been cured;
-52-
54
(g) this Agreement shall have been terminated in accordance with
its terms;
(h) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the Nasdaq National
Market, (2) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not mandatory),
(3) the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States and having
a Material Adverse Effect or materially adversely affecting (or materially
delaying) the consummation of the Offer, (4) any limitation or proposed
limitation (whether or not mandatory) by any U.S. governmental authority or
agency, or any other event, that materially adversely affects generally the
extension of credit by banks or other financial institutions, or (5) in the case
of any of the situations described in clauses (1) through (4) inclusive existing
at the date of commencement of the Offer, a material escalation or worsening
thereof;
(i) (1) any person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Sub, any of its
affiliates, or any group of which any of them is a member, shall have acquired
beneficial ownership of more than 10% of the outstanding shares of Company
Common Stock, (2) shall have entered into a definitive agreement or an agreement
in principle with the Company with respect to a tender offer or exchange offer
for any shares of Company Common Stock or merger, consolidation or other
business combination with or involving the Company or any of its subsidiaries or
(3) shall have otherwise announced a tender offer with respect to shares of
Company Common Stock; provided, that upon satisfaction and maintenance of the
Minimum Tender Condition, this condition (i) shall only consist of clause (2)
hereof;
(j) any bankruptcy proceedings shall have been instituted with
respect to the Company and not dismissed;
(k) any third party consent, the failure of which to obtain would
have a Material Adverse Effect on the Company, shall not have been obtained;
which, in the sole judgment of Sub or Parent, in any such case, and regardless
of the circumstances giving rise to any such condition (other than any action or
inaction by Parent or any of its subsidiaries which constitutes a breach of this
Agreement), makes it inadvisable to proceed with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of Sub and Parent and
their respective affiliates and may be asserted by Sub or Parent regardless of
the circumstances giving rise to such condition (other than any action or
inaction by Parent or any of its subsidiaries which constitutes a breach of this
Agreement) or may be waived by Sub and Parent in whole or in part at any time
and from time to time in their sole discretion. The failure by Parent, Sub or
any other affiliate of Parent at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to particular facts and circumstances shall not be deemed a
-53-
55
waiver with respect to any other facts and circumstances and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
REST OF THIS PAGE INTENTIONALLY LEFT BLANK
-54-
