Exhibit 1
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AGREEMENT AND PLAN OF MERGER
among
BORLAND INTERNATIONAL, INC.,
a Delaware corporation,
("Acquirer"),
VIXEN ACQUISITION CORPORATION,
a Delaware corporation and wholly-owned
subsidiary of Acquirer,
and
VISIGENIC SOFTWARE, INC.,
a Delaware corporation
("Target")
Dated November 17, 1997
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TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER................................................... 1
Section 1.1 Effective Time of the Merger.............................. 1
Section 1.2 Closing................................................... 2
Section 1.3 Effects of the Merger..................................... 2
Section 1.4 Directors and Officers.................................... 2
ARTICLE II CONVERSION OF SECURITIES..................................... 3
Section 2.1 Conversion of Capital Stock............................... 3
Section 2.2 Exchange of Certificates.................................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET..................... 6
Section 3.1 Organization.............................................. 6
Section 3.2 Target Capital Structure.................................. 7
Section 3.3 Authority; No Conflict; Required Filings and Consents..... 8
Section 3.4 SEC Filings; Financial Statements......................... 9
Section 3.5 Absence of Undisclosed Liabilities........................ 10
Section 3.6 Absence of Certain Changes or Events...................... 10
Section 3.7 Taxes..................................................... 10
Section 3.8 Properties................................................ 11
Section 3.9 Intellectual Property..................................... 11
Section 3.10 Compliance; Permits; Restrictions......................... 13
Section 3.11 Agreements, Contracts and Commitments..................... 14
Section 3.12 Litigation................................................ 15
Section 3.13 Environmental Matters..................................... 15
Section 3.14 Employee Benefit Plans.................................... 16
Section 3.15 Insurance................................................. 17
Section 3.16 Section 203 of the DGCL Not Applicable.................... 17
Section 3.17 Pooling of Interests...................................... 17
Section 3.18 Interested Party Transactions............................. 17
Section 3.19 Registration Statement: Joint Proxy Statement/Prospectus. 17
Section 3.20 Opinion of Financial Advisor.............................. 18
Section 3.21 No Existing Discussions................................... 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB........... 18
Section 4.1 Organization.............................................. 18
Section 4.2 Acquirer Capital Structure................................ 19
Section 4.3 Authority; No Conflict; Required Filings and Consents..... 20
Section 4.4 SEC Filings; Financial Statements......................... 21
Section 4.5 Absence of Undisclosed Liabilities........................ 22
Section 4.6 Absence of Certain Changes or Events...................... 22
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(continued)
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Section 4.7 Taxes...................................................... 22
Section 4.8 Properties................................................. 23
Section 4.9 Intellectual Property...................................... 23
Section 4.10 Compliance; Permits; Restrictions.......................... 24
Section 4.11 Agreements, Contracts and Commitments...................... 25
Section 4.12 Litigation................................................. 25
Section 4.13 Environmental Matters...................................... 25
Section 4.14 Employee Benefit Plans..................................... 26
Section 4.15 Pooling of Interests....................................... 27
Section 4.16 Interested Party Transactions.............................. 27
Section 4.17 Registration Statement; Joint Proxy Statement/Prospectus... 27
Section 4.18 Opinion of Financial Advisor............................... 28
Section 4.19 Interim Operations of Sub.................................. 28
Section 4.20 Acquirer Common Stock...................................... 28
ARTICLE V CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME............... 28
Section 5.1 Covenants of Target........................................ 28
Section 5.2 Covenants of Acquirer...................................... 31
Section 5.3 Cooperation................................................ 32
ARTICLE VI ADDITIONAL AGREEMENTS......................................... 33
Section 6.1 No Solicitation............................................ 33
Section 6.2 Proxy Statement; Registration Statement.................... 34
Section 6.3 Consents................................................... 34
Section 6.4 Current Nasdaq Quotation................................... 34
Section 6.5 Access to Information...................................... 34
Section 6.6 Stockholder Meetings....................................... 35
Section 6.7 Legal Conditions to Merger................................. 35
Section 6.8 Public Disclosure.......................................... 36
Section 6.9 Tax-Free Organization...................................... 36
Section 6.10 Pooling Accounting......................................... 36
Section 6.11 Affiliate Agreements....................................... 36
Section 6.12 Nasdaq Quotation........................................... 36
Section 6.13 Stock Plans, Options and Employee Benefits................. 36
Section 6.14 Brokers or Finders......................................... 38
Section 6.15 Indemnification............................................ 39
Section 6.16 Additional Agreements; Reasonable Efforts.................. 40
ARTICLE VII CONDITIONS TO MERGER.......................................... 40
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. 40
Section 7.2 Additional Conditions to Obligations of Acquirer and Sub... 41
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Section 7.3 Additional Conditions to Obligations of Target............ 42
ARTICLE VIII TERMINATION AND AMENDMENT.................................... 44
Section 8.1 Termination............................................... 44
Section 8.2 Effect of Termination..................................... 45
Section 8.3 Fees and Expenses......................................... 45
Section 8.4 Amendment................................................. 46
Section 8.5 Extension; Waiver......................................... 46
ARTICLE IX MISCELLANEOUS................................................ 47
Section 9.1 Nonsurvival of Representations, Warranties and Agreements. 47
Section 9.2 Notices................................................... 47
Section 9.3 Interpretation............................................ 48
Section 9.4 Counterparts.............................................. 48
Section 9.5 Entire Agreement; No Third Party Beneficiaries............ 48
Section 9.6 Governing Law............................................. 48
Section 9.7 Assignment................................................ 48
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of November
17, 1997 by and among Borland International, Inc., a Delaware corporation
("Acquirer"), Vixen Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Acquirer ("Sub"), and Visigenic Software, Inc., a
Delaware corporation ("Target").
RECITALS
A. The Boards of Directors of Acquirer, Sub and Target deem it advisable
and in the best interests of each corporation and its respective stockholders
that Acquirer and Target combine in order to advance the long-term business
strategies, goals and interests of Acquirer and Target;
B. The combination of Acquirer and Target shall be effected by the terms
of this Agreement through a transaction (the "Merger") in which Sub will merge
with and into Target, Target will become a wholly-owned subsidiary of Acquirer
and the stockholders of Target will become stockholders of Acquirer;
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Acquirer's willingness to enter into this Agreement, certain
stockholders of Target are entering into Voting Agreements in substantially the
form of Exhibit A hereto;
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D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under Section 368(a) of the Code; and
E. It is intended that the Merger shall qualify for accounting treatment
as a pooling of interests.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Effective Time of the Merger. Subject to the provisions of
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this Agreement, a certificate of merger (the "Certificate of Merger") in such
form as is required by the relevant provisions of the Delaware General
Corporation Law (the "DGCL") shall be duly prepared, executed and acknowledged
by the Surviving Corporation (as defined in Section 1.3) and thereafter
delivered to the Secretary of State of the State of Delaware for filing, as
provided in the DGCL, as soon as practicable on or after the Closing Date (as
defined in Section 1.2). The
Merger shall become effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware (the "Effective Time").
Section 1.2 Closing. The closing of the Merger (the "Closing") will
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take place at 10:00 a.m., Pacific Standard Time, on a date to be specified by
Acquirer and Target, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections 7.1,
7.2(b) (other than the delivery of the officers' certificate referred to
therein) and 7.3(b) (other than the delivery of the officers' certificate
referred to therein), provided that the other closing conditions set forth in
Article VII have been met or waived as provided in Article VII at or prior to
the Closing (the "Closing Date"), at the offices of Xxxx Xxxx Xxxx &
Freidenrich, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, unless another
date or place is agreed to in writing by Acquirer and Target.
Section 1.3 Effects of the Merger.
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(a) At the Effective Time (i) the separate existence of Sub shall cease
and Sub shall be merged with and into Target (Sub and Target are sometimes
referred to herein as the "Constituent Corporations" and Target is sometimes
referred to herein as the "Surviving Corporation"), (ii) the Certificate of
Incorporation of Target shall be amended so that Article III of such Certificate
of Incorporation shall read as follows: "The total number of shares of all
classes of stock which the Corporation shall have authority to issue is 1,000,
all of which shall consist of Common Stock, par value $.001 per share," and, as
so amended, such Certificate of Incorporation shall be the Certificate of
Incorporation of the Surviving Corporation, and (iii) subject to the
requirements of Section 6.15, the Bylaws of Sub as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation.
(b) At and after the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the DGCL. Without limiting the
foregoing, and subject thereto, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations; and all and singular rights, privileges, powers
and franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, shall be vested in the Surviving Corporation, and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise, in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the Constituent Corporations shall thereafter attach to the Surviving
Corporation, and may be enforced against it to the same extent as if such debts
and liabilities had been incurred by it.
Section 1.4 Directors and Officers. The initial director(s) of the
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Surviving Corporation shall be the directors of Sub immediately prior to the
Effective Time, each of whom will hold office in accordance with the Certificate
of Incorporation and Bylaws of the Surviving
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Corporation. The officers of Sub immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. At the Effective Time, by
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virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, $.001 par value, of Target ("Target Common Stock") or
capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
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capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Acquirer-Owned Stock. Any
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shares of Target Common Stock that are owned by Target as treasury stock and any
shares of Target Common Stock that are owned by Acquirer, Sub or any other
wholly-owned Subsidiary (as defined below) of Acquirer shall be canceled and
retired and shall cease to exist and no stock of Acquirer or other consideration
shall be delivered in exchange therefor. All shares of Common Stock, $.01 par
value, of Acquirer ("Acquirer Common Stock") owned by Target shall remain
unaffected by the Merger. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of such
party do not have a majority of the voting interest in such partnership) or (ii)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(c) Exchange Ratio for Target Common Stock. Subject to Section 2.2,
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each issued and outstanding share of Target Common Stock (other than shares to
be canceled in accordance with Section 2.1(b)) shall be converted into 0.81988
(which amount will be adjusted for any stock split or stock dividend effected
between the date of this Agreement and the Effective Time) (the "Exchange
Ratio") fully paid and nonassessable shares of Acquirer Common Stock. All such
shares of Target Common Stock, when so converted, 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 certificates
representing the number of fully paid and nonassessable shares of Acquirer
Common Stock into which such holder's shares of Target Common Stock were
converted at the Effective Time and any cash in lieu of fractional shares of
Acquirer Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without interest.
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(d) Target Stock Options and Employee Stock Purchase Plan. At the
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Effective Time, all then outstanding options to purchase Target Common Stock
issued under Target's 1995 Stock Option Plan, as amended (the "Target Employee
Option Plan"), and individual stock options assumed by Target through Target's
prior acquisitions (the "Target Individual Options") will be assumed by Acquirer
in accordance with Section 6.13. At the Effective Time, all then outstanding
options to purchase Target Common Stock issued under Target's 1996 Outside
Directors Stock Option Plan (the "Target Director Option Plan") will terminate
in accordance with the terms of the Director Option Plan. Immediately prior to
the Effective Time, all then outstanding rights to acquire shares of Target
Common Stock under Target's 1996 Employee Stock Purchase Plan (the "Target
Purchase Plan") will be exercised for the purchase of shares of Target Common
Stock, as provided in Section 6.13. Immediately prior to the Effective Time, all
awards accrued as of the Effective Time under Target's Executive Performance
Incentive Plan (the "Target Incentive Plan") shall be paid in cash or stock, as
provided in Section 6.13.
Section 2.2 Exchange of Certificates. The procedures for exchanging
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outstanding shares of Target Common Stock for Acquirer Common Stock pursuant to
the Merger are as follows:
(a) Exchange Agent. As of the Effective Time, Acquirer shall deposit
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with a bank or trust company designated by Acquirer with the approval of Target
(the "Exchange Agent"), for the benefit of the holders of shares of Target
Common Stock, for exchange in accordance with this Section 2.2, through the
Exchange Agent, certificates representing the shares of Acquirer Common Stock
(such shares of Acquirer Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for outstanding
shares of Target Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
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Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Target Common Stock (each a "Certificate" and,
collectively, the "Certificates") whose shares were converted pursuant to
Section 2.1 into shares of Acquirer Common Stock (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
Exchange Agent and shall be in such form and have such other provisions as
Acquirer and Target may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Acquirer Common Stock. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Acquirer Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II and cash in lieu of fractional
shares in accordance with Section 2.2(f), and the Certificate so surrendered
shall immediately be canceled. In the event of a transfer of ownership of Target
Common Stock which is not registered in the transfer records of Target, a
certificate representing the proper number of shares of Acquirer Common Stock
may be
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issued to a transferee if the Certificate representing such Target Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing the number of shares of Acquirer Common Stock into which the shares
of Target Common Stock represented thereby were converted at the Effective Time
and cash in lieu of any fractional shares of Acquirer Common Stock as
contemplated by this Section 2.2.
(c) Lost or Stolen Certificates. The instructions for effecting the
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surrender of the Certificates shall set forth procedures that must be taken by
the holder of any Certificate that has been lost, destroyed or stolen. It shall
be a condition to the right of such holder to receive a certificate representing
shares of Acquirer Common Stock that the Exchange Agent shall have received,
along with the letter of transmittal, a duly executed lost certificate
affidavit, including an agreement to indemnify Acquirer, signed exactly as the
name or names of the registered holder or holders appeared on the books of
Target immediately prior to the Effective Time, together with a customary bond
and such other documents as Acquirer or the Exchange Agent may reasonably
require in connection therewith.
