Exhibit 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXX, INC.,
VERITAS ACQUISITION CORP.
AND
METRO INFORMATION SERVICES, INC.
DATED AS OF AUGUST 20, 2001
ARTICLE I THE MERGER....................................................... 1
1.1 Effective Time of the Merger.......................................... 1
1.2 Closing............................................................... 2
1.3 Effects of the Merger................................................. 2
1.4 Directors and Officers................................................ 2
ARTICLE II CONVERSION OF SECURITIES........................................ 2
2.1 Conversion of Capital Stock........................................... 2
2.2 Exchange of Certificates.............................................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 7
3.1 Organization, Standing and Power; Subsidiaries........................ 7
3.2 Capitalization........................................................ 8
3.3 Authority; No Conflict; Required Filings and Consents................. 11
3.4 SEC Filings; Financial Statements; Information Provided............... 12
3.5 No Undisclosed Liabilities............................................ 14
3.6 Absence of Certain Changes or Events.................................. 14
3.7 Taxes................................................................. 15
3.8 Owned and Leased Real Properties...................................... 17
3.9 Intellectual Property................................................. 18
3.10 Agreements, Contracts and Commitments................................ 20
3.11 Litigation........................................................... 21
3.12 Environmental Matters................................................ 22
3.13 Employee Benefit Plans............................................... 24
3.14 Compliance With Laws................................................. 27
3.15 Permits.............................................................. 27
3.16 Labor Matters........................................................ 27
3.17 Insurance............................................................ 27
3.18 Assets............................................................... 28
3.19 Customers and Suppliers.............................................. 28
3.20 Accounts Receivable.................................................. 28
3.21 Prepayments, Prebilled Invoices and Deposits......................... 29
3.22 Government Contracts................................................. 29
3.23 No Existing Discussions.............................................. 29
3.24 Opinion of Financial Advisor......................................... 29
3.25 Articles 14 and 14.1 of the VSCA Not Applicable...................... 30
3.26 Brokers; Schedule of Fees and Expenses............................... 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY
SUBSIDIARY...................................................... 30
4.1 Organization, Standing and Power...................................... 31
4.2 Capitalization........................................................ 31
4.3 Authority; No Conflict; Required Filings and Consents................. 32
4.4 SEC Filings; Financial Statements; Information Provided............... 33
4.5 Tax Matters........................................................... 34
4.6 Operations of the Transitory Subsidiary............................... 34
4.7 Brokers............................................................... 34
4.8 Litigation............................................................ 34
4.9 Absence of Certain Changes or Events.................................. 34
ARTICLE V CONDUCT OF BUSINESS.............................................. 35
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5.1 Covenants of the Company.............................................. 35
5.2 Employee Stock Purchase Plan.......................................... 38
5.3 Confidentiality....................................................... 38
ARTICLE VI ADDITIONAL AGREEMENTS........................................... 38
6.1 No Solicitation....................................................... 38
6.2 Proxy Statement/Prospectus; Registration Statement.................... 42
6.3 Nasdaq Quotation...................................................... 42
6.4 Access to Information................................................. 42
6.5 Company Shareholders Meeting.......................................... 43
6.6 Additional Agreements................................................. 44
6.7 Legal Conditions to the Merger........................................ 44
6.8 Public Disclosure..................................................... 45
6.9 Reorganization........................................................ 46
6.10 Affiliate Agreements................................................. 46
6.11 AMEX Listing......................................................... 46
6.12 Company Stock Plans.................................................. 46
6.13 Shareholder Litigation............................................... 47
6.14 Indemnification...................................................... 47
6.15 Notification of Certain Matters...................................... 48
6.16 Exemption from Liability Under Section 16(b)......................... 48
6.17 Comfort Letters...................................................... 49
6.18 Representation on Buyer Board........................................ 49
ARTICLE VII CONDITIONS TO MERGER........................................... 49
7.1 Conditions to Each Party's Obligation To Effect the Merger............ 49
7.2 Additional Conditions to Obligations of the Buyer and the
Transitory Subsidiary................................................. 50
7.3 Additional Conditions to Obligations of the Company................... 51
ARTICLE VIII TERMINATION AND AMENDMENT..................................... 53
8.1 Termination........................................................... 53
8.2 Effect of Termination................................................. 54
8.3 Fees and Expenses..................................................... 54
8.4 Amendment............................................................. 56
8.5 Extension; Waiver..................................................... 56
ARTICLE IX MISCELLANEOUS................................................... 56
9.1 Nonsurvival of Representations and Warranties......................... 56
9.2 Notices............................................................... 56
9.3 Entire Agreement...................................................... 58
9.4 No Third Party Beneficiaries.......................................... 58
9.5 Assignment............................................................ 58
9.6 Severability.......................................................... 58
9.7 Counterparts and Signature............................................ 58
9.8 Interpretation........................................................ 59
9.9 Governing Law......................................................... 59
9.10 Remedies............................................................. 59
9.11 WAIVER OF JURY TRIAL................................................. 59
ii
Exhibit A Plan of Merger
Exhibit B Form of Shareholder's Agreement
Exhibit C Form of Executive Retention Agreement
Exhibit D Form of Affiliate Agreement
iii
TABLE OF DEFINED TERMS
Reference in
Terms Agreement
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Acquisition Proposal.......................................... Section 6.1(f)
Affiliate..................................................... Section 3.2(d)
Affiliate Agreement........................................... Section 6.10
Affiliate Contracts........................................... Section 3.10(b)
Agreement..................................................... Preamble
Alternative Acquisition Agreement............................. Section 6.1(b)
AMEX.......................................................... Section 2.2(e)
Antitrust Laws................................................ Section 6.7(b)
Antitrust Order............................................... Section 6.7(b)
Articles of Merger............................................ Section 1.1
Buyer......................................................... Preamble
Buyer Class B Common Stock.................................... Section 4.2
Buyer Common Stock............................................ Section 2.1(c)
Buyer Disclosure Schedule..................................... Article IV
Buyer ESPP.................................................... Section 6.12(d)
Buyer Material Adverse Effect................................. Section 4.1
Buyer Preferred Stock......................................... Section 4.2
Buyer SEC Reports............................................. Section 4.4(a)
Buyer Stock Option............................................ Section 6.12(a)
Certificates.................................................. Section 2.2(b)
Closing....................................................... Section 1.2
Closing Date.................................................. Section 1.2
Code.......................................................... Preamble
Company....................................................... Preamble
Company Balance Sheet......................................... Section 3.4(b)
Company Board................................................. Section 3.3(a)
Company Common Stock.......................................... Section 2.1(b)
Company Disclosure Schedule................................... Article III
Company Employee Plans........................................ Section 3.13(a)
Company ESPP.................................................. Section 5.1(n)