(d) Distributions with Respect to Unexchanged Shares. No dividends
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or other distributions declared or made after the Effective Time with respect to
Acquirer Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Acquirer Common Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to subsection (f)
below until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquirer Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Acquirer Common
Stock to which such holder is entitled pursuant to subsection (f) below and the
amount of dividends or other distributions with a record date after the
Effective Time previously paid with respect to such whole shares of Acquirer
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Acquirer Common Stock.
(e) No Further Ownership Rights in Target Common Stock. All shares
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of Acquirer Common Stock issued pursuant to this Article II (and any cash paid
pursuant to subsection (d) or (f) of this Section 2.2) shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining to such
shares of Target Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by Target
on such shares of Target Common Stock in accordance with the terms of this
Agreement on or prior to the date hereof and which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of
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Target Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.2.
(f) No Fractional Shares. No certificate or scrip representing
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fractional shares of Acquirer Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Acquirer.
Notwithstanding any other provision of this Agreement, each holder of shares of
Target Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Acquirer Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Acquirer Common Stock multiplied by the last reported sale prices
of Acquirer Common Stock, as reported on The Nasdaq National Market, on the
trading day immediately preceding the date of the Effective Time.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
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which remains undistributed to the stockholders of Target for one year after the
Effective Time shall be delivered to Acquirer, upon demand, and any stockholders
of Target who have not previously complied with this Section 2.2 shall
thereafter look only to Acquirer for certificates evidencing Acquirer Common
Stock, cash in lieu of fractional shares of Acquirer Common Stock, and any
dividends or distributions with respect to Acquirer Common Stock.
(h) No Liability. Neither Acquirer nor Target shall be liable to any
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holder of shares of Target Common Stock or Acquirer Common Stock, as the case
may be, for such shares (or dividends or distributions with respect thereto)
properly delivered to a public official as required by any applicable abandoned
property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquirer and Sub that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure schedule delivered by Target to Acquirer on or before the date of
this Agreement (the "Target Disclosure Schedule"). All disclosures set forth in
the Target Disclosure Schedule shall refer to the corresponding numbered and
lettered Sections of this Article III to which they principally pertain. For
purposes of this Agreement, the phrase "Target Material Adverse Effect" means a
material adverse effect on the business, operations, financial condition or
results of operations of Target and its Subsidiaries, taken as a whole.
Section 3.1 Organization. Each of Target and its Subsidiaries is a
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corporation or other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept with
respect to such entity) under the laws of the jurisdiction of its incorporation
or organization, has all requisite power to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified to do business and is in
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good standing (with respect to jurisdictions which recognize such concept with
respect to such entity) in each other jurisdiction in which the failure to be so
qualified and in good standing would have a Target Material Adverse Effect. The
Target Disclosure Schedule contains a list of each of Target's Subsidiaries and
the jurisdiction of their organization. Except for their interests in Target
Subsidiaries, neither Target nor any of its Subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any such equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity,
excluding securities of any publicly traded company held for investment by
Target and comprising less than five percent of the outstanding stock of such
company.
Section 3.2 Target Capital Structure.
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(a) The authorized capital stock of Target consists of 50,000,000
shares of Target Common Stock and 2,000,000 shares of Preferred Stock, $.001 par
value ("Target Preferred Stock"). As of November 13, 1997: (i) 14,515,265 shares
of Target Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable; (ii) no shares of Target Common Stock were
held in the treasury of Target or by Subsidiaries of Target; (iii) 3,662,570
shares of Target Common Stock were reserved for issuance under the Target
Employee Option Plan, 3,153,814 of which were subject to outstanding options and
508,756 shares of which were reserved for future option grants; (iv) 291,194
shares of Target Common Stock were reserved for issuance pursuant to the Target
Individual Options; (v) 200,000 shares of Target Common Stock were reserved for
issuance under the Target Director Option Plan, 60,000 shares of which were
subject to outstanding options; (vi) 327,579 shares of Target Common Stock were
reserved for future issuance under the Target Purchase Plan, (vii) 96,385 shares
of Target Common Stock were reserved for future issuance under the Target
Incentive Plan and (viii) no shares of Target Preferred Stock were outstanding.
No change in such capitalization has occurred between November 13, 1997 and the
date of this Agreement other than the exercise and termination of outstanding
stock options and the accrual of rights under the Target Purchase Plan. All
shares of Target Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable. There are no obligations, contingent or otherwise, of Target
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of Target Common Stock or the capital stock or other equity securities of any
Target Subsidiary or provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such Subsidiary or any other
entity other than guarantees of bank obligations of such Subsidiaries entered
into in the ordinary course of business. All of the outstanding shares of
capital stock and all other outstanding equity securities of each of Target's
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable,
and all such shares and other equity securities (other than directors'
qualifying shares in the case of foreign Subsidiaries) are owned by Target or
another Target Subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations on Target's voting rights, charges or
other encumbrances of any nature, except as imposed by law, rule or regulation.
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(b) Except as set forth in this Section 3.2 or as reserved for future
grants of options or rights under the Target Employee Option Plan, the Target
Individual Options, the Target Director Option Plan, the Target Incentive Plan
or the Target Purchase Plan, and except for Target Common Stock issued
subsequent to November 13, 1997, there are no equity securities of any class of
Target or any of its Subsidiaries, or any security exchangeable or convertible
into such equity securities, issued, reserved for issuance or outstanding.
Except as set forth in this Section 3.2, and except for: (i) options to purchase
shares of Target Common Stock granted pursuant to Section 5.1(e); (ii) rights to
purchase Target Common Stock outstanding under the Target Purchase Plan and the
Target Individual Options; (iii) rights under the Target Incentive Plan; and
(iv) rights of acceleration or early vesting or termination of repurchase
options under (A) option agreements executed in connection with the Target
Employee Option Plan, (B) the Target Director Option Plan, (C) the Target
Incentive Plan or (D) stock purchase agreements under Target's 1993 and 1994
Purchase Plans (the "Target SPAs"), there are no options, warrants, calls,
rights or contracts of any character to which Target or any of its Subsidiaries
is a party or by which it is bound obligating Target or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold (excluding,
in each case, upon exchange or conversion of an equity security), additional
shares of capital stock of Target or any of its Subsidiaries or obligating
Target or any of its Subsidiaries to grant, extend, accelerate the vesting of or
enter into any such option, warrant, call, right or contract. To the knowledge
of Target, there are no voting trusts, proxies or other agreements or
understandings with respect to the shares of capital stock of Target, except as
contemplated in connection with this Agreement.
Section 3.3 Authority; No Conflict; Required Filings and Consents.
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(a) Target has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Target, subject only to the adoption
of this Agreement and the approval of the Merger by Target's stockholders under
applicable provisions of the DGCL. This Agreement has been duly executed and
delivered by Target and, assuming its due authorization, execution, and delivery
by Acquirer and, if applicable, Sub, constitutes the valid and binding
obligation of Target, enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy laws and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Target does not,
and the consummation of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of any provision of
the Certificate of Incorporation or Bylaws of Target, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which Target or any of its
Subsidiaries is a party or by which any of them or any of their properties or
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assets may be bound, or (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Target or any of its Subsidiaries or any of their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not be reasonably likely to have a Target Material Adverse Effect
or a material adverse effect on the parties' ability to consummate the
transactions contemplated by this Agreement.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required to be made or obtained by Target or any of its Subsidiaries at or
before the Effective Time in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of a pre-merger notification report under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act") and any
applicable filings under the antitrust laws of any foreign country, (ii) the
filing by Acquirer of the Registration Statement (as defined in Section 3.19)
with the Securities and Exchange Commission (the "SEC") in accordance with the
Securities Act of 1933, as amended (the "Securities Act"), (iii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL, (iv) the filing of the Proxy Statement (as defined
in Section 3.19) and related proxy materials with the SEC in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country and (vi) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a Target Material Adverse Effect or
a material adverse effect on the parties' ability to consummate the transactions
contemplated by this Agreement.
Section 3.4 SEC Filings; Financial Statements.
---------------------------------
(a) Target has filed and made available to Acquirer all forms, reports
and documents required to be filed by Target with the SEC, other than
registration statements on Form S-8 (collectively, the "Target SEC Reports").
The Target SEC Reports (excluding the exhibits thereto and the preliminary Proxy
Statement) at the time filed (or, if amended or superseded by a subsequent
filing, then on the date of such filing), (i) complied in all material respects
with the applicable requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Target SEC
Reports or necessary in order to make the statements in such Target SEC Reports,
in the light of the circumstances under which they were made, not misleading.
None of Target's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Target SEC Reports, including any
Target SEC Reports filed after the date of this Agreement until the Closing
(excluding the Preliminary Proxy Statement), complied or will comply as to form
in all material respects with the applicable published rules
9
and regulations of the SEC with respect thereto, was or will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted for presentation in quarterly reports on by Form 10-Q) and fairly
presented, or will fairly present, in all material respects, the consolidated
financial position of Target and its Subsidiaries as of the respective dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The unaudited consolidated balance sheet of
Target as of September 30, 1997 is referred to herein as the "Target Balance
Sheet."
Section 3.5 Absence of Undisclosed Liabilities. Except as disclosed in
----------------------------------
the Target SEC Reports, Target and its Subsidiaries do not have any liabilities,
either accrued or contingent (whether or not required to be reflected in
financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, would be reasonably likely
to have a Target Material Adverse Effect, other than (i) liabilities reflected
on the Target Balance Sheet, (ii) liabilities specifically described in this
Agreement, or in the Target Disclosure Schedule, (iii) liabilities for future
performance under contracts entered into by Target or its Subsidiaries or by
which any of them or any of their assets or properties may be bound and (iv)
normal or recurring liabilities incurred since September 30, 1997 in the
ordinary course of business consistent with past practices.
Section 3.6 Absence of Certain Changes or Events. Since the date of
------------------------------------
the Target Balance Sheet, Target and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been: (i) any damage, destruction
or loss (whether or not covered by insurance) with respect to Target or any of
its Subsidiaries having a Target Material Adverse Effect; (ii) any material
change by Target in its accounting methods, principles or practices; (iii) any
material revaluation by Target of any of its assets, including, without
limitation, writing down the value of capitalized software or inventory or
writing off notes or accounts receivable other than in the ordinary course of
business; or (iv) any other event that constitutes a Target Material Adverse
Effect.
Section 3.7 Taxes.
-----
(a) For purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Target has prepared and timely filed all federal, state, local and
foreign returns, estimates, information statements and reports ("Returns")
relating to Taxes required to
10
be filed by Target or any of its Subsidiaries, and such Returns are true and
correct in all material respects and have been completed in all material
respects in accordance with applicable law, except where failure of such Returns
to be prepared and timely filed or to be so accurate would not be reasonably
likely to have a Target Material Adverse Effect.
(c) Target and each of its Subsidiaries as of the Effective Time: (i)
will have paid all Taxes it is required to pay prior to the Effective Time and
(ii) will have withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld, except where
any failure to make such payment or withholding would not be reasonably likely
to have a Target Material Adverse Effect.
(d) There is no material Tax deficiency outstanding, proposed or
assessed against Target or any of its Subsidiaries that is not reflected as a
liability on the Target Balance Sheet nor has Target or any of its Subsidiaries
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any material Tax.
(e) No audit or other examination of any Return of Target or any of its
Subsidiaries by any Tax authority is presently in progress, nor has Target or
any of its Subsidiaries been notified of any request for such an audit or other
examination excluding audits, examinations or notifications that are not
reasonably likely to result in a Target Material Adverse Effect.
(f) No material adjustment relating to any Returns filed by Target or
any of its Subsidiaries has been proposed in writing by any Tax authority to
Target or any of its Subsidiaries or any representative thereof.
(g) Neither Target nor any of its Subsidiaries has any liability for
unpaid Taxes which has not been accrued for or reserved on the Target Balance
Sheet, whether asserted or unasserted, contingent or otherwise, which is
material to Target and its Subsidiaries, taken as a whole, other than any
liability for unpaid Taxes accrued since the date of the Target Balance Sheet in
connection with the operation of the business of Target and its Subsidiaries in
the ordinary course.
Section 3.8 Properties. All leases of Target and its Subsidiaries
----------
("Target Leases") are in good standing, valid and enforceable in accordance with
their respective terms, except as such enforceability may be limited by (i)
bankruptcy laws and other similar laws affecting creditors' rights generally and
(ii) general principles of equity, regardless of whether asserted in a
proceeding in equity or at law, and neither Target nor its Subsidiaries is in
default under any of such leases, except where the lack of such good standing,
validity and enforceability or the existence of such default would not be
reasonably likely to have a Target Material Adverse Effect.
Section 3.9 Intellectual Property.
---------------------
(a) Target and its Subsidiaries own, or are licensed to use, all
trademarks, trade names, service marks, and copyrights and, to the knowledge of
Target, all patents, together
11
with any applications for and registrations of such trademarks, trade names,
service marks, copyrights and, to the knowledge of Target, all patents, and all
processes, formulae, methods, schematics, technology, know-how, software
programs or applications and tangible or intangible proprietary information or
materials that are necessary to conduct the business of Target and its
Subsidiaries as currently conducted, the absence of which rights could
reasonably be expected to have a Target Material Adverse Effect (the foregoing
collectively referred to as "Target Intellectual Property Rights").
(b) The Target Disclosure Schedule contains an accurate list as of the
date of this Agreement of (i) all patents and patent applications and all
registered trademarks, and trademark applications and all registered copyrights
included in the Target Intellectual Property Rights, including the jurisdictions
in which each such Target Intellectual Property Right has been issued or
registered or in which any such application for such issuance and registration
has been filed, and (ii) the following agreements relating to each of the
products of Target or its Subsidiaries (the "Target Products") or other Target
Intellectual Property: all (A) agreements granting any right to distribute or
sublicense a Target Product on any exclusive basis, (B) agreements pursuant to
which the amounts actually paid or payable under firm commitments to Target or
its Subsidiaries are $250,000 or more, and (C) agreements pursuant to which any
party is granted any rights to access source code or to use source code to
create derivative works of Target Products (other than source code escrow
agreements, porting agreements, localization or translation agreements and
licenses pursuant to which such access is permitted principally to enable the
licensee to develop products ancillary to the Target Products, in each case
entered into in the ordinary course of business). The licenses and agreements
listed in the Target Disclosure Schedule pursuant to clause (ii) of the
preceding sentence shall not include agreements reflected solely by purchase
orders.
(c) The Target Disclosure Schedule contains an accurate list as of the
date of this Agreement of all licenses, sublicenses and other agreements to
which Target or its Subsidiaries are a party and pursuant to which Target or its
Subsidiaries are authorized to use any third party technology, trade secret,
know-how, process, patent, trademark or copyright, including software, which is
incorporated in or forms a part of any Target Product, excluding "off the shelf"
or other software at a cost of less than $10,000 which is widely available
through regular commercial distribution channels on standard terms and
conditions, or which if required to be replaced, such replacement could not
reasonably be expected to have a Material Adverse Effect ("Licensed Intellectual
Property").
(d) Target and its Subsidiaries are not, and will not be as a result of
the execution and delivery of this Agreement or the performance of their
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Target Intellectual Property Rights or Licensed
Intellectual Property, the breach of which could reasonably be expected to have
a Target Material Adverse Effect.
(e) To Target's knowledge, all patents and registered trademarks,
service marks and copyrights claimed by or issued to Target which relate to any
Target Product are valid and subsisting. The operation of the businesses of
Target and its Subsidiaries as such businesses
12
are currently conducted, including Target's design, development, manufacture,
marketing and the sale of the Target Products has not and does not infringe or
misappropriate any copyright, trademark, service xxxx or trade secret of any
third party or, to its knowledge, infringe any patent or constitute unfair
competition or trade practices under the laws of any jurisdiction, except where
any of the foregoing could not reasonably be expected to have a Target Material
Adverse Effect. Except for notices delivered prior to January 1, 1995 regarding
matters which were subsequently resolved or are no longer pending, Target (i)
has not received written notice that it has been sued in any suit, action or
proceeding which involves a claim of infringement of any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party, and (ii) has no knowledge of any written claim challenging or questioning
the validity or effectiveness of any license or agreement relating to any Target
Intellectual Property Rights or Licensed Intellectual Property.
(f) Target and its Subsidiaries are not subject to any proceeding or
outstanding decree, order, judgment, or stipulation restricting in any manner
the use, transfer, or licensing thereof by Target or its Subsidiaries, or which
may affect the validity, use or enforceability of such Target Intellectual
Property. Target and its Subsidiaries are not subject to any agreement which
restricts in any material respect the use, transfer, or licensing by Target and
its Subsidiaries of the Target Intellectual Property and Target Products where
such restriction would be likely to have a Target Material Adverse Effect.
(g) Target and its Subsidiaries have taken reasonable steps to protect
their rights in their material confidential information and trade secrets or any
trade secrets or confidential information of third parties provided to them,
and, without limiting the foregoing, Target has and enforces a policy requiring
each employee and independent contractor developing Target Intellectual Property
or having access to confidential information regarding Target Intellectual
Property to execute a proprietary information/confidentiality agreement
substantially in the form provided to Acquirer and all such current and former
employees and contractors of Target and its Subsidiaries have executed such an
agreement, except where the failure to do so is not reasonably likely to have a
Target Material Adverse Effect.
Section 3.10 Compliance; Permits; Restrictions.
---------------------------------
(a) Neither Target nor any of its Subsidiaries is in conflict with or
in violation of any law, rule, regulation, order, judgment or decree applicable
to Target or any of its Subsidiaries or by which Target or any of its
Subsidiaries or any of their respective properties is bound or affected, except
for conflicts and violations that (individually or in the aggregate) would not
be reasonably likely to have a Target Material Adverse Effect. No investigation
or review by any Governmental Entity is pending or, to Target's knowledge, has
been threatened in a writing delivered to Target against Target or any of its
Subsidiaries (except for such threats delivered prior to January 1, 1995
regarding matters which were subsequently resolved or are no longer pending).
There is no material judgment, injunction, order or decree binding upon Target
or any of its Subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Target or
any its Subsidiaries, any
13
acquisition of material property by Target or any of its Subsidiaries, or the
conduct of business by Target as currently conducted.
(b) Target and its Subsidiaries hold, to the extent legally required,
all permits, licenses, variances, exemptions, orders and approvals from
governmental authorities that are material to and required for the operation of
their businesses as currently conducted (collectively, the "Target Permits"),
except where the failure to hold any such Target Permit would be reasonably
likely to have a Target Material Adverse Effect. Target and its Subsidiaries are
in compliance in all material respects with the terms of the Target Permits,
except where the failure to be in compliance with the terms of the Target
Permits would not be reasonably likely to have a Target Material Adverse Effect.
Section 3.11 Agreements, Contracts and Commitments. As of the date of
-------------------------------------
this Agreement, neither Target nor any of its Subsidiaries is a party to or is
bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or member of Target's Board of Directors, other than those that are
terminable by Target or any of its Subsidiaries on no more than 30 days notice
without liability or financial obligation, except to the extent general
principles of wrongful termination law may limit Target's or any of its
Subsidiaries' ability to terminate employees at will;
(b) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of software products in the ordinary course of business where such agreement or
guarantee might reasonably result in a Target Material Adverse Effect;
(c) any agreement, contract or commitment containing any covenant
limiting in any material respect the right of Target or any of its Subsidiaries
to engage in any line of business or to compete with any person; or
(d) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by Target or any of its Subsidiaries after the
date of this Agreement of any material assets not in the ordinary course of
business or pursuant to which Target has any ownership interest in any
corporation, partnership, joint venture or other business enterprise other than
Target's Subsidiaries.
Neither Target nor any of its Subsidiaries, nor to Target's knowledge any
other party to a Target Contract (as defined below), is in breach, violation or
default under, and neither Target nor any of its Subsidiaries has received
written notice (except for notices delivered prior to January 1, 1995 regarding
matters which were subsequently resolved or are no longer pending) that it has
breached, violated or defaulted under, any of the material terms or conditions
of any of the agreements, contracts or commitments to which Target or any of its
Subsidiaries is a party or by which it is bound that are required to be filed as
an exhibit to a Target SEC Report or to be disclosed in the Target Disclosure
Schedule (any such agreement, contract or commitment, a "Target Contract") in
such a manner as would permit any other party to cancel or terminate any such
Target Contract, or would permit any other party to seek damages or other
remedies, which
14
cancellation, termination, damages or other remedies would be reasonably likely
to have a Target Material Adverse Effect.
Section 3.12 Litigation. There is no action, suit or proceeding,
----------
arbitration or, to Target's knowledge, investigation (collectively, "Matter")
against Target or any of its Subsidiaries pending or as to which Target has
received any written notice of assertion (except for notices delivered prior to
January 1, 1995 regarding Matters which were subsequently resolved or are no
longer pending).
Section 3.13 Environmental Matters.
---------------------
(a) To the knowledge of Target, no underground storage tanks are
present under any property that Target or any of its Subsidiaries has at any
time owned, operated, occupied or leased. No amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), is present as a
result of the actions of Target or any of its Subsidiaries, or, to Target's
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water, that Target or any of its Subsidiaries has at any time owned,
operated, occupied or leased, where the presence of such Hazardous Material is
reasonably likely to have a Target Material Adverse Effect.
(b) At no time has Target or any of its Subsidiaries transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has Target or any of its Subsidiaries disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(collectively, "Hazardous Materials Activities") in violation of any rule,
regulation, treaty or statute promulgated by any Governmental Entity to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity, with the exception of violations that have not had or are not
reasonably likely to have a Target Material Adverse Effect.
(c) Target and its Subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents from Governmental Entities
necessary for the conduct of their Hazardous Materials Activities as such
Hazardous Materials Activities are currently being conducted (the "Environmental
Permits"), the absence of which would be reasonably likely to have a Target
Material Adverse Effect.
(d) No action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending or, to the knowledge of Target, threatened
concerning any Environmental Permit or any Hazardous Materials Activity of
Target or any of its Subsidiaries. Target is not aware of any fact or
circumstance which could involve Target in any environmental
15
litigation or impose upon Target any environmental liability which would be
reasonably likely to have a Target Material Adverse Effect.
Section 3.14 Employee Benefit Plans.
----------------------
(a) Set forth in the Target Disclosure Schedule is a list of all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of Target or any trade or business (whether or not
incorporated) which is a member or which is under common control with Target
within the meaning of Section 414 of the Code (an "ERISA Affiliate") (together,
the "Target Employee Plans").
(b) With respect to the Target Employee Plans, individually and in the
aggregate, to the knowledge of Target, no event has occurred, and there exists
no condition or set of circumstances reasonably likely to have a Target Material
Adverse Effect.
(c) With respect to the Target Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Target, which obligations are reasonably likely to have a Target
Material Adverse Effect.
(d) Except as disclosed in Target SEC Reports filed prior to the date
of this Agreement, and except as provided for in this Agreement, neither Target
nor any of its Subsidiaries is a party to any oral or written (i) union or
collective bargaining agreement, (ii) agreement with any officer or other key
employee of Target or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Target of the nature contemplated by this Agreement,
other than with respect to (A) options granted under the Target Employee Option
Plan (including the lapse of repurchase options for the benefit of Target
thereunder) or the Target Director Option Plan, (B) rights granted under Target
Purchase Plan, (C) the Target Incentive Plan or (D) the Target SPAs, (iii)
agreement with any officer of Target providing any term of employment or
compensation guarantee extending for a period longer than one year from the date
hereof or for the payment of compensation in excess of $100,000 per annum, or
(iv) agreement or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement, other than with
respect to (A) options granted under the Target Employee Option Plan (including
the lapse of repurchase options for the benefit of Target thereunder) or the
Target Director Option Plan, (B) the lapse of repurchase options for
16
the benefit of Target under the Target SPAs, (C) rights granted under Target
Purchase Plan or (D) the Target Incentive Plan.
Section 3.15 Insurance. Target maintains insurance policies (the
---------
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, except as such enforceability may be limited
by (i) bankruptcy laws and other similar laws affecting creditors' rights
generally and (ii) general principles of equity, regardless of whether asserted
in a proceeding in equity or at law, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. Target and its Subsidiaries have complied in all
material respects with the provisions of each Insurance policy under which it is
the insured party. No insurer under any Insurance Policy has canceled or
generally disclaimed liability under any such policy or, to Target's knowledge,
indicated in writing any intent to do so or not to renew any such policy. All
claims under the Insurance Policies have been filed in a timely fashion, except
where the failure to so file has not had and is not reasonably likely to have a
Target Material Adverse Effect.
Section 3.16 Section 203 of the DGCL Not Applicable. The Board of
--------------------------------------
Directors of Target has taken all necessary action so that the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in said Section 203) will not apply to the execution, delivery or
performance of this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 3.17 Pooling of Interests.
--------------------
(a) To its knowledge, neither Target nor any of its Affiliates (as
defined in Section 6.11) has, through the date of this Agreement, taken or
agreed to take any action which would prevent Acquirer from accounting for the
business combination to be effected by the Merger as a pooling of interests.
(b) Target has received a letter from Xxxxxx Xxxxxxxx LLP, dated the
date of this Agreement, stating that it will deliver at Closing a letter to the
effect that it believes that Target could be a combining entity in a transaction
accounted as a pooling of interests (the "Target Preliminary Pooling Letter").
Section 3.18 Interested Party Transactions. Except as set forth in the
-----------------------------
Target SEC Reports, since the date of Target's last proxy statement to its
stockholders, no event has occurred that would be required to be reported by
Target as a Certain Relationship or Related Transaction, pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
Section 3.19 Registration Statement: Joint Proxy Statement/Prospectus.