Company Insiders.............................................. Section 6.16(c)
Company Intellectual Property................................. Section 3.9(a)
Company Material Adverse Effect............................... Section 3.1(a)
Company Material Contracts.................................... Section 3.10(a)
Company Nonvoting Common Stock................................ Section 3.2(a)
Company Permits............................................... Section 3.15
Company Preferred Stock....................................... Section 3.2(a)
Company SEC Reports........................................... Section 3.4(a)
Company Stock Options......................................... Section 3.2(b)
Company Stock Plans........................................... Section 3.2(b)
Company Shareholder Approval.................................. Section 3.3(a)
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Reference in
Terms Agreement
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Company Shareholders Meeting.................................. Section 3.4(c)
Company Voting Proposal....................................... Section 3.3(a)
Confidentiality Agreement..................................... Section 5.3
Constituent Corporations...................................... Section 1.3
Contamination................................................. Section 3.12(c)
Contracts..................................................... Section 3.10(e)
Effective Time................................................ Section 1.1
Employee Benefit Plan......................................... Section 3.13(a)
Environmental Law............................................. Section 3.12(b)
ERISA......................................................... Section 3.13(a)
ERISA Affiliate............................................... Section 3.13(a)
Exchange Agent................................................ Section 2.2(a)
Exchange Fund................................................. Section 2.2(a)
Exchange Act.................................................. Section 3.3(c)
Exchange Ratio................................................ Section 2.1(c)
GAAP.......................................................... Section 3.4(b)
Governmental Entity........................................... Section 3.3(c)
Governmental Regulations...................................... Section 3.8(b)
Government Contracts.......................................... Section 3.22
Hazardous Substance........................................... Section 3.12(e)
HSR Act....................................................... Section 3.3(c)
Indemnified Parties........................................... Section 6.14(a)
Insurance Policies............................................ Section 3.17
Intellectual Property......................................... Section 3.9(a)
Liens......................................................... Section 3.18
Merger........................................................ Preamble
Ordinary Course of Business................................... Section 3.2(e)
Outside Date.................................................. Section 8.1(b)
Plan of Merger................................................ Preamble
Proxy Statement/Prospectus.................................... Section 3.4(c)
Registration Statement........................................ Section 3.4(c)
Release....................................................... Section 3.12(d)
Representatives............................................... Section 6.1(a)
Real Estate................................................... Section 3.8(a)
Regulation M-A Filing......................................... Section 3.4(c)
Rule 145 Affiliate............................................ Section 2.2(j)
SCC........................................................... Section 1.1
SEC........................................................... Section 3.3(c)
Section 16 Information........................................ Section 6.16(b)
Securities Act................................................ Section 3.3(c)
Shareholder's Agreement....................................... Preamble
Shareholder Designee.......................................... Section 6.18(a)
Special ESPP Period........................................... Section 6.12(d)
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Reference in
Terms Agreement
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Specified Time................................................ Section 6.1(a)
Subsidiary.................................................... Section 3.1(b)
Superior Proposal............................................. Section 6.1(f)
Surviving Corporation......................................... Section 1.3
Tax Returns................................................... Section 3.7(a)
Taxes......................................................... Section 3.7(a)
Third Party Confidentiality Agreement......................... Section 6.1(a)
Transitory Subsidiary......................................... Preamble
VSCA.......................................................... Preamble
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
20, 2001, is entered into by and among Xxxxx, Inc., a Massachusetts corporation
(the "Buyer"), Veritas Acquisition Corp., a Virginia corporation and a wholly
owned subsidiary of the Buyer (the "Transitory Subsidiary"), and Metro
Information Services, Inc., a Virginia corporation (the "Company").
WHEREAS, the boards of directors of the Buyer and the Company deem it
advisable and in the best interests of each corporation and their respective
shareholders that the Buyer acquire the Company in order to advance the long-
term business interests of the Buyer and the Company;
WHEREAS, the acquisition of the Company shall be effected through a merger
(the "Merger") of the Transitory Subsidiary with and into the Company in
accordance with the terms of this Agreement, including the Plan of Merger
attached hereto as Exhibit A (the "Plan of Merger"), and the Virginia Stock
Corporation Act (the "VSCA"), as a result of which the Company shall become a
wholly owned subsidiary of the Buyer;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, Xxxx X. Xxxx has entered into a Shareholder's Agreement, dated as of
the date of this Agreement, in the form attached hereto as Exhibit B (the
"Shareholder's Agreement"), pursuant to which, among other things, such
shareholder has agreed to give the Buyer a proxy to vote a certain number of the
shares of capital stock of the Company that such shareholder owns in favor of
the Merger; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Buyer, the Transitory Subsidiary and the Company agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
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Agreement, prior to the Closing, the Buyer shall prepare, and on the Closing
Date or as soon as practicable thereafter the Buyer shall cause to be filed with
the State Corporation Commission of Virginia (the "SCC"), articles of merger
(the "Articles of Merger") in such form as is required by, and executed by the
Surviving Corporation in accordance with, the relevant provisions of the VSCA
and shall make all other filings or recordings required under the VSCA. The
Merger shall become effective upon the issuance of the Certificate of Merger by
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the SCC or at such later time as is established by the Buyer and the Company and
set forth in the Articles of Merger (the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") shall take place at
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10:00 a.m., Boston time, on a date to be specified by the Buyer and the Company
(the "Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VII (other than
delivery of items to be delivered at the Closing and other than satisfaction of
those conditions that by their nature are to be satisfied at the Closing, it
being understood that the occurrence of the Closing shall remain subject to the
delivery of such items and the satisfaction or waiver of such conditions at the
Closing), at the offices of Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, unless another date, place or time is agreed to in writing by the
Buyer and the Company.
1.3 Effects of the Merger. At the Effective Time (a) the separate existence
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of the Transitory Subsidiary shall cease and the Transitory Subsidiary shall be
merged with and into the Company (the Transitory Subsidiary and the Company are
sometimes referred to herein as the "Constituent Corporations," and the Company
following the Merger is sometimes referred to herein as the "Surviving
Corporation"), (b) the Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended to be identical to the
Articles of Incorporation of the Transitory Subsidiary as in effect immediately
prior to the Effective Time except that all references to the name of the
Transitory Subsidiary shall be changed to refer to the name of the Company, and,
as so amended, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation, until further amended in accordance
with the VSCA, and (c) the Bylaws of the Company as in effect immediately prior
to the Effective Time shall be amended to be identical to the Bylaws of the
Transitory Subsidiary as in effect immediately prior to the Effective Time
except that all references to the name of the Transitory Subsidiary shall be
changed to refer to the name of the Company, and, as so amended, such Bylaws
shall be the Bylaws of the Surviving Corporation, until further amended in
accordance with the VSCA. The Merger shall have the other effects set forth in
Section 13.1-721 of the VSCA.