---------------------------------------------------------
The information supplied by Target for inclusion in the registration statement
on Form S-4 pursuant to which shares of Acquirer Common Stock to be issued in
the Merger will be registered with the SEC (the "Registration Statement") shall
not at the time the Registration Statement is declared
17
effective by the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not misleading. The
information supplied by Target for inclusion in the joint proxy
statement/prospectus (the "Proxy Statement") to be sent to the stockholders of
Target and Acquirer in connection with the meetings of their stockholders to
consider this Agreement and the Merger (the "Target Stockholders' Meeting" and
the "Acquirer Stockholders' Meeting," respectively, and, collectively, the
"Stockholder Meetings") shall not, on the date the Proxy Statement is first
mailed to stockholders of Target or at the time of the Stockholders' Meetings,
contain any statement which, at such time and in light of the circumstances
under which it was made, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements made in the Proxy Statement not false or misleading, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders'
Meetings which has become materially false or misleading. If at any time prior
to the Stockholders' Meetings any event relating to Target or any of its
Affiliates, officers or directors should be discovered by Target which is
required to be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Target shall promptly inform Acquirer.
Section 3.20 Opinion of Financial Advisor. The financial advisor of
----------------------------
Target, BancAmerica Xxxxxxxxx Xxxxxxxx, has delivered to Target an opinion,
dated the date of this Agreement, to the effect that the aggregate Merger
consideration is fair to Target from a financial point of view.
Section 3.21 No Existing Discussions. As of the date hereof, Target is
-----------------------
not engaged, directly or indirectly, in any negotiations with any other party
with respect to an Acquisition Proposal (as defined in Section 6.1).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIRER AND SUB
Acquirer and Sub represent and warrant to Target that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by Acquirer to Target on or before the date of
this Agreement (the "Acquirer Disclosure Schedule"). All disclosures set forth
in the Acquirer Disclosure Schedule shall refer to the corresponding numbered
and lettered Sections of this Article IV to which they principally pertain. For
purposes of this Agreement, the phrase "Acquirer Material Adverse Effect" means
a material adverse effect on the business, operations, financial condition, or
results of operations of Acquirer and its Subsidiaries, taken as a whole.
Section 4.1 Organization. Each of Acquirer and Sub and Acquirer's other
------------
Subsidiaries that are material to the business of Acquirer and all of its
Subsidiaries, taken as a whole (the "Material Acquirer Subsidiaries") is a
corporation or other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept with
respect to such entity) under the laws of the jurisdiction of its incorporation
or organization, has
18
all requisite power to own, lease and operate its property and to carry on its
business as now being conducted, and is duly qualified to do business and is in
good standing (with respect to jurisdictions which recognize such concept with
respect to such entity) in each jurisdiction in which the failure to be so
qualified and in good standing would have an Acquirer Material Adverse Effect.
Except for their interests in Acquirer Subsidiaries, neither Acquirer nor any of
its Subsidiaries directly or indirectly owns any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or entity,
excluding securities of any publicly traded company held for investment by
Acquirer and comprising less than five percent of the outstanding stock of such
company.
Section 4.2 Acquirer Capital Structure.
--------------------------
(a) The authorized capital stock of Acquirer consists of 100,000,000
shares of Acquirer Common Stock and 1,000,000 shares of Preferred Stock, $.01
par value, of which 100,000 shares are designated as Series A Junior
Participating Preferred Stock ("Acquirer Series A Preferred Stock") and 1,470
shares are designated as Series B Convertible Preferred Stock ("Acquirer Series
B Preferred Stock"). As of November 13, 1997: (i) 38,597,404 shares of Acquirer
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable; (ii) no shares of Acquirer Common Stock were held in the
treasury of Acquirer or by Subsidiaries of Acquirer; (iii) 9,609,598 shares of
Acquirer Common Stock were reserved for issuance pursuant to stock options
granted and outstanding under Acquirer's employee and director option plans
(collectively, the "Acquirer Option Plans"); (iv) 200,000 shares of Acquirer
Common Stock were reserved for issuance under Acquirer's Employee Stock Purchase
Plan (the "Acquirer Purchase Plan"); (v) 198,000 shares of Acquirer Common Stock
were reserved for issuance pursuant to outstanding warrants; (vi) no shares of
Acquirer Series A Preferred Stock were outstanding; and (vii) 495 shares of
Acquirer Series B Preferred Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable. No change in such capitalization
has occurred between November 13, 1997 and the date of this Agreement other than
the exercise and termination of outstanding stock options and the accrual of
rights under the Acquirer Purchase Plan. All shares of Acquirer Common Stock
subject to issuance as specified above, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. There
are no obligations, contingent or otherwise, of Acquirer or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Acquirer
Common Stock or Acquirer Series B Preferred Stock (except as provided in the
Acquirer's Restated Certificate of Incorporation) or the capital stock or other
securities of any Acquirer Subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such Subsidiary or any other entity other than guarantees of bank obligations of
such Subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock and all other outstanding equity securities
of each of Acquirer's Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable, and all such shares and other equity securities (other
than directors' qualifying shares in the case of foreign Subsidiaries) are owned
by Acquirer or another Acquirer Subsidiary free and clear of all security
interests, liens, claims,
19
pledges, agreements, limitations on Acquirer's voting rights, charges or other
encumbrances of any nature, except as imposed by law, rule or regulation.
(b) Except as set forth in this Section 4.2 or as reserved for future
grants of options or rights under the Acquirer Option Plans or the Acquirer
Purchase Plan, and except for Acquirer Common Stock issued subsequent to
November 13, 1997, there are no equity securities of any class of Acquirer or
any of its Subsidiaries, or any security exchangeable or convertible into such
equity securities, issued, reserved for issuance or outstanding. Except as set
forth in this Section 4.2 and except for up to 975 shares of Acquirer Series B
Preferred Stock and warrants for the purchase of up to 390,000 shares of
Acquirer Common Stock issuable in connection with Acquirer's Series B Preferred
Stock Subscription Agreements (the "Acquirer Series B Agreements"), there are no
options, warrants, calls, rights or contracts of any character to which Acquirer
or any of its Subsidiaries is a party or by which it is bound obligating
Acquirer or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold (excluding, in each case, upon exchange or conversion
of an equity security), additional shares of capital stock of Acquirer or any of
its Subsidiaries or obligating Acquirer or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, call,
right or contract. To the knowledge of Acquirer, there are no voting trusts,
proxies or other agreements or understandings with respect to the shares of
capital stock of Acquirer.
Section 4.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Acquirer and Sub have all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Acquirer and Sub,
subject only to the approval of the issuance of Acquirer Common Stock in the
Merger by Acquirer's stockholders under applicable rules of the Nasdaq Stock
Market and provisions of the DGCL. This Agreement has been duly executed and
delivered by Acquirer and Sub and, assuming its due authorization, execution and
delivery by Target, constitutes the valid and binding obligation of Acquirer and
Sub, enforceable in accordance with its terms, except as such enforceability may
be limited by (i) bankruptcy laws and other similar laws affecting creditors'
rights generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law. The Board of Directors of Acquirer
has taken all necessary steps to ensure that the Merger and other transactions
contemplated hereby will not result in the distribution or exercisability of any
rights under the Rights Agreement between Acquirer and Manufacturers Hanover
Trust Company of California, as rights agent, dated as of December 20, 1991 (the
"Acquirer Rights Agreement").
(b) The execution and delivery of this Agreement by Acquirer does not,
and the consummation of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of any provision of
the Certificate of Incorporation or Bylaws of Acquirer or Sub, (ii) result in
any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under any of
the terms, conditions
20
or provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Acquirer or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Acquirer or any of its Subsidiaries or any of its or their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not be reasonably likely to have an Acquirer Material Adverse
Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be made or
obtained by Acquirer or any of its Subsidiaries at or before the Effective Time
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of a pre-merger notification report under the HSR Act and any applicable filings
under the antitrust laws of any foreign country, (ii) the filing of the
Registration Statement with the SEC in accordance with the Securities Act, (iii)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware in accordance with the DGCL, (iv) the filing of the Proxy Statement
with the SEC in accordance with the Exchange Act, (v) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country and (vi) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, would not be reasonably likely
to have an Acquirer Material Adverse Effect or a material adverse effect on the
parties' ability to consummate the transactions contemplated by this Agreement.
Section 4.4 SEC Filings; Financial Statements.
---------------------------------
(a) Acquirer has filed and made available to Target all forms, reports
and documents required to be filed by Acquirer with the SEC since January 1,
1996 other than registration statements on Form S-8 (collectively, the "Acquirer
SEC Reports"). The Acquirer SEC Reports (excluding the exhibits thereto and the
preliminary Proxy Statement) at the time filed (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
(i) complied in all material respects with the applicablbe requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Acquirer SEC Reports or necessary in order to make
the statements in such Acquirer SEC Reports, in the light of the circumstances
under which they were made, not misleading. None of Acquirer's Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Acquirer SEC Reports, including any
Acquirer SEC Reports filed after the date of this Agreement until the Closing
(excluding the Preliminary Proxy Statement), complied or will comply as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, was or will be prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of
21
unaudited statements, as permitted for presentation in quarterly reports on Form
10-Q) and fairly presented, or will present, in all material respects, the
consolidated financial position of Acquirer and its Subsidiaries as of the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudite d interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The unaudited
consolidated balance sheet of Acquirer as of September 30, 1997 is referred to
herein as the "Acquirer Balance Sheet."
Section 4.5 Absence of Undisclosed Liabilities. Except as disclosed in
----------------------------------
the Acquirer SEC Reports, Acquirer and its Subsidiaries do not have any
liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate would be
reasonably likely to have an Acquirer Material Adverse Effect, other than (i)
liabilities reflected on the Acquirer Balance Sheet, (ii) liabilities
specifically described in this Agreement, or in the Acquirer Disclosure
Schedule, (iii) liabilities for future performance under contracts entered into
by Acquirer or its Subsidiaries or by which any of them or their assets or
properties may be bound, and (iv) normal or recurring liabilities incurred since
September 30, 1997 in the ordinary course of business consistent with past
practices.
Section 4.6 Absence of Certain Changes or Events. Since the date of
------------------------------------
the Acquirer Balance Sheet, Acquirer and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been: (i) any damage, destruction
or loss (whether or not covered by insurance) with respect to Acquirer or any of
its Subsidiaries having an Acquirer Material Adverse Effect; (ii) any material
change by Acquirer in its accounting methods, principles or practices; (iii) any
material revaluation by Acquirer of any of its assets, including, without
limitation, writing down the value of capitalized software or inventory or
writing off notes or accounts receivable other than in the ordinary course of
business; or (iv) any other event that constitutes an Acquirer Material Adverse
Effect.
Section 4.7 Taxes.
-----
(a) Acquirer has prepared and timely filed all material required
Returns relating to Taxes required to be filed by Acquirer or any of the
Material Acquirer Subsidiaries, and such Returns are true and correct in all
material respects and have been completed in all material respects in accordance
with applicable law, except where failure of such Returns to be prepared and
timely filed or to be so accurate would not be reasonably likely to have a
Target Material Adverse Effect.
(b) Acquirer and each of its Subsidiaries as of the Effective Time: (i)
will have paid all Taxes it is required to pay prior to the Effective Time and
(ii) will have withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld, except where
any failure to make such payment or withholding would not be reasonably likely
to have an Acquirer Material Adverse Effect.
22
(c) There is no material Tax deficiency outstanding, proposed or
assessed against Acquirer or any of the Material Acquirer Subsidiaries that is
not reflected as a liability on the Acquirer Balance Sheet nor has Acquirer or
any of the Material Acquirer Subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
material Tax.
(d) Neither Acquirer nor any of its Subsidiaries has any liability for
unpaid Taxes which have not been accrued for or reserved on Acquirer Balance
Sheet, whether asserted or unasserted, contingent or otherwise, which is
material to Acquirer and its Subsidiaries, taken as a whole, other than any
liability for unpaid Taxes accrued since the date of the Acquirer Balance Sheet
in connection with the operation of the business of Acquirer or its Subsidiaries
in the ordinary course.
Section 4.8 Properties. Acquirer and its Subsidiaries own and have
----------
good and marketable title to all the real property that they purport to own
(including all reflected in the Acquirer Balance Sheet), free and clear of any
liens, claims or encumbrances other than those described or set forth in the
Acquirer SEC reports or the exhibits thereto, and none of such real properties
are subject to any rights of way, building use restrictions, exceptions,
variances, reservations or limitations except where any imperfection of title or
any such liens, claims, encumbrances, restrictions, variances, reservations or
limitations are not reasonably likely to have an Acquirer Material Adverse
Effect. All leases under which Acquirer or any of its Subsidiaries lease real
property ("Acquirer Lease(s)") are in good standing, valid and enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy laws or other similar laws affecting creditors' rights
generally and (ii) general principles of equity, regardless of whether asserted
in a proceeding in equity or at law, and neither Acquirer nor its Subsidiaries
is in default under any of such Acquirer Material Leases, except where the lack
of such good standing, validity and enforceability or the existence of such
default would not be reasonably likely to have an Acquirer Material Adverse
Effect.
Section 4.9 Intellectual Property.