1.4 Directors and Officers. The directors and officers of the Transitory
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Subsidiary immediately prior to the Effective Time shall become the directors
and officers, respectively, of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the
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Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each share of the
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common stock of the Transitory Subsidiary issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
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and nonassessable share of common stock, $.01 par value per share, of the
Surviving Corporation.
(b) Cancellation of Buyer-Owned Stock. All shares of common stock,
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$0.01 par value per share, of the Company, including all shares of Nonvoting
Common Stock ("Company Common Stock"), that are owned by any wholly owned
Subsidiary of the Company and any shares of Company Common Stock owned by the
Buyer, the Transitory Subsidiary or any other wholly owned Subsidiary of the
Buyer immediately prior to the Effective Time shall be cancelled and shall cease
to exist and no stock of the Buyer or other consideration shall be delivered in
exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2, each
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share of Company Common Stock (other than shares to be cancelled in accordance
with Section 2.1(b)) issued and outstanding immediately prior to the Effective
Time shall be automatically converted into the right to receive 0.48 shares (the
"Exchange Ratio") of common stock, $0.10 par value per share, of the Buyer
("Buyer Common Stock") upon surrender of the certificate representing such share
of Company Common Stock in the manner provided in Section 2.2. As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
each holder of a certificate representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto, except the right to
receive shares of Buyer Common Stock pursuant to this Section 2.1(c) and any
cash in lieu of fractional shares of Buyer Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 2.2, without interest.
(d) Adjustments to Exchange Ratio. In the event of any reclassification,
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stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Buyer Common Stock or Company Common
Stock), reorganization, recapitalization or other like change with respect to
Buyer Common Stock or Company Common Stock occurring (or for which a record date
is established) after the date hereof and prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted to reflect fully such event.
(e) Unvested Stock. At the Effective Time, any shares of Buyer Common Stock
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issued in accordance with Section 2.1(c) with respect to any unvested shares of
Company Common Stock awarded to employees, directors, advisors or consultants
pursuant to any of the Company's plans or arrangements and outstanding
immediately prior to the Effective Time shall be converted into unvested shares
of Buyer Common Stock in accordance with the Exchange Ratio and shall remain
subject to the same terms, restrictions and vesting schedule as in effect
immediately prior to the Effective Time, except to the extent by their terms
such unvested shares of Company Common Stock vest at the Effective Time. The
Company shall not take or permit any action which would accelerate vesting of
any unvested shares, except to the extent required by their terms as in effect
on the date hereof. Copies of the relevant agreements governing such shares and
the vesting thereof have been provided to the Buyer. All outstanding rights
which the Company may hold immediately prior to the Effective Time to repurchase
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unvested shares of Company Common Stock shall be assigned to the Buyer in the
Merger and shall thereafter be exercisable by the Buyer upon the same terms and
conditions in effect immediately prior to the Effective Time, except that the
shares purchasable pursuant to such rights and the purchase price payable per
share shall be appropriately adjusted to reflect the Exchange Ratio. The Company
shall take all steps necessary to cause the foregoing provisions of this Section
2.1(e) to occur.
(f) Treatment of Company Stock Options. Following the Effective Time,
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Company Stock Options shall be treated in the manner set forth in Section 6.12.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
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shares of Company Common Stock for shares of Buyer Common Stock pursuant to the
Merger are as follows:
(a) Exchange Agent. As of the Effective Time, the Buyer shall deposit
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with EquiServe LP or another bank or trust company designated by the Buyer and
acceptable to the Company (the "Exchange Agent"), for the benefit of the holders
of shares of the Company Common Stock, for exchange in accordance with this
Section 2.2, through the Exchange Agent, (i) certificates representing that
number of whole shares of Buyer Common Stock equal to the aggregate number of
shares of Buyer Common Stock issuable pursuant to Section 2.1(c), (ii) cash in
an amount sufficient to make payments for fractional shares required pursuant to
Section 2.2(e) and (iii) any dividends or distributions to which holders of
shares of Company Common Stock may be entitled pursuant to Section 2.2(c). The
shares of Buyer Common Stock deposited with the Exchange Agent pursuant to
clause (i) above, together with any dividends or distributions with respect
thereto with a record date after the Effective Time, and the cash deposited
pursuant to clause (ii) above being hereinafter referred to as the "Exchange
Fund."
(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 the Company Common Stock (the "Certificates")
whose shares were converted pursuant to Section 2.1 into the right to receive
shares of Buyer 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 the Buyer may reasonably
specify) and (ii) instructions for effecting the surrender of the Certificates
in exchange for shares of Buyer Common Stock (plus cash in lieu of fractional
shares, if any, of Buyer Common Stock and any dividends or distributions as
provided below). Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by the
Buyer, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor (A) a
certificate representing that number of whole shares of Buyer Common Stock which
such holder has the right to receive pursuant to Section 2.1(c), (B) cash in an
amount sufficient to make payments for fractional shares pursuant to the
provisions of Section 2.2(e) and (C) any dividends or distributions pursuant to
the provisions of Section 2.2(c), and the Certificate so surrendered shall
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immediately be cancelled. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, (x)
a certificate representing the proper number of shares of Buyer Common Stock
issuable pursuant to Section 2.1(c), (y) the proper amount of cash in lieu of
fractional shares pursuant to Section 2.2(e) and (z) any dividends or
distributions pursuant to Section 2.2(c) may be issued or paid to a person other
than the person in whose name the Certificate so surrendered is registered, if
such Certificate 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 (1) shares of Buyer Common Stock issuable pursuant to Section 2.1(c),
(2) cash in lieu of fractional shares pursuant to Section 2.2(e) and (3) any
dividends or distributions pursuant to Section 2.2(c) as contemplated by this
Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
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other distributions declared or made after the Effective Time with respect to
Buyer Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.2(e)
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 issued and paid to the record holder of the
Certificate, (i) certificates representing whole shares of Buyer Common Stock
issued in exchange therefor, (ii) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Buyer Common Stock to which
such holder is entitled pursuant to Section 2.2(e) 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 Buyer Common Stock, without interest,
and (iii) 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 Buyer Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
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Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (together with any cash or dividends or other
distributions paid pursuant to Sections 2.2(c) or 2.2(e)) shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and from and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be cancelled and exchanged as provided in this
Article II.
(e) No Fractional Shares. No certificate or scrip representing
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fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests shall not entitle
the owner thereof to vote or to any other rights of a stockholder of the Buyer.
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Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock converted pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Buyer Common Stock (after
taking into account all Certificates registered in the name of or delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Buyer Common Stock multiplied
by the average of the last reported sales prices per share of the Buyer Common
Stock on the American Stock Exchange ("AMEX") during the ten consecutive trading
days ending on the last trading day prior to the Closing Date.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
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remains undistributed to the holders of Company Common Stock 180 days after the
Effective Time shall be delivered to the Buyer, upon demand, and any holder of
Company Common Stock who has not previously complied with this Section 2.2 shall
thereafter look only to the Buyer, as a general unsecured creditor, for payment
of its claim for shares of Buyer Common Stock, any cash in lieu of fractional
shares of Buyer Common Stock issued pursuant to Section 2.2(e) and any dividends
or distributions paid pursuant to Section 2.2(c).
(g) No Liability. To the extent permitted by applicable law, none of the
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Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation or the
Exchange Agent shall be liable to any holder of shares of Company Common Stock
or Buyer Common Stock, as the case may be, for such shares of Buyer Common Stock
(or dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which any shares of
Buyer Common Stock, and any cash in lieu of fractional shares payable to the
holder of such Certificate pursuant to Section 2.2(e) or any dividends or
distributions payable to the holder of such Certificate pursuant to Section
2.2(c), would otherwise escheat to or become the property of any Governmental
Entity), all such shares of Buyer Common Stock, cash in lieu of fractional
shares or dividends or distributions in respect of such Certificate shall, to
the extent permitted by applicable law, become the property of the Buyer, free
and clear of all claims or interest of any person previously entitled thereto.
(h) Withholding Rights. Each of the Buyer and the Surviving Corporation
------------------
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it reasonably determines that it is required to deduct and
withhold with respect to the making of such payment under the Code, or any other
applicable provision of law. To the extent that amounts are so withheld by the
Surviving Corporation or the Buyer, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such deduction
and withholding was made by the Surviving Corporation or the Buyer, as the case
may be.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
-----------------
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
6
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the shares of Buyer Common Stock, any cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Buyer Common Stock
deliverable in respect thereof pursuant to this Agreement.
(j) Rule 145 Affiliates. Notwithstanding anything herein to the
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contrary, Certificates surrendered for exchange by any affiliate of the Company
(within the meaning of Rule 145 promulgated under the Securities Act) (each such
person, a "Rule 145 Affiliate") shall not be exchanged until the Buyer has
received an Affiliate Agreement (as such term is defined in Section 6.10 below)
from such Rule 145 Affiliate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as expressly set forth herein or in the disclosure schedule
delivered by the Company to the Buyer and the Transitory Subsidiary on or before
the date of this Agreement (the "Company Disclosure Schedule"). The Company
Disclosure Schedule shall be arranged in sections and paragraphs corresponding
to the numbered and lettered sections and paragraphs contained in this Article
III, and the disclosure in any section or paragraph shall qualify (1) the
corresponding section or paragraph in this Article III and (2) such other
sections and paragraphs in this Article III only to the extent that it is clear
from a reading of such disclosure that it also qualifies or applies to such
other sections or paragraphs.
3.1 Organization, Standing and Power; Subsidiaries.
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(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except for such failures to be so organized, qualified or in good standing,
individually or in the aggregate, which have not had and are not reasonably
likely to have a Company Material Adverse Effect. For purposes of this
Agreement, the term "Company Material Adverse Effect" means any change, event,
circumstance, development or effect that is or is reasonably likely to have a
material adverse effect on (i) the business, assets, liabilities,
capitalization, prospects, condition (financial or other), or results of
operations of the Company and its Subsidiaries, taken as a whole, (ii) the
ability of the Company to consummate the transactions contemplated by this
7
Agreement or (iii) the ability of the Buyer to operate the business of the
Company and each of its Subsidiaries immediately after the Closing; provided,
however, that for purposes of this Agreement, the following shall not be taken
into account in determining whether there has been or would be a "Company
Material Adverse Effect": (x) any adverse change in the stock price or trading
volume of the Company in and of itself, as quoted on The Nasdaq National Market,
and (y) changes or effects relating to the economy or the IT services business
as a whole not substantially disproportionately affecting the Company and its
Subsidiaries taken as a whole. For the avoidance of doubt, the parties agree
that the terms "material," "materially" or "materiality" as used in this
Agreement with an initial lower case "m" shall have their respective customary
and ordinary meanings, without regard to the meaning ascribed to Company
Material Adverse Effect in the prior sentence of this paragraph.
(b) Neither the Company nor any of its Subsidiaries directly or
indirectly owns any equity, membership, partnership or similar interest in, or
any interest convertible into or exchangeable or exercisable for any equity,
membership, partnership or similar interest in, any corporation, partnership,
joint venture, limited liability company or other business association or
entity, whether incorporated or unincorporated. Neither the Company nor any of
its Subsidiaries has, at any time, been a general partner or managing member of
any general partnership, limited partnership or other entity. Section 3.1(b) of
the Company Disclosure Schedule sets forth a complete and accurate list of all
of the Company's Subsidiaries and the Company's direct or indirect equity
interest therein. As used in this Agreement, the term "Subsidiary" means, with
respect to a party, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether incorporated
or unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner or a managing member (excluding partnerships, the general
partnership interests of which held by such party and/or one or more of its
Subsidiaries do not have a majority of the voting interest in such partnership),
(ii) such party and/or one or more of its Subsidiaries holds voting power to
elect a majority of the board of directors or other governing body performing
similar functions, or (iii) such party and/or one or more of its Subsidiaries,
directly or indirectly, owns or controls more than 50% of the equity,
membership, partnership or similar interests.
(c) The Company has made available to the Buyer complete and accurate
copies of the Articles of Incorporation and Bylaws of the Company and the
charter, bylaws or other organizational documents of each Subsidiary of the
Company.
3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of (i)
49,000,000 shares of Company Common Stock, (ii) 1,000,000 shares of nonvoting
common stock, $0.01 par value per share ("Company Nonvoting Common Stock"), and
(iii) 1,000,000 shares of preferred stock, $.01 par value per share ("Company
Preferred Stock"). The rights and privileges of each class of the Company's
capital stock are as set forth in the Company's Articles of Incorporation. As of
the close of business on August 17, 2001, (w) 15,337,760 shares of Company
Common Stock were issued and outstanding, (x) no shares of Company Common Stock
were held by Subsidiaries of the Company, (y) no shares of the Company Nonvoting
8
Common Stock were issued or outstanding and (z) no shares of the Company
Preferred Stock were issued or outstanding. Section 3.2(a) of the Company
Disclosure Schedule lists all issued and outstanding shares of Company Common
Stock that constitute restricted stock or that are otherwise subject to a
repurchase or redemption right or right of first refusal in favor of the
Company; the name of the applicable shareholder; the lapsing schedule for any
such shares, including the extent to which any such repurchase or redemption
right or right of first refusal has lapsed as of the date of this Agreement,
whether (and to what extent) the lapsing will be accelerated in any way by the
transactions contemplated by this Agreement or by termination of employment or
change in position following consummation of the Merger; and whether such holder
has the sole power to vote and dispose of such shares.