---------------------
(a) Acquirer and its Subsidiaries own, or are licensed to use, all
trademarks, trade names, service marks, copyrights, and to the knowledge of
Acquirer, all patents, together with any applications for and registrations of
such trademarks, trade names, service marks, copyrights and, to the knowledge of
Acquirer, all patents, and all processes, formulae, methods, schematics,
technology, know-how, software programs or applications and tangible or
intangible proprietary information or materials that are necessary to conduct
the business of Acquirer and its Subsidiaries as currently conducted, the
absence of which rights could reasonably be expected to have an Acquirer
Material Adverse Effect (the foregoing collectively referred to as "Acquirer
Intellectual Property Rights").
(b) Acquirer and its Subsidiaries are not, and will not be as a result
of the execution and delivery of this Agreement or the performance of their
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Acquirer
23
Intellectual Property Rights or licensed intellectual property rights, the
breach of which could reasonably be expected to have a Acquirer Material Adverse
Effect.
(c) To Acquirer's knowledge, all patents and registered trademarks,
service marks and copyrights claimed by or issued to Acquirer which relate to
any Acquirer product are valid and subsisting. The operation of the businesses
of Acquirer and its Subsidiaries as such businesses are currently conducted,
including Acquirer's design, development, manufacture, marketing and the sale of
its products has not and does not infringe or misappropriate any copyright,
trademark, service xxxx or trade secret of any third party or, to its knowledge,
infringe any patent or constitute unfair competition or trade practices under
the laws of any jurisdiction, except where any of the foregoing might not
reasonably likely have a Acquirer Material Adverse Effect. Except for notices
delivered prior to January 1, 1995 regarding matters which were subsequently
resolved or are no longer pending and except where such matter could not
reasonably be expected to have an Acquirer Material Adverse Effect, Acquirer (i)
has not received written notice that it has been sued in any suit, action or
proceeding which involves a claim of infringement of any patent, trademark,
service xxxx, copyright, trade secret or other proprietary right of any third
party, and (ii) has no knowledge of any written claim challenging or questioning
the validity or effectiveness of any license or agreement relating to any
Acquirer Intellectual Property Rights or licensed intellectual property rights.
(d) Acquirer and Acquirer Subsidiaries are not subject to any
proceeding or outstanding decree, order, judgment, or stipulation restricting in
any manner the use, transfer, or licensing thereof by Acquirer or Acquirer
Subsidiaries, or which may affect the validity, use or enforceability of such
Acquirer Intellectual Property.
(e) Acquirer and its Subsidiaries have taken reasonable steps to
protect their rights in their material confidential information and trade
secrets or any trade secrets or confidential information of third parties
provided to them, and, without limiting the foregoing, Acquirer has and enforces
a policy requiring each employee and independent contractor developing Acquirer
Intellectual Property or having access to confidential information regarding
Acquirer Intellectual Property to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Acquirer and all such current and former employees and contractors of Acquirer
and its Subsidiaries have executed such an agreement, except where the failure
to do so is not reasonably likely to have an Acquirer Material Adverse Effect.
Section 4.10 Compliance; Permits; Restrictions.
---------------------------------
(a) Neither Acquirer nor any of its Subsidiaries is in conflict with,
or in default or in violation of any law, rule, regulation, order, judgment or
decree applicable to Acquirer or any of its Subsidiaries or by which Acquirer or
any of its Subsidiaries or any of their respective properties is bound or
affected, except for conflicts and violations that (individually or in the
aggregate) would not be reasonably likely to have an Acquirer Material Adverse
Effect. No investigation or review by any Governmental Entity is pending or, to
Acquirer's knowledge, has been threatened in a writing delivered to Acquirer
against Acquirer or any of the Material Acquirer Subsidiaries (except for
threats delivered prior to January 1, 1995 regarding matters
24
which were subsequently resolved or are no longer pending). There is no material
agreement, judgment, injunction, order or decree binding upon Acquirer or any of
the Material Acquirer Subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
Acquirer or any the Material Acquirer Subsidiaries, any acquisition of material
property by Acquirer or any of the Material Acquirer Subsidiaries or the conduct
of business by Acquirer or any of the Material Acquirer Subsidiaries as
currently conducted.
(b) Acquirer and the Material Acquirer Subsidiaries hold, to the extent
legally required, all permits, licenses, variances, exemptions, orders and
approvals from governmental authorities that are material to and required for
the operation of their businesses as currently conducted, except where the
failure to hold any such Acquirer Permit would be reasonably likely to have an
Acquirer Target Adverse Effect (collectively, the "Acquirer Permits"). Acquirer
and the Material Acquirer Subsidiaries are in compliance in all material
respects with the terms of the Acquirer Permits, except where the failure to be
in compliance with the terms of the Acquirer Permits would not be reasonably
likely to have a Acquirer Material Adverse Effect.
Section 4.11 Agreements, Contracts and Commitments. Neither Acquirer
-------------------------------------
nor any of the Material Acquirer Subsidiaries, nor to Acquirer's knowledge any
other party to an Acquirer Contract (as defined below), is in breach, violation
or default under, and neither Acquirer nor any of the Material Acquirer
Subsidiaries has received written notice (except for notices delivered prior to
January 1, 1995 regarding matters which were subsequently resolved and are no
longer pending) that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Acquirer or any of the Material Acquirer Subsidiaries is a party or by
which it is bound that are required to be filed as an exhibit to an Acquirer SEC
Report (any such agreement, contract or commitment, an "Acquirer Contract") in
such a manner as would permit any other party to cancel or terminate any such
Acquirer Contract, or would permit any other party to seek damages or other
remedies, which cancellation, termination, damages or other remedies would be
reasonably likely to have an Acquirer Material Adverse Effect.
Section 4.12 Litigation. Except as disclosed in the Acquirer SEC
----------
Reports, there is no action, suit or proceeding, or arbitration or investigation
against Acquirer or any of its Subsidiaries pending or as to which Acquirer has
received any written notice of assertion, which is reasonably likely to have an
Acquirer Material Adverse Effect, or a material adverse effect on the ability of
Acquirer to consummate the transactions contemplated by this Agreement.
Section 4.13 Environmental Matters.
---------------------
(a) To the knowledge of Acquirer, no underground storage tanks are
present under any property that Acquirer or any of its Subsidiaries has at any
time owned, operated, occupied or leased. No amount of any Hazardous Material is
present as a result of the actions of Acquirer or any of its Subsidiaries, or,
to Acquirer's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that Acquirer or any of its
Subsidiaries has at any time owned,
25
operated, occupied or leased, where the presence of such Hazardous Material is
reasonably likely to have an Acquirer Material Adverse Effect.
(b) At no time has Acquirer or any of its Subsidiaries transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has Acquirer or any of its Subsidiaries conducted any
Hazardous Materials Activities in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity, with the exception of
violations that have not had or are not reasonably likely to have an Acquirer
Material Adverse Effect.
(c) Acquirer and its Subsidiaries currently hold all Environmental
Permits the absence of which would be reasonably likely to have an Acquirer
Material Adverse Effect.
(d) No action, proceeding, revocation proceeding, amendment procedure,
writ, injunction or claim is pending or, to the knowledge of Acquirer,
threatened concerning any Environmental Permit or any Hazardous Materials
Activity of Acquirer or any of its Subsidiaries. Acquirer is not aware of any
fact or circumstance which could involve Acquirer in any environmental
litigation or impose upon Acquirer any environmental liability which would be
reasonably likely to have an Acquirer Material Adverse Effect.
Section 4.14 Employee Benefit Plans.
----------------------
(a) Acquirer has made available to Target all employee benefit plans
(as defined in Section 3(3) of ERISA) and all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of Acquirer or any ERISA Affiliate of Acquirer
(together, the "Acquirer Employee Plans").
(b) With respect to the Acquirer Employee Plans, individually and in
the aggregate, to the knowledge of Acquirer, no event has occurred, and there
exists no condition or set of circumstances in connection with which Acquirer
could be subject to any liability that is reasonably expected to have an
Acquirer Material Adverse Effect.
(c) With respect to the Acquirer Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of Acquirer, which obligations are reasonably likely to
have an Acquirer Material Adverse Effect.
(d) Except as disclosed in Acquirer SEC Reports filed prior to the date
of this Agreement, and except as provided for in this Agreement, neither
Acquirer nor any of its Subsidiaries is a party to any oral or written (i) union
or collective bargaining agreement, (ii) agreement with any officer or other key
employee of Acquirer or any of its Subsidiaries, the
26
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Acquirer of the nature
contemplated by this Agreement, (iii) agreement with any officer of Acquirer
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof, or (iv) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
Section 4.15 Pooling of Interests.
--------------------
(a) To its knowledge, neither Acquirer nor any of its Affiliates (as
defined in Section 6.11) has, through the date of this Agreement, taken or
agreed to take any action which would prevent Acquirer from accounting for the
business combination to be effected by the Merger as a pooling of interests.
(b) Acquirer has received a letter from Price Waterhouse LLP, dated the
dat e of this Agreement, stating that it will deliver at Closing a letter to the
effect that it concurs with Acquirer's management as to the appropriateness of
pooling of interests accounting for the Merger under Accounting Principles Board
Opinion No. 16, if the Merger is consummated in accordance with this Agreement
(the "Acquirer Preliminary Pooling Letter").
Section 4.16 Interested Party Transactions. Except as set forth in the
-----------------------------
Acquirer SEC Reports, since the date of Acquirer's last proxy statement to its
stockholders, no event has occurred that would be required to be reported by
Acquirer as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.
Section 4.17 Registration Statement; Joint Proxy Statement/Prospectus.
--------------------------------------------------------
The information supplied by Acquirer for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Acquirer for inclusion in the Proxy Statement shall not, on the date
the Proxy Statement is first mailed to stockholders of Target, at the time of
the Target Stockholder's Meeting, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Proxy Statement not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Target Stockholders' Meeting which has become materially false
or misleading. If at any time prior to the Stockholders' Meetings any event
relating to Acquirer or any of its Affiliates, officers or directors should be
discovered by Acquirer which is required to be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Acquirer shall
promptly inform Target.
27
Section 4.18 Opinion of Financial Advisor. The financial advisor of
----------------------------
Acquirer, Xxxxxxxxx & Xxxxx LLC, has delivered to Acquirer an opinion, dated the
date of this Agreement, to the effect that the Exchange Ratio is fair to
Acquirer from a financial point of view.
Section 4.19 Interim Operations of Sub. Sub was formed solely for the
-------------------------
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement. Acquirer, in its capacity as sole stockholder of
Sub, has adopted this Agreement and approved the Merger.
Section 4.20 Acquirer Common Stock. The Acquirer Common Stock to be
---------------------
issued in accordance with Article II and the Acquirer Common Stock to be issued
in accordance with Section 6.13 of this Agreement will be validly issued, fully
paid and nonassessable and not subject to preemptive rights, and will be freely
tradable, except for restrictions on transfer imposed by law or required in
order to preserve pooling of interests accounting treatment of the Merger.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 5.1 Covenants of Target. During the period from the date of this
-------------------
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Target agrees as to itself and its Subsidiaries, except
to the extent that Acquirer shall otherwise consent in writing (which consent
will not be unreasonably withheld or delayed), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due, subject to good faith
disputes over such debts or taxes, to pay or perform its other obligations when
due, and, to the extent consistent with such business, to use all reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and key employees and (iii) preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it. Target shall promptly notify Acquirer of any event or
occurrence not in the ordinary course of business of Target of which Target has
knowledge where such event or occurrence would result in a breach of any
covenant of Target set forth in this Agreement or cause any representation or
warranty of Target set forth in this Agreement to be inaccurate in any material
respect as of the date made or (except in the case of representations and
warranties that speak specifically as of the date hereof or as of another
specific date) as of the Effective Time. Except as expressly contemplated by
this Agreement, subject to Section 6.1, Target shall not (and shall not permit
any of its Subsidiaries to), without the prior written consent of Acquirer (
which consent will not be unreasonably withheld or delayed):
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock granted under any
employee stock plan of Target or authorize cash payments in exchange for any
options granted under any of such plans except as required by the terms of such
plans or any related agreements in effect as of the date of this Agreement;
28
(b) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Target Intellectual Property Rights other than
(i) the grant of non-exclusive licenses in the ordinary course of business
consistent with past practices and (ii) the grant of exclusive licenses in
connection with [describe type of transaction] transactions entered into in the
ordinary course of business consistent with past practices;
(c) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any of its capital stock, or 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;
(d) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service by such party;
(e) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities convertible
into shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) rights to purchase shares of Target Common Stock
under the Target Purchase Plan, (ii) options to purchase up to an aggregate of
150,000 shares of Target Common Stock in connection with the hiring, retention
and/or promotion of employees of or consultants to the Target or its
Subsidiaries (other than officers and directors of Target) in the ordinary
course of business consistent with Target's past policies, or (iii) shares of
Target Common Stock issuable upon the exercise of options granted under the
Target Employee Option Plan or the Target Director Option Plan or the Target
Individual Options or pursuant to rights under the Target Purchase Plan or
pursuant to the Target Incentive Plan;
(f) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the assets
of, or by any other manner, any business or any corporation or other business
organization or division;
(g) Sell, lease, license, encumber or otherwise dispose of (by merger,
consolidation, sale of assets or otherwise) any of its properties or assets
which are material, individually or in the aggregate, to the business of Target
and its Subsidiaries, taken as a whole, except for licenses and sales in the
ordinary course of business consistent with past practices;
(h) Take any action to: (i) increase the compensation payable or to
become payable to its officers or employees, except for increases in salary or
wages of employees in accordance with past practices, (ii) grant any additional
severance or termination pay to, or enter into any employment or severance
agreements with, officers, (iii) grant any additional severance or termination
pay to, or enter into any employment or severance agreement, with any employee,
except in accordance with past practices, (iv) enter into any collective
bargaining agreement, or (v) establish, adopt, enter into or amend in any
material respect any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
29
employment, termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(i) Revalue any material amount of its assets, including writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practices;
(j) Incur any material indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others, other
than indebtedness incurred under outstanding lines of credit;
(k) Amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(l) Incur or commit to incur capital expenditures in excess of $200,000
during any calendar month;
(m) Enter into or amend any agreement pursuant to which any third party
is granted exclusive marketing, distribution or manufacturing rights with
respect to any Target product or any agreement pursuant to which any third party
is granted any right to source code or to use source code to make or create
derivative works other than pursuant to (i) agreements relating to the porting
of Target's software with specific products of third parties, (ii) customary
source code escrow agreements with customers, (iii) agreements for the
development of ancillary products, and (iv) agreements relating to the
localization or translation of software, in each case entered into in the
ordinary course of business consistent with past practice;
(n) Amend or terminate any material contract, agreement or license to
which it is a party except in the ordinary course of business;
(o) Waive or release any material right or claim, except in the
ordinary course of business;
(p) Initiate any litigation or arbitration proceeding, other than a
proceeding relating to the enforcement or interpretation of its rights under
this Agreement or relating to the transactions contemplated hereby;
(q) Agree in writing or otherwise to take any of the actions described
in Sections (a) through (p) above; or
(r) Take any other action which is reasonably likely to make any of
Target's representations or warranties contained in this Agreement inaccurate in
any material respect as of the date made or (except in the case of
representations or warranties that speak specifically as of the date hereof or
as of another specific date) as of the Effective Time.