(b) Section 3.2(b) of the Company Disclosure Schedule lists the number
of shares of Company Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date of this Agreement and the plans
under which such options were granted (collectively, the "Company Stock Plans")
and sets forth a complete and accurate list of all holders of outstanding
options to purchase shares of Company Common Stock (such outstanding options,
the "Company Stock Options") under the Company Stock Plans, indicating with
respect to each Company Stock Option the number of shares of Company Common
Stock subject to such Company Stock Option, the relationship of the holder to
the Company, and the exercise price, the date of grant, vesting schedule and the
expiration date thereof, including the extent to which any vesting has occurred
as of the date of this Agreement. No Company Stock Options will be accelerated
in any way by the transactions contemplated by this Agreement or by termination
of employment or change in position following consummation of the Merger. The
Company has provided to the Buyer accurate and complete copies of (i) all
Company Stock Plans and (ii) the forms of all stock option agreements evidencing
all Company Stock Options.
(c) Except (i) as set forth in this Section 3.2 and (ii) as reserved
for future grants under Company Stock Plans, (A) there are no equity securities
of any class of the Company or any of its Subsidiaries (other than equity
securities of any such Subsidiary that are directly or indirectly owned by the
Company), or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (B) there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound obligating the Company
or any of its Subsidiaries to issue, exchange, transfer, deliver or sell, or
cause to be issued, exchanged, transferred, delivered or sold, additional shares
of capital stock or other equity interests of the Company or any of its
Subsidiaries or any security or right convertible into or exchangeable or
exercisable for any such shares or other equity interests, or obligating the
Company or any of its Subsidiaries to grant, extend, accelerate the vesting of,
otherwise modify or amend or enter into any such option, warrant, equity
security, call, right, commitment or agreement. Neither the Company nor any of
its Subsidiaries has outstanding any stock appreciation rights, phantom stock,
performance-based rights or similar rights or obligations.
9
(d) Other than the Shareholder's Agreement, neither the Company nor
any of its affiliates (as such term is defined in Rule 405 promulgated under the
Securities Act) (each, an "Affiliate") is a party to or is bound by any, and to
the knowledge of the Company, there are no, agreements or understandings with
respect to the voting (including voting trusts and proxies) or sale or transfer
(including agreements imposing transfer restrictions) of any shares of capital
stock or other equity interests of the Company or any of its Subsidiaries.
Except as contemplated by this Agreement, there are no registration rights, and
there is no rights agreement, "poison pill" anti-takeover plan or other
agreement or understanding to which the Company or any of its Subsidiaries is a
party or by which it or they are bound with respect to any equity security of
any class of the Company or any of its Subsidiaries or with respect to any
equity security, partnership interest or similar ownership interest of any class
of any of its Subsidiaries. Shareholders of the Company are not entitled to
dissenters' or appraisal rights under applicable state law in connection with
the Merger or the transactions contemplated by this Agreement.
(e) All outstanding shares of Company Common Stock are, and all shares
of Company Common Stock subject to issuance as specified in Sections 3.2(b) and
3.2(c) above, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be, duly authorized,
validly issued, fully paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the VSCA, the Company's Articles of Incorporation or Bylaws or any agreement to
which the Company is a party or is otherwise bound. There are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of the Company or any of its Subsidiaries or to provide funds
to or make any material investment (in the form of a loan, capital contribution
or otherwise) in the Company or any Subsidiary of the Company or any other
entity, other than guarantees of bank obligations of Subsidiaries of the Company
entered into in the ordinary course of business consistent with past practice
(the "Ordinary Course of Business").
(f) All of the outstanding shares of capital stock and other equity
securities or interests of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights and all such shares (other than directors' qualifying shares in the case
of non-U.S. Subsidiaries, all of which the Company has the power to cause to be
transferred for no or nominal consideration to the Buyer or the Buyer's
designee) are owned, of record and beneficially, by the Company or another
Subsidiary of the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations in the Company's voting rights, charges
or other encumbrances of any nature.
(g) No consent of the holders of Company Stock Options is required in
connection with the actions contemplated by Section 6.12.
10
3.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject only to the approval and adoption of this
Agreement and the Plan of Merger (the "Company Voting Proposal") by the
Company's shareholders under the VSCA (the "Company Shareholder Approval"), to
consummate the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, the board of directors of the Company (the "Company
Board"), at a meeting duly called and held, by the unanimous vote of all
Directors (i) determined that the Merger, the Plan of Merger and this Agreement
are in the best interests of the Company and its shareholders, (ii) adopted this
Agreement and the Plan of Merger in accordance with the provisions of the VSCA,
(iii) directed that this Agreement and the Plan of Merger be submitted to the
shareholders of the Company for their adoption and approval and resolved to
recommend that the shareholders of the Company vote in favor of the adoption and
approval of this Agreement and the Plan of Merger and (iv) to the extent
necessary, adopted a resolution having the effect of causing the Company, the
Buyer, the Transitory Subsidiary and any Affiliate of any of them not to be
subject to any state takeover law or similar law that might otherwise apply to
the Merger and any other transactions contemplated by this Agreement or the
Shareholder's Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement by the Company
have been duly authorized by all necessary corporate action on the part of the
Company, subject only to the required receipt of the Company Shareholder
Approval. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms.
(b) The execution and delivery of this Agreement by the Company does
not, and the consummation by the Company of the transactions contemplated by
this Agreement will not, (i) conflict with, or result in any violation or breach
of, any provision of the Articles of Incorporation or Bylaws of the Company or
the charter, bylaws or other organizational document of any Subsidiary of the
Company, (ii) conflict with, or 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, require a consent or waiver under, constitute a
change in control under, require the payment of a penalty under or result in the
imposition of any Lien on the Company's or any of its Subsidiary's assets under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract or other agreement, instrument or obligation
to which the Company 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) subject to
obtaining the Company Shareholder Approval and compliance with the requirements
specified in clauses (i), (ii), (iii), (iv) and (v) of Section 3.3(c), conflict
with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of its or their
properties or assets, except in the case of clauses (ii) and (iii) of this
Section 3.3(b) for any such conflicts, violations, breaches, defaults,
terminations, cancellations, accelerations or losses which, individually or in
the aggregate, are not reasonably likely to be material to the Company and its
11
Subsidiaries taken as a whole. Section 3.3(b) of the Company Disclosure Schedule
lists all consents, waivers and approvals under any of Company's or any of its
Subsidiaries' material agreements, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
(c) No consent, approval, license, permit, order or authorization of,
or registration, declaration, notice or filing with, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority, agency or instrumentality, foreign or domestic (a
"Governmental Entity"), is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the pre-merger notification
requirements under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing of the Articles of Merger with the SCC
and appropriate corresponding documents with the Secretaries of State of other
states in which the Company is qualified as a foreign corporation to transact
business, (iii) the filing of the Proxy Statement/Prospectus with the Securities
and Exchange Commission (the "SEC") in accordance with the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (iv) the filing of such reports,
schedules or materials under Section 13 or Rule 14a-12 of the Exchange Act and
materials under Rule 165 and Rule 425 of the Securities Act of 1933, as amended
(the "Securities Act"), as may be required in connection with this Agreement and
the transactions contemplated hereby and thereby, (v) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and (vi) such other consents,
licenses, permits, orders, authorizations, filings, approvals and registrations
which, if not obtained or made, would not be reasonably likely, individually or
in the aggregate, to be material to the Company and its Subsidiaries taken as a
whole.