30
Section 5.2 Covenants of Acquirer. During the period from the date of
---------------------
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Acquirer agrees as to itself and its
Subsidiaries, except to the extent that Target shall otherwise consent in
writing (which consent will not be unreasonably withheld or delayed), to carry
on its business in the usual, regular and ordinary course in substantially the
same manner as previously conducted, to pay its debts and taxes when due subject
to good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use all
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and key employees and (iii) preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it. Acquirer shall promptly notify Target of any event or
occurrence not in the ordinary course of business of Acquirer of which Acquirer
has knowledge where such event or occurrence would result in a breach of any
covenant of Acquirer set forth in this Agreement or cause any representation or
warranty of Acquirer to be inaccurate in any material respect as of the date
made or (except in the case of representations and warranties that speak as of a
specific date) as of the Effective Time. Except as expressly contemplated by
this Agreement, Acquirer shall not (and shall not permit any of its Subsidiaries
to), without the prior written consent of Target (which consent shall not be
unreasonably withheld or delayed):
(a) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any of its capital stock, 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;
(b) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service by such party;
(c) Issue, deliver or sell to any of its directors, officers,
employees or consultants any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than the
issuance, delivery and/or sale of (i) rights to purchase shares of Acquirer
Common Stock under the Acquirer Purchase Plan, (ii) options to purchase shares
of Acquirer Common Stock granted under the Acquirer Option Plans in the ordinary
course of business consistent with Acquirer's past policies or (iii) shares of
Acquirer Common Stock issuable upon the exercise of options granted under the
Acquirer Option Plans or pursuant to rights under the Acquirer Purchase Plan;
(d) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities convertible
into shares of its capital stock, or subscriptions, rights, warrants or options
to acquire any such shares or convertible securities (i) by means of any public
offering registered under the Securities Act (other than an offering registered
pursuant to a registration statement on Form S-8) or (ii) in any transaction
exempt
31
from such registration where the gross proceeds from such transaction are
reasonably expected to exceed $50,000,000 (other than Acquirer Series B
Preferred Stock and warrants issuable pursuant to the Acquirer Series B
Agreements, the securities of Acquirer issuable upon conversion of Acquirer
Series B Preferred Stock or upon the exercise of warrants issuable pursuant to
the Acquirer Series B Agreements), in any such case unless Acquirer has advised
Target in advance of its intention to effect such offering or enter into such
transaction and, if Target so requests, consulted with Target regarding the
advisability of such proposed offering or transaction;
(e) Acquire or agree to acquire by merging or consolidating with, or
by purchasing an equity interest in or a substantial portion of the assets of,
or by any other manner, any business or any corporation or other business
organization or division where the consideration to be paid by Acquirer therefor
consists of voting securities, cash and/or other assets having an aggregate
value (as determined in good faith by the Board of Directors of Acquirer at the
time such acquisition is approved by such Board) of more than $125,000,000
unless Acquirer has advised Target in advance of its intention to effect such
acquisition and, if Target so requests, consulted with Target regarding the
advisability of such proposed acquisition;
(f) Sell, lease, license or otherwise dispose of (by merger,
consolidation, sale of assets or otherwise) any of its properties or assets
which are material, individually or in the aggregate, to the business of
Acquirer and its Subsidiaries, taken as a whole, except for licenses and sales
in the ordinary course of business;
(g) Amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(h) Agree in writing or otherwise to take any of the actions
described in Sections (a) through (g) above; or
(i) Take any other action which is reasonably likely to make any of
Acquirer's representations or warranties contained in this Agreement inaccurate
in any material respect as of the date made or (except in the case of
representations or warranties that speak specifically as of the date hereof or
as of another specific date) as of the Effective Time.
Section 5.3 Cooperation. Subject to compliance with applicable law, from
-----------
the date hereof until the Effective Time, each of Acquirer and Target shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions contemplated
hereby.
32
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 No Solicitation.
---------------
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement or the Effective Time, Target shall not, directly
or indirectly, through any officer, director, employee, affiliate, agent or
representative, (i) solicit, initiate, seek, entertain, or knowingly encourage
or support any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, sale of
any material portion of assets, sale of shares of capital stock of Target
(including without limitation by way of a tender offer) constituting more than
10% of the total outstanding voting securities of Target (excluding sales
permitted pursuant to Section 5.1), other than the transactions contemplated by
this Agreement (any of such proposals or offers being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage or participate in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or (iii) agree to,
approve or recommend any Acquisition Proposal; provided, however, that nothing
-------- -------
contained in this Agreement shall prevent Target or its Board of Directors from
(A) providing non-public information to, or engaging or participating in
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity
(including a new and unsolicited Acquisition Proposal received by Target after
the execution of this Agreement from a person or entity whose initial contact
with Target may have been solicited by Target prior to the execution of this
Agreement) or recommending such an unsolicited bona fide written Acquisition
Proposal to the stockholders of Target, if and only to the extent that (1) the
Board of Directors of Target determines in good faith (after consultation with
its financial advisor) that such Acquisition Proposal would, if consummated,
result in a transaction more favorable to Target's stockholders from a financial
point of view than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal") and that the party making such Superior Proposal has the
financial means, or the ability to obtain the necessary financing, to conclude
such transaction, (2) the Board of Directors of Target determines in good faith
(after consultation with its outside legal counsel) that the failure to take
such action would create a substantial risk of liability for breach of its
fiduciary duties to Target's stockholders under applicable law and (3) prior to
furnishing such non-public information to such person or entity, such Board of
Directors receives from such person or entity an executed confidentiality
agreement with terms no less favorable to Target than those contained in the
nondisclosure letter agreements dated October 28, 1997 between Acquirer and
Target (the "Confidentiality Agreements"); or (B) complying with Rules 14d-9 or
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal
or making any disclosure to Target's stockholders if, in the good faith judgment
of the Board of Directors at Target (after consultation with its outside legal
counsel), failure to do so would be inconsistent with any law, rule, regulation
or duty applicable to Target or its Board of Directors.
33
(b) Target shall notify Acquirer no later than 24 hours after receipt
by Target (or its advisors) of any Acquisition Proposal or any request for
nonpublic information in connection with an Acquisition Proposal or for access
to the properties, books or records of Target by any person or entity that
informs Target that it is considering making, or has made, an Acquisition
Proposal. Such notice shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact.
Section 6.2 Proxy Statement; Registration Statement.
---------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
Acquirer and Target shall prepare and file with the SEC the Proxy Statement, and
Acquirer shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement will be included as a prospectus. Acquirer and Target
shall use all reasonable efforts to cause the Registration Statement to become
effective as soon after such filing as practicable. The Proxy Statement shall
include the recommendation of the Board of Directors of Target in favor of this
Agreement and the Merger and the recommendation of the Board of Directors of
Acquirer in favor of the issuance of shares of Acquirer Common Stock pursuant to
the Merger; provided that, notwithstanding anything to the contrary in Sections
6.1, 6.2, 6.6 or other provisions of this Agreement, the Board of Directors of
Target may withdraw such recommendation if such Board of Directors determines in
good faith (after consultation with its outside legal counsel) that the failure
to withdraw such recommendation would create a substantial risk of liability for
breach of its fiduciary duties to its stockholders under applicable law.
(b) Acquirer and Target shall make all necessary filings with respect
to the Merger under the Securities Act and the Exchange Act and applicable state
blue sky laws and the rules and regulations thereunder.
Section 6.3 Consents. Each of Acquirer and Target shall use all
--------
reasonable efforts to obtain all necessary consents, waivers and approvals under
any of Acquirer's or Target's material agreements, contracts, licenses or leases
as may be necessary to consummate the Merger and the other transactions
contemplated by this Agreement.
Section 6.4 Current Nasdaq Quotation. Each of Acquirer and Target
------------------------
agrees to continue the quotation of Acquirer Common Stock and Target Common
Stock, respectively, on The Nasdaq National Market during the period from the
date of this Agreement until the earlier of the termination of this Agreement or
the Effective Time.
Section 6.5 Access to Information. Upon reasonable notice, Target and
---------------------
Acquirer shall each (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time or the termination of this Agreement, to all its properties,
books, contracts, commitments and records and, during such period, each of
Target and Acquirer shall (and shall cause each of its Subsidiaries to) furnish
promptly to the other (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (ii) all other information
34
concerning its business, properties and personnel as such other party may
reasonably request. Unless otherwise required by law, the parties will hold any
such information which is nonpublic in confidence in accordance with the
Confidentiality Agreements. No information or knowledge obtained in any
investigation pursuant to this Section 6.5 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
Section 6.6 Stockholder Meetings. Acquirer and Target each shall call
--------------------
a meeting of its respective stockholders, subject to the provisions of
applicable law, to be held as promptly as reasonably practicable for the purpose
of voting upon, in the case of Target, the adoption of this Agreement and the
approval of the Merger and, in the case of Acquirer, the issuance of shares of
Acquirer Common Stock pursuant to the Merger. Subject to Sections 6.1 and 6.2,
Acquirer and Target will, through their respective Board of Directors, recommend
to their respective stockholders approval of such matters and will coordinate
and cooperate with respect to the timing of such meetings and shall use all
reasonable efforts to hold such meetings on the same day and as soon as
reasonably practicable after the date hereof. Subject to applicable law and the
provisions of Sections 6.1 and 6.2(a), each party shall use its reasonable
efforts to solicit from its stockholders proxies in favor of such matters.
Section 6.7 Legal Conditions to Merger. Each of Acquirer and Target
--------------------------
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger (which
actions shall include, without limitation, furnishing all information required
under the HSR Act and in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and use its best efforts
to furnish information to each other in connection with any such requirements
imposed upon either of them or any of their Subsidiaries in connection with the
Merger. Each of Acquirer and Target will, and will cause its Subsidiaries to,
(i) take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity required to be obtained or made by
Target, Acquirer or any of their Subsidiaries in connection with the Merger (any
of the foregoing an "Approval") or the taking of any action contemplated thereby
or by this Agreement, (ii) diligently oppose or pursue any rehearing, appeal or
other challenge which may be available to it of any refusal to issue any
Approval or of any order or ruling of any Governmental Entity which may
adversely affect the ability of the parties hereto to consummate the Merger or,
except as permitted by Sections 6.1, 6.2 and 6.6, to take any action
contemplated by any Approval or by this Agreement until such time as such
refusal to issue any Approval or any order or ruling has become final and non-
appealable, and (iii) diligently oppose any objections to, appeals from or
petitions to reconsider or reopen any Approval or the taking of any action
contemplated thereby or by this Agreement. Notwithstanding the foregoing,
neither Target nor Acquirer shall be required to agree, as a condition to any
Approval, to divest itself of or hold separate any Subsidiary, division or
business unit which is material to the business of such party and its
Subsidiaries, taken as a whole, or the divestiture or holding separate of which
would be reasonably likely to have a material adverse effect on (A) the
business, financial condition or results of operations of such party and its
Subsidiaries, taken as a whole or (B) the benefits intended to be derived as a
result of the Merger.
35
Section 6.8 Public Disclosure. Acquirer and Target shall consult with
-----------------
each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law or by the rules of the NASD.