(d) The affirmative vote for approval and adoption of this Agreement
and the Plan of Merger by the holders of a majority of the outstanding shares of
Company Common Stock on the record date for the Company Shareholders Meeting is
the only vote of the holders of any class or series of the Company's capital
stock or other securities necessary to approve and adopt this Agreement and the
Plan of Merger and for consummation by the Company of the other transactions
contemplated by this Agreement. There are no holders of bonds, debentures, notes
or other indebtedness of the Company having the right to vote (nor holders of
bonds, debentures, notes or other indebtedness of the Company convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which shareholders of the Company may vote.
3.4 SEC Filings; Financial Statements; Information Provided.
-------------------------------------------------------
(a) The Company has filed all registration statements, forms, reports
and other documents required to be filed by the Company with the SEC since
January 1, 1998, and has made available to the Buyer copies of all registration
statements, forms, reports and other documents filed by the Company with the SEC
since such date. All such registration statements, forms, reports and other
documents (including those that the Company may file after the date hereof until
12
the Closing) are referred to herein as the "Company SEC Reports." The Company
SEC Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
were or will be prepared in compliance in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Company SEC Reports, and (iii) did not or will not at the time they were or are
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Company SEC Reports or necessary in
order to make the statements in such Company SEC Reports, in the light of the
circumstances under which they were made, not misleading. No Subsidiary of the
Company is subject to the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the
Company SEC Reports at the time filed (i) complied or will comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) were or will be
prepared in accordance with United States generally accepted accounting
principles ("GAAP") 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 by the SEC on Form 10-Q
under the Exchange Act) and (iii) fairly presented or will fairly present in
accordance with GAAP the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Company and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal year-end adjustments
which were not or will not be material in amount. The consolidated, unaudited
balance sheet of the Company as of June 30, 2001 is referred to herein as the
"Company Balance Sheet."
(c) The information to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in the registration statement on Form S-
4 to be filed by the Buyer pursuant to which shares of Buyer Common Stock issued
in connection with the Merger shall be registered under the Securities Act (the
"Registration Statement"), or for inclusion in any filing pursuant to Rule 165
or Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act
(each, a "Regulation M-A Filing"), shall not at the time the Registration
Statement or any Regulation M-A Filing is filed with the SEC, at any time it is
amended or supplemented, or 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 therein or necessary in order to
make the statements therein not misleading. The information to be supplied by
the Company for inclusion in the proxy statement/prospectus (the "Proxy
Statement/Prospectus") to be sent to the shareholders of the Company in
connection with the meeting of the Company's shareholders to consider the
approval and adoption of this Agreement and the Plan of Merger (the "Company
Shareholders Meeting") shall not, on the date the Proxy Statement/Prospectus is
first mailed to shareholders of the Company, or at the time of the Company
Shareholders Meeting or at the Effective Time, 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
13
material fact necessary in order to make the statements made in the Proxy
Statement/Prospectus 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 Company Shareholders Meeting which has
become false or misleading. If at any time prior to the Effective Time any event
relating to the Company or any of its Affiliates, officers or directors should
be discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, the
Company shall promptly inform the Buyer.
3.5 No Undisclosed Liabilities.
--------------------------
(a) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, and except for normal liabilities incurred since the
date of the Company Balance Sheet in the Ordinary Course of Business, the
Company and its Subsidiaries do not have any material liabilities, either
accrued, contingent or otherwise (whether or not required to be reflected in
financial statements in accordance with GAAP), and whether due or to become due.
(b) Section 3.5(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its Subsidiaries in an aggregate principal
amount in excess of $100,000 is outstanding or may be incurred and the
respective principal amounts outstanding thereunder as of the date of this
Agreement. For purposes of this Section, "indebtedness" means, with respect to
any person, without duplication, (i) all obligations of such person for borrowed
money, or with respect to deposits or advances of any kind to such person, (ii)
all obligations of such person evidenced by bonds, debentures, notes or similar
instruments, (iii) all obligations of such person upon which interest charges
are customarily paid, (iv) all obligations of such person under conditional sale
or other title retention agreements relating to property purchased by such
person, (v) all obligations of such person issued or assumed as the deferred
purchase price of property or services (excluding obligations of such person or
creditors for raw materials, inventory, services and supplies incurred in the
Ordinary Course of Business), (vi) all capitalized lease obligations of such
person, (vii) all obligations of others secured by any lien on property or
assets owned or acquired by such person, whether or not the obligations secured
thereby have been assumed, (viii) all obligations of such person under interest
rate or currency hedging transactions (valued at the termination value thereof),
(ix) all letters of credit issued for the account of such person and (x) all
guarantees and arrangements having the economic effect of a guarantee by such
person of any indebtedness of any other person. All of the outstanding
indebtedness of the type described in this Section 3.5(b) and in individual
principal amounts in excess of $100,000 of the Company or any of its
Subsidiaries may be prepaid by the Company or its Subsidiary at any time without
the consent or approval of, or prior notice to, any other person, and without
payment of any premium or penalty.
3.6 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Company SEC Reports filed prior to the date of this Agreement, since December
31, 2000, the Company and its Subsidiaries have conducted their respective
14
businesses only in the Ordinary Course of Business and (a) since December 31,
2000, there has not been (i) any change, event, circumstance, development or
effect that individually or in the aggregate has had, or is reasonably likely to
have, a Company Material Adverse Effect or (ii) any material change by the
Company or any of its Subsidiaries in its accounting methods not required
pursuant to GAAP and (b) since June 30, 2001, there has not been any other
action or event that would have required the consent of the Buyer pursuant to
Section 5.1 of this Agreement (other than paragraph (l) of Section 5.1) had such
action or event occurred after the date of this Agreement.
3.7 Taxes.
-----
(a) Each of the Company and its Subsidiaries has timely filed all Tax
Returns that it was required to file (taking into account applicable
extensions), and all such Tax Returns were correct and complete in all material
respects. Each of the Company and its Subsidiaries has paid on a timely basis or
contested in good faith and fully reserved for all Taxes that were due (whether
or not shown) on any such Tax Returns. The unpaid Taxes of the Company and its
Subsidiaries for Tax periods through the date of the Company Balance Sheet do
not exceed the accruals and reserves for Taxes set forth on the Company Balance
Sheet exclusive of any accruals or reserves for "deferred taxes" or similar
items that reflect timing differences between Tax and financial accounting
principles. All Taxes attributable to periods commencing after the date of the
Company Balance Sheet have arisen in the Ordinary Course of Business and are
consistent with regard to type and amount with Taxes incurred in comparable
historical periods. All Taxes that the Company or any of its Subsidiaries is or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity.
For purposes of this Agreement, (i) "Taxes" means all taxes, charges, fees,
levies or other similar assessments or liabilities, including without limitation
income, gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, services, transfer, withholding, employment,
payroll and franchise taxes imposed by the United States of America or any
state, local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof and
(ii) "Tax Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) The Company made available to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries for any period commencing after December 31, 1996. The Company has
made available to the Buyer correct and complete copies of all other material
Tax Returns of the Company and its Subsidiaries together with all related
examination reports and statements of deficiency for all periods commencing
after December 31, 1996. No examination or audit of any Tax Return of the
Company or any of its Subsidiaries by any Governmental Entity is currently in
progress or, to the knowledge of the Company, threatened or contemplated.
Neither the Company nor any of its Subsidiaries has been informed by any
15
Governmental Entity that the Governmental Entity believes that the Company or
any of its Subsidiaries was required to file any material Tax Return that was
not filed. Neither the Company nor any of its Subsidiaries has waived any
statute of limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency.
(c) Neither the Company nor any of its Subsidiaries: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or any of its Subsidiaries is subject to an
election under Section 341(f) of the Code; (ii) has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code;
(iii) has made any payments, is obligated to make any payments, or is a party to
any agreement that could obligate it to make any payments that may be treated as
an "excess parachute payment" as defined in Section 280G of the Code determined
without regard to Section 280G(b)(4) of the Code; (iv) has any actual or
potential liability for any Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of law in any jurisdiction), or as a transferee or successor, by
contract, or otherwise; or (v) is or has been required to make a basis reduction
pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).
(d) Neither the Company nor any of its Subsidiaries has undergone, or
will undergo as a result of the transactions contemplated by this Agreement, a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481(h) of the Code.
(e) There is no limitation on the utilization by either the Company or
any Subsidiary of its net operating losses, built-in losses, Tax credits or
similar items under Sections 382 or 383 of the Code or comparable provisions of
state law (other than such limitation arising as a result of the consummation of
the transactions contemplated by this Agreement).
(f) Neither the Company nor any Subsidiary has distributed to its
shareholders or security holders stock or securities of a controlled
corporation, nor has stock or securities of the Company or any Subsidiary been
distributed, in a transaction to which Section 355 of the Code applies (i) in
the two years prior to the date of this Agreement or (ii) in a distribution that
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code).
(g) To the Company's knowledge, after consulting with its advisors,
neither the Company nor any Affiliate has taken or agreed to take any action
which would prevent the Merger from constituting a transaction qualifying as a
reorganization under Section 368(a) of the Code.
16
3.8 Owned and Leased Real Properties.
--------------------------------
(a) Section 3.8(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of (i) the addresses of all real property owned by
the Company or any Subsidiary (the "Real Estate") and (ii) all material
liabilities, liens, encumbrances, easements, restrictions, reservations,
tenancies, agreements or other obligations affecting the Real Estate. There is
no pending or, to the Company's knowledge, threatened material condemnation or
eminent domain proceeding with respect to the Real Estate. There are no material
taxes or betterment assessments other than ordinary real estate taxes pending or
payable against the Real Estate.
(b) The Real Estate complies in all material respects with the
requirements of all applicable building, zoning, subdivision, health, safety,
environmental, pollution control, waste products, sewage control and all other
applicable statutes, laws, codes, ordinances, rules, orders and regulations
(collectively, "Governmental Regulations"). There is no action pending or, to
the Company's knowledge, threatened by any Governmental Entity claiming that the
Real Estate materially violates any Governmental Regulations or threatening to
shut down the business of the Company or any of the Subsidiaries. There are no
suits, petitions, notices or proceedings pending, given or, to the Company's
knowledge, threatened by any persons or Governmental Entities before any court,
Governmental Entity or instrumentalities, administrative or otherwise, which if
given, commenced or concluded would have a material adverse effect on the
Company's title to the Real Estate or the operation of the business of the
Company or any Subsidiary as presently operated.
(c) To the Company's knowledge, all of the buildings, fixtures and
other improvements located on the Real Estate are in good operating condition
and repair in all material respects, and, to the Company's knowledge, the
operation thereof as presently conducted is not in violation of any material
applicable building code, zoning ordinance or other law or regulation, except
where such violations, individually or in the aggregate, has not had and is not
reasonably likely to have a Company Material Adverse Effect.
(d) Section 3.8(d) of the Company Disclosure Schedule sets forth a
true, correct and complete list of all title insurance policies, surveys,
engineering reports environmental health and safety reports prepared with
respect to the Real Estate since January 1, 1996, true, correct and complete
copies of all of which have previously been made available to the Buyer.
(e) Section 3.8(e) of the Company Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Company or any of
its Subsidiaries and lists the term of such lease and the rent payable
thereunder. The Company has made available to the Buyer correct and complete
copies of the leases and subleases (as amended to date) listed in Section 3.8(e)
of the Company Disclosure Schedule. With respect to each lease and sublease
listed in Section 3.8(e) of the Company Disclosure Schedule:
17
(i) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(ii) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(iii) neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any other party to the lease or sublease is in
material breach or default, and no event has occurred which, with notice or
lapse of time (or both) would constitute a material breach or default or permit
termination, modification or acceleration thereunder;
(iv) there are no material disputes, oral agreements, forfeiture
proceedings or forbearance programs in effect as to the lease or sublease;
(v) neither the Company nor any of its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(vi) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities; and
(vii) the Company's consolidated financial statements contain adequate
reserves to provide for the restoration of the property subject to the leases at
the end of the respective lease terms, to the extent required by the leases.
3.9 Intellectual Property.
---------------------
(a) Other than with respect to software programs that are commercially
available on a general basis, the Company and its Subsidiaries exclusively own,
or license or otherwise possess legally enforceable rights to use on an
exclusive basis, without any obligation to make any fixed or contingent
payments, including any royalty payments, all Intellectual Property that is
material to the conduct of the business of the Company and its Subsidiaries as
currently conducted or planned to be conducted by the Company and its
Subsidiaries (the "Company Intellectual Property"). For purposes of this
Agreement, the term "Intellectual Property" means (i) patents, trademarks,
service marks, trade names, domain names, copyrights, designs and trade secrets,
(ii) any applications for and registrations of such patents, trademarks, service
marks, trade names, domain names, copyrights and designs, (iii) processes,
formulae, methods, schematics, technology, know-how, computer software programs
and applications and (iv) other tangible or intangible proprietary or
confidential information and material.