Section 6.9 Tax-Free Organization. Both before and after the Effective
---------------------
Time, Acquirer and Target shall each use all reasonable efforts to cause the
Merger to be treated as a reorganization within the meaning of Section 368(a) of
the Code.
Section 6.10 Pooling Accounting. Acquirer and Target shall each use
------------------
all reasonable efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests. Each of Acquirer and
Target shall use all reasonable efforts (i) to cause its respective Affiliates
(as defined in Section 6.11) not to take any action that would adversely affect
the ability of Acquirer to account for the business combination to be effected
by the Merger as a pooling of interests and (ii) to cause its respective
Affiliates to sign and deliver to Acquirer a customary "pooling letter" in form
and substance agreed upon by Target and Acquirer to the extent that receipt of
such letter is required to assure the availability of pooling of interests
accounting treatment.
Section 6.11 Affiliate Agreements. Acquirer and Target have provided
--------------------
each other with a list of those persons who are, in Acquirer's or Target's
respective reasonable judgment, "affiliates" of Acquirer or Target,
respectively, within the meaning of Rule 145 under the Securities Act ("Rule
145"). Each such person who is an "affiliate" of Acquirer or Target within the
meaning of Rule 145 is referred to herein as an "Affiliate." Acquirer and Target
shall provide each other such information and documents as Target or Acquirer
shall reasonably request for purposes of reviewing such list and shall notify
the other party in writing regarding any change in the identity of its
Affiliates prior to the Closing Date. Target shall use all reasonable efforts to
deliver or cause to be delivered to Acquirer at least 30 days prior to Closing
Date from each of the Affiliates of Target, an executed Affiliate Agreement, in
form and substance reasonably satisfactory to Acquirer and Target, by which such
Affiliate of Target agrees to comply with the applicable requirements of Rule
145 ("Affiliates Agreement"). Acquirer shall be entitled to place appropriate
legends on the certificates evidencing any Acquirer Common Stock to be received
by such Affiliates of Target pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the
Acquirer Common Stock, consistent with the terms of the Affiliates Agreements.
Section 6.12 Nasdaq Quotation. Acquirer shall use its best efforts to
----------------
cause the shares of Acquirer Common Stock to be issued in the Merger to be
approved for quotation on The Nasdaq National Market, subject to official notice
of issuance, prior to the Closing Date.
Section 6.13 Stock Plans, Options and Employee Benefits.
------------------------------------------
(a) At the Effective Time, each outstanding option to purchase Target
Common Stock (a "Target Option") under the Target Employee Option Plan or the
Target Individual Options shall be deemed to constitute an option to acquire, on
the same terms and
36
conditions as were applicable under such Target Option, the same number of
shares of Acquirer Common Stock as the holder of such Target Option would have
been entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time (rounded down to the
nearest whole number), at a price per share (rounded up to the nearest tenth of
a cent) equal to (i) the aggregate exercise price for the shares of Target
Common Stock otherwise purchasable pursuant to such Target Option divided by
(ii) the number of full shares of Acquirer Common Stock deemed purchasable
pursuant to such Target Option in accordance with the foregoing; provided,
--------
however, that in the case of any Target Options to which Section 422 of the
-------
Code applies ("incentive stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 425(a) of the
Code.
(b) As soon as practicable after the Effective Time, Acquirer shall
deliver to the participants in the Target Employee Option Plan and the holders
of the Target Individual Options an appropriate notice setting forth such
participants' rights pursuant thereto and the Target Options shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 6.13 after giving effect to the Merger). Acquirer shall comply with
the terms of the Target Employee Option Plan and the Target Individual Options
and ensure, to the extent required by, and subject to the provisions of, such
plan, that Target Options which qualified as incentive stock options prior to
the Effective Time will continue to qualify as incentive stock options after the
Effective Time.
(c) Acquirer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquirer Common Stock for delivery
upon the exercise of the Target Options assumed in accordance with this Section
6.13. On the first business day after the date of the Effective Time, Acquirer
shall file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Acquirer Common Stock subject to
the Target Options assumed pursuant to this Section 6.13 and shall use its best
efforts to maintain the effectiveness of such registration statement (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as the Target Options remain outstanding. With respect to those
individuals, if any, who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Acquirer shall administer Target Options assumed pursuant to this
Section 6.13 in a manner that complies with Rule 16b-3 promulgated under the
Exchange Act to the extent the Target Employee Option Plan and the Target
Individual Options complied with such rule prior to the Merger.
(d) Target shall take such action as is necessary to cause the ending
date of the then current offering period under of the Target Purchase Plan to be
the last trading day on which the Target Common Stock is traded on The Nasdaq
National Market immediately prior to the Effective Time (the "Final Target
Purchase Date"); provided, that, such change in such current offering period
shall be conditioned upon the consummation of the Merger. On the Final Target
Purchase Date, Target shall apply the funds credited as of such date under the
Target Purchase Plan within each participant's payroll withholding account to
the purchase of whole shares of Target Common Stock in accordance with the terms
of the Target Purchase Plan.
37
(e) Employees of Target or its Subsidiaries as of the Effective Time
shall be permitted to participate in the Acquirer Purchase Plan commencing on
the first enrollment date of such plan following the Effective Time, subject to
the eligibility provisions of such plan (with employees receiving credit, for
purposes of such eligibility provisions, for service with Target or Acquirer).
(f) Immediately prior to the Effective Time, all awards accrued as of
the Effective Time under the Target Incentive Plan shall be paid in accordance
with the terms of the Target Incentive Plan. Such awards shall be paid in cash
or stock, as provided in the Target Incentive Plan, upon the election of the
employees of Target or its Subsidiaries receiving the awards.
(g) Acquirer shall cause the Registration Statement to cover any shares
of Acquirer Common Stock issuable in the Merger upon conversion of Target Common
Stock issued prior to the Effective Time upon any exercise of any option or
right, or the delivery of any award, or the purchase of any shares under the
Target Employee Option Plan, the Target Individual Options, the Target Director
Option Plan, the Target Incentive Plan or the Target Purchase Plan.
(h) Acquirer shall, and shall cause the Surviving Corporation and its
Subsidiaries to, provide employees of the Surviving Corporation and its
Subsidiaries with benefits (other than those described in Section 6.15),
including 401(k), deferred compensation, health and welfare and paid-time off
benefits, which are no less favorable in the aggregate than those generally
provided by Acquirer to its U.S. employees.
(i) To the extent that any employee of Target or any of Target's
Subsidiaries becomes eligible to participate in any employee benefit plan of
Acquirer after the Effective Time, Acquirer, the Surviving Corporation and their
Subsidiaries, to the extent such employee benefit plan permits, shall credit
such employee's service with Target or its Subsidiaries for purposes of
determining such employee's eligibility to participate in and vesting under, and
for purposes of calculating the benefits under, such employee benefit plan. To
the extent permitted by such employee benefit plan of Acquirer and applicable
law, Acquirer, the Surviving Corporation and its Subsidiaries shall waive any
pre-existing condition limitations, waiting periods or similar limitations under
such employee benefit plan. If Acquirer can amend any employee benefit plan
without significant cost or expense to implement such service credit or waiver,
it shall do so.
(j) This Section 6.13 will survive the termination of the Merger, is
intended to benefit and may be enforced by each of the persons who participate
in any of the employee benefits plans referred to in this Section 6.13, and will
be binding on all successors and assigns of Acquirer and Surviving Corporation.
Section 6.14 Brokers or Finders. Each of Acquirer and Target
------------------
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
except Xxxxxxxxx & Xxxxx LLC, whose fees and expenses will be paid by Acquirer
in accordance with
38
Acquirer's agreement with such firm (a copy of which has been delivered by
Acquirer to Target prior to the date of this Agreement), and BancAmerica
Xxxxxxxxx Xxxxxxxx, whose fees and expenses will be paid by Target in accordance
with Target's agreement with such firm (a copy of which has been delivered by
Target to Acquirer prior to the date of this Agreement), and each of Acquirer
and Target agrees to indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its Affiliate.
Section 6.15 Indemnification.
---------------
(a) From and after the Effective Time, Acquirer shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date of this Agreement or who becomes prior to the Effective Time, an officer or
director of Target or any of its Subsidiaries (the "Indemnified Parties")
against all losses, claims, damages, costs, fines, penalties, expenses, fees
(including reasonable attorneys' fees), liabilities or judgments or amounts that
are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director or officer of Target or any of its Subsidiaries, whether pertaining to
any matter existing or occurring prior to or after the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities") including, without limitation, all losses, claims,
damages, costs, fines, penalties, expenses, fees, liabilities or judgments based
in whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby. Acquirer and the
Surviving Corporation, as the case may be, will pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party to
the full extent permitted by law. Any Indemnified Party wishing to claim
indemnification under this Section 6.15, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Target,
Acquirer or the Surviving Corporation (but the failure so to notify an
Indemnifying Party shall not relieve it from any liability which it may have
under this Section 6.15 except to the extent such failure prejudices such
party).
(b) Without limiting any commitment under Section 6.15(a), from and
after the Effective Time, the Surviving Corporation and Acquirer will fulfill
and honor in all respects the obligations of Target pursuant to Target's
Certificate of Incorporation and Bylaws, as in effect as of the date hereof and
any indemnification agreement between Target and any Indemnified Party existing
and in force as of the date of this Agreement and identified in the Target
Disclosure Schedule.
(c) Acquirer shall maintain, or shall cause the Surviving Corporation
to maintain, in effect a policy or policies of directors and officers liability
insurance with coverage substantially comparable to policies in force as of the
date of this Agreement (copies of which have been provided to Acquirer) covering
the Indemnified Parties for a period of not less than six years following the
Effective Time; provided, however, that in no event shall Acquirer or the
-------- -------
39
Surviving Corporation be required to expend in any one year an amount in excess
of 150% of the annual premiums currently paid by Target for such insurance; and,
provided, however, that if during such period the annual premiums for such
-------- -------
comparable insurance coverage exceed such amount, Acquirer or the Surviving
Corporation shall be obligated to obtain a policy which, in the reasonable
judgment of Acquirer, provides the best coverage available for a cost not
exceeding such amount.
(d) The provisions of this Section 6.15 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives, and may not be amended, altered or repealed without
the written consent of any affected Indemnified Party.
Section 6.16 Additional Agreements; Reasonable Efforts. Subject to the
-----------------------------------------
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of stockholders of Target
described in Section 6.6. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals. This Agreement shall have been adopted
---------------------
and the Merger shall have been approved by the affirmative vote of the holders
of a majority of the shares of Target Common Stock outstanding as of the record
date for the Target Stockholders Meeting (the "Target Requisite Vote"), and the
issuance of shares of Acquirer Common Stock in the Merger shall have been
approved by the minimum vote required under Rule 4460(i)(b) of the National
Association of Securities Dealers, Inc. (the "Acquirer Requisite Vote").
(b) HSR Waiting Period. The waiting period applicable to the
------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) Approvals. Other than the filing provided for by Section 1.1, all
---------
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity the
absence or nonoccurrence of which would be reasonably likely to have a Target
Material Adverse Effect or an Acquirer Material Adverse Effect shall have been
filed, occurred or been obtained.
40
(d) Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(e) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or restricting
Acquirer's operation of the business of Target after the Merger shall have been
issued by any Governmental Entity, nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal in
any jurisdiction in the United States.
(f) Pooling Letters. Acquirer shall have received a letter from Price
---------------
Waterhouse LLP, dated as of the Closing Date, confirming the statements
contained in the Acquirer Preliminary Pooling Letter, and Target shall have
received a letter from Xxxxxx Xxxxxxxx LLP, dated as of the Closing Date,
confirming the statements contained in the Target Preliminary Pooling Letter.
(g) Nasdaq. The shares of Acquirer Common Stock to be issued in the
------
Merger and upon exercise of options under the Target Employee Option Plan shall
have been approved for quotation on The Nasdaq National Market.
Section 7.2 Additional Conditions to Obligations of Acquirer and Sub.
--------------------------------------------------------
The obligations of Acquirer and Sub to effect the Merger are subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Acquirer and
Sub:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Target set forth in this Agreement shall be true and correct as of the
Closing Date as though made on and as of the Closing Date (except for such
representations and warranties that speak specifically as of the date hereof or
as of another specific date, which shall be true and correct as of such date),
except for (i) changes contemplated by this Agreement and (ii) where the failure
to be true and correct would not be reasonably likely to have a Target Material
Adverse Effect (it being understood that, for purposes of determining whether
such representations and warranties are true and correct as of the Closing Date,
(i) any inaccuracy that primarily results from or relates to general business,
economic or industry conditions shall be disregarded, (ii) any inaccuracy that
directly or indirectly results from or relates to the announcement or pendency
of the Merger or any of the other transactions contemplated by this Agreement
shall be disregarded, and (iii) any inaccuracy that directly or indirectly
results from or relates to the taking of any action contemplated or permitted by
this Agreement shall be disregarded); and Acquirer shall have received a
certificate signed on behalf of Target by the chief executive officer and the
chief financial officer of Target to such effect.
(b) Performance of Obligations of Target. Target shall have performed
------------------------------------
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date (except, in the case of Target's
obligations under the second sentence of
41
Section 5.1 and under Section 5.1(r), where such failure of performance would
not be reasonably likely to have a Target Material Adverse Effect); and Acquirer
shall have received a certificate signed on behalf of Target by the chief
executive officer and the chief financial officer of Target to such effect.
(c) Tax Opinion. Acquirer shall have received a written opinion from
------------
Xxxx Xxxx Xxxx & Freidenrich, A Professional Corporation, counsel to Acquirer,
to the effect that the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code; provided,
---------
however, that if Xxxx Xxxx Xxxx & Freidenrich, A Professional Corporation,
-------
does not render such opinion or withdraws or modifies such opinion, this
condition shall nonetheless be deemed to be satisfied if special counsel to
Target renders such opinion to Acquirer.
(d) Employment Agreements. Xxxxx Xxxxx and Xxxx Xxxxxxxxxxx shall have
----------------------
executed and delivered to Acquirer Employment Agreements in the form of
Exhibit B and Exhibit C hereto, respectively (the "Employment Agreements").
--------- ---------
(e) Non-Competition Agreements. Each person listed in the preamble
--------------------------
of Exhibit D hereto shall have executed and delivered to Acquirer a Non-
---------
Competition Agreement substantially in the form of Exhibit D hereto.
---------
(f) No Material Adverse Change. After the date of this Agreement,
--------------------------
there shall not have occurred any material adverse change in the business,
operations, financial condition or results of operations of Target and its
Subsidiaries, taken as a whole (it being understood that, for purposes of this
subsection, (i) any adverse change that primarily results from or relates to
general business, economic or industry conditions shall be disregarded, (ii) any
adverse change that directly or indirectly results from or relates to the
announcement or pendency of the Merger or any of the other transactions
contemplated by this Agreement shall be disregarded, and (iii) any adverse
change that directly or indirectly results from or relates to the taking of any
action contemplated or permitted by this Agreement shall be disregarded).
Without limiting the generality of the foregoing and notwithstanding anything
herein to the contrary, a material and adverse deviation in the financial
performance of Target from the consensus of published financial analyst
estimates as of the date of this Agreement for the fiscal quarter ending
December 31, 1997 shall be deemed a material adverse change under this
subsection (f).
Section 7.3 Additional Conditions to Obligations of Target. The
----------------------------------------------
obligation of Target to effect the Merger is subject to the satisfaction on or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Target:
(a) Representations and Warranties. The representations and
-------------------------------
warranties of Acquirer and Sub set forth in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(except for such representations and warranties that speak specifically as of
the date hereof or as of another specific date, which shall be true and correct
as of such date), except for (i) changes contemplated by this Agreement and (ii)
where the failure to be true and correct would not be reasonably likely to have
an Acquirer Material Adverse Effect, (it being understood that, for purposes of
determining whether such
42
representations and warranties are true and correct as of the Closing Date, (i)
any inaccuracy that primarily results from or relates to general business,
economic or industry conditions shall be disregarded, (ii) any inaccuracy that
directly or indirectly results from or relates to the announcement or pendency
of the Merger or any of the other transactions contemplated by this Agreement
shall be disregarded, and (iii) any inaccuracy that directly or indirectly
results from or relates to the taking of any action contemplated or permitted by
this Agreement shall be disregarded); and Target shall have received a
certificate signed on behalf of Acquirer by the chief executive officer and the
chief financial officer of Acquirer to such effect.
(b) Performance of Obligations of Acquirer and Sub. Acquirer and Sub
-----------------------------------------------
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date (except,
in the case of Acquirer's obligations under the second sentence of Section 5.2
and under Section 5.2(i), where such failure of performance would not be
reasonably likely to have an Acquirer Material Adverse Effect); and Target shall
have received a certificate signed on behalf of Acquirer by the chief executive
officer and the chief financial officer of Acquirer to such effect.
(c) Tax Opinion. Target shall have received the opinion of Xxxxxx
------------
Godward LLP, special counsel to Target, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code; provided, however, that if Xxxxxx Godward LLP
-----------------
does not render such opinion or withdraws or modifies such opinion, this
condition shall nonetheless be deemed to be satisfied if counsel to Acquirer
renders such opinion to Target.
(d) Employment Agreements. Acquirer shall have executed and delivered
---------------------
the Employment Agreements.
(e) No Material Adverse Change. After the date of this Agreement,
--------------------------
there shall not have occurred any material adverse change in the business,
operations, financial condition or results of operations of Acquirer and its
Subsidiaries, taken as a whole (it being understood that, for purposes of this
subsection, (i) any adverse change that primarily results from or relates to
general business, economic or industry conditions shall be disregarded, (ii) any
adverse change that directly or indirectly results from or relates to the
announcement or pendency of the Merger or any of the other transactions
contemplated by this Agreement shall be disregarded, and (iii) any adverse
change that directly or indirectly results from or relates to the taking of any
action contemplated or permitted by this Agreement shall be disregarded).
Without limiting the generality of the foregoing and notwithstanding anything
herein to the contrary, a material and adverse deviation in the financial
performance of Acquirer from the consensus of published financial analyst
estimates as of the date of this Agreement for the fiscal quarter ending
December 31, 1997 shall be deemed a material adverse change under this
subsection (e).
(f) Rights Plan. The Acquirer Rights Plan shall have been amended to
-----------
provide that the Merger and the other transactions contemplated by this
Agreement will not result the distribution or exercisability of any rights under
the Acquirer Rights Plan.
43
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time (with respect to Sections 8.1(b) through 8.1(g), by
written notice by the terminating party to the other party); whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of Target or Acquirer:
(a) by the mutual written consent of Acquirer and Target;
(b) by either Acquirer or Target if the Merger shall not have been
consummated by March 31, 1998; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date
(except, in the case of Target's obligations under the second sentence of
Section 5.1 and under Section 5.1(r), where such failure of performance would
not be reasonably likely to have a Target Material Adverse Effect);
(c) by either Acquirer or Target if a court of competent jurisdiction
or other Governmental Entity in the United States shall have issued a
nonappealable final order, decree or ruling or taken any other action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger (provided, however, that the right to terminate this
Agreement under this Section 8.1(c) shall not be available to any party which
has failed to comply in any material respect with its obligations under Section
6.7);
(d) by either Acquirer or Target, if at the Target Stockholders'
Meeting or the Acquirer Stockholders' Meeting (including any adjournment or
postponement) the final vote of the stockholders shall have been taken and, in
respect of Target, the Target Requisite Vote shall not have been obtained or, in
respect of Acquirer, the Acquirer Requisite Vote shall not have been obtained
(provided, however, that the right to terminate this Agreement under this
Section 8.1(d) shall not be available to any party which has failed to comply in
any material respect with its obligations under Sections 6.2 and 6.6);
(e) by Acquirer, if (i) the Board of Directors of Target shall have
withdrawn or modified its recommendation of this Agreement or the Merger in a
manner adverse to Acquirer or shall have resolved or publicly announced its
intention to do so; (ii) an Alternative Transaction (as defined in Section
8.3(e)) shall have been consummated or the Board of Directors of Target shall
have recommended an Alternative Transaction to the stockholders of Target or
shall have resolved or publicly announced its intention to recommend or engage
in such an Alternative Transaction; or (iii) a tender offer or exchange offer
for 50% or more of the outstanding shares of Target Common Stock is commenced
(other than by Acquirer or an Affiliate of Acquirer) and the Board of Directors
of Target shall have (A) recommended (or resolved or publicly announced its
intention to recommend) that the stockholders of Target tender their shares in
such tender or exchange offer or (B) resolved or publicly announced its
intention to take no position with respect to such tender or exchange offer;
44
(f) by Target, if the Board of Directors of Target shall have
determined (i) to recommend an Acquisition Proposal to its stockholders after
determining, pursuant to Section 6.1, that such Acquisition Proposal constitutes
a Superior Proposal or (ii) to withdraw its recommendation of this Agreement or
the Merger in accordance with the provisions of Section 6.2; or
(g) by Acquirer or Target, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 7.2(a) or (b) (in the case of termination by Acquirer) or 7.3(a) or (b)
(in the case of termination by Target) not to be satisfied and (ii) shall not
have been cured within 20 business days following receipt by the breaching party
of written notice of such breach from the other party.
Section 8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 8.1, there shall be no liability or obligation on
the part of Acquirer, Target, Sub or their respective officers, directors,
stockholders or Affiliates, except as set forth in Section 8.3 and further
except to the extent that such termination results from the willful breach by a
party of any of its representations, warranties or covenants set forth in this
Agreement (except, in the case of Target's obligations under the second sentence
of Section 5.1 and under Section 5.1(r), where such failure of performance would
not be reasonably likely to have a Target Material Adverse Effect); provided
that, the provisions of Sections 6.14 and 8.3 of this Agreement and the
Confidentiality Agreements shall remain in full force and effect and survive any
termination of this Agreement.
Section 8.3 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; provided, however, that Acquirer and Target shall share
equally all fees and expenses, other than attorneys' fees, incurred in
connection with the printing and filing of the Proxy Statement (including any
related preliminary materials) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto.
(b) If this Agreement is terminated by Acquirer or by Target pursuant
to Section 8.1(d) as a result of the failure to receive the Target Requisite
Vote or by Target pursuant to Section 8.1(f), Target shall reimburse Acquirer
for all of its reasonable and documented legal, accounting and financial
advisory fees and all other reasonable and documented out-of-pocket expenses
incurred by Acquirer in connection with this Agreement and the transactions
contemplated hereby, in an aggregate amount not to exceed $750,000.
(c) If (i) this Agreement is terminated by Acquirer pursuant to Section
8.1(e) or by Target pursuant to Section 8.1(f), and (ii) within six months after
such termination, an Alternative Transaction is consummated, Target shall pay to
Acquirer a termination fee of $4,000,000 in cash, less any amount previously
paid by Target in reimbursement of Acquirer's
45
expenses pursuant to Section 8.3(b), at or prior to the consummation of such
Alternative Transaction.
(d) If this Agreement is terminated by Acquirer or Target pursuant to
Section 8.1(d) as a result of the failure to receive the Acquirer Requisite
Vote, Acquirer shall pay to Target a termination fee of $4,000,000 in cash
within one business day after such termination.
(e) As used in this Agreement, an "Alternative Transaction" means (i) a
transaction or series of transactions pursuant to which any person or group (as
such term is defined under the Exchange Act) other than Acquirer or Sub or any
Affiliate thereof, (a "Third Party") acquires or would acquire (upon completion
of such transaction or series of transactions) shares (or securities exercisable
for or convertible into shares) representing more than 50% of the outstanding
shares of Target Common Stock, pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger, consolidation or share exchange involving Target if,
upon consummation of such merger, consolidation or share exchange such Third
Party owns or would own more than 50% of the outstanding equity securities of
Target or the entity surviving such merger or resulting from such consolidation
(where Target either disappears into such entity in such merger or consolidation
or becomes a direct or indirect Subsidiary of such entity), or (iii) any other
transaction or series of transactions pursuant to which any third party acquires
or would acquire (upon completion of such transaction or series of transactions)
control of assets of Target and its Subsidiaries (including, for this purpose,
outstanding equity securities of Subsidiaries of such party) having a fair
market value equal to more than 50% of the fair market value of all the
consolidated assets of Target and its Subsidiaries immediately prior to such
transaction or series of transactions. The occurrence of any of the foregoing
prior to the date of this Agreement shall not constitute an "Alternative
Transaction" under this Agreement.
Section 8.4 Amendment. This Agreement may be amended by the parties
---------
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Target, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.5 Extension; Waiver. At any time prior to the Effective Time,
-----------------
any party hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
46
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Closing
and the Effective Time, except for covenants and agreements which, by their
terms, are to be performed after the Effective Time and the agreements of the
Affiliates of Target delivered pursuant to Section 6.11. The Confidentiality
Agreements shall survive the execution and delivery of this Agreement.
Section 9.2 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) 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 Acquirer or Sub, to
Borland International, Inc.
000 Xxxxxxx Xxx
Xxxxxx Xxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich
A Professional Corporation
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
(b) if to Target, to
Visigenic Software, Inc.
000 Xxxxxxx'x Xxxxxx Xxxxxxxxx
Xxx Xxxxx, XX 00000
Attention: President
Facsimile No.: (000) 000-0000
47
with a copy to
Xxxxxx Godward LLP
3000 El Camino Real
Five Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Section 9.3 Interpretation. When a reference is made in this Agreement
--------------
to an Article or a Section, such reference shall be to an Article or a Section
of this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. 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 phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. The phrases "the date of this Agreement", "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to November 17, 1997. The words "agreement," "contract" or "commitment"
when used in this Agreement shall mean a legally binding agreement, contract or
commitment.
Section 9.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement (including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Sections 6.13 and 6.15 is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed and construed
-------------
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law, except that the DGCL shall, to the extent
applicable, govern the procedures to be taken hereunder to effect the Merger.
Section 9.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
48
IN WITNESS WHEREOF, Acquirer, Sub and Target have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
VISIGENIC SOFTWARE, INC. BORLAND INTERNATIONAL, INC.
By: ______________________________ By: _______________________________
Title: ___________________________ Title: ____________________________
VIXEN ACQUISITION CORPORATION
By: _______________________________
Title: ____________________________
49