(b) The execution and delivery of this Agreement and consummation of
the Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any material license, sublicense or
other agreement relating to any Company Intellectual Property or any software
programs that are commercially available on a general basis, including software
18
that is used in the manufacture of, incorporated in, or forms a part of any
product or service sold by or expected to be sold by the Company or any of its
Subsidiaries. Section 3.9(b)(i) of the Company Disclosure Schedule sets forth a
complete and accurate list of the Company Intellectual Property (other than
unregistered copyrights, trade secrets and confidential information) owned by
the Company or a Subsidiary, and Section 3.9(b)(ii) sets forth a complete and
accurate list of the Company Intellectual Property licensed by the Company or a
Subsidiary from a third party.
(c) All material patents and registrations for registered trademarks,
service marks and copyrights which are held by the Company or any of its
Subsidiaries are valid and subsisting. To the knowledge of the Company, no other
person or entity is infringing, violating or misappropriating, as applicable, in
any material respect, any of the Company Intellectual Property.
(d) None of the (i) products previously or currently sold by the
Company or any of its Subsidiaries or (ii) business or activities previously or
currently conducted by the Company or any of its Subsidiaries infringes,
violates or constitutes a misappropriation of, as applicable, in any material
respect, any Intellectual Property of any third party. Neither the Company nor
any of its Subsidiaries has received any complaint, claim or notice alleging any
such infringement, violation or misappropriation.
(e) The Company and its Subsidiaries have taken reasonable measures
and precautions to protect and maintain the confidentiality, secrecy and value
of all Company Intellectual Property. Without limiting the generality of the
foregoing, (i) all current and former employees of the Company and its
Subsidiaries who are or were involved in, or who have contributed to, the
creation or development of any Company Intellectual Property have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage with respect to the assignment of Intellectual
Property other than inventions conceived of or reduced to practice prior to such
person's employment with the Company or its Subsidiaries) that is similar in
scope to the form of the Company's Staff Member Agreement previously provided to
the Buyer by the Company, and (ii) all current and former employees of the
Company or any of its Subsidiaries who are or were involved in, or who have
contributed to, the creation or development of any Company Intellectual Property
have executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage with respect to the
assignment of Intellectual Property other than inventions conceived of or
reduced to practice prior to such person's providing services to the Company or
any of its Subsidiaries or outside the scope of such person's performance under
such agreement) that contains terms at least as favorable, on the whole, to the
Company and/or such Subsidiary as those in the form of the Company's Staff
Member Agreement previously provided to the Buyer by the Company. The Company
and its Subsidiaries have entered into agreements with each current and former
non-employee consultant and independent contractor requiring such non-employee
consultant or independent contractor to impose on its employees who are involved
in, or who contribute to, the creation or development of any Company
Intellectual Property obligations with respect to such Company Intellectual
Property in favor of the Company substantially similar to those set forth in the
19
Staff Member Agreement. To the knowledge of the Company, no current or former
employee, officer, director, shareholder, consultant or independent contractor
has any right, claim or interest in or with respect to any Company Intellectual
Property. All of the Company's Staff Member Agreements and other agreements
containing substantially similar provisions set forth in the Staff Member
Agreement signed by current and former employees, consultants and independent
contractors remain in full force and effect unless terminated or expired
pursuant to the express terms thereof and have not been superseded by any
subsequent agreements.
3.10 Agreements, Contracts and Commitments.
-------------------------------------
(a) Section 3.10(a) of the Company Disclosure Schedules sets forth a
complete and accurate list of all contracts and agreements (collectively, the
"Company Material Contracts") that are material to the business, assets,
liabilities, capitalization, prospects, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole.
Without limiting the generality of the foregoing, the term "Company Material
Contracts" shall include, and Section 3.10(a) of the Company Disclosure Schedule
shall list, (i) any written arrangement (or group of related written
arrangements) which requires the performance of services or the delivery of
products by the Company or any of its Subsidiaries at a fixed price of $50,000
or more (which shall include, for purposes of this Agreement, an agreement for
the provision of services on a "time and materials not to exceed basis" with a
defined deliverable required for the maximum billed amount); (ii) any written
arrangement (or group of related written arrangements) for the lease of personal
property from or to a third party for lease payments in excess of $25,000 per
annum; (iii) all written arrangements with each customer that accounted for at
least $1,000,000 of revenue in the twelve-month period ended June 30, 2001; and
(iv) any written arrangement (or group of related written arrangements) not
entered into in the Ordinary Course of Business and involving amounts in excess
of $50,000. The Company has made available to the Buyer a complete and accurate
copy of each Company Material Contract.
(b) Section 3.10(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of each contract or agreement to which the Company or
any of its Subsidiaries is a party or bound with any Affiliate of the Company
(other than any Subsidiary which is a direct or indirect wholly owned Subsidiary
of the Company) (collectively, the "Affiliate Contracts"). The Company has
provided the Buyer with a complete and accurate copy of each Affiliate Contract.
Except as set forth in the Company SEC Reports filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries has entered into any
transaction with any director, officer or other Affiliate of the Company or any
of its Subsidiaries or any transaction that would be subject to proxy statement
disclosure pursuant to Item 404 of Regulation S-K.
(c) There is no non-competition or other similar agreement,
commitment, judgment, injunction or order to which the Company or any of its
Subsidiaries is a party or subject that has or could reasonably be expected to
have the effect of prohibiting or impairing the conduct of the business by the
Company or any of its Subsidiaries in any material respect. Neither the Company
20
nor any of its Subsidiaries has entered into (or is otherwise bound by) any
agreement under which it is restricted from selling, licensing or otherwise
distributing any of its technology or products, or providing services, to
customers or potential customers or any class of customers, in any geographic
area, during any period of time.
(d) Neither the Company nor any of its Subsidiaries is a party to any
agreement under which a third party would be entitled to receive a license or
any other right to intellectual property of the Buyer or any of the Buyer's
Affiliates (other than the Company and its Subsidiaries) following the Closing.
(e) Sections 3.10(a) and 3.10(b) of the Company Disclosure Schedule
accurately disclose with respect to each Company Material Contract and Affiliate
Contract, respectively (the Company Material Contracts and Affiliate Contracts
are referred to collectively as the "Contracts"), if applicable, (i) the project
name; (ii) the date of the Contract; and (iii) the customer name and address and
customer contact person and phone number. Sections 3.10(a)(i) and (ii) and
3.10(b) of the Company Disclosure Schedule also accurately disclose with respect
to the Contracts listed therein: (A) the contract amount or, if the contract
amount is not fixed, a good faith, reasonable estimate of the contract amount;
(B) the total xxxxxxxx to date under such Contract; (C) the total recognized
revenues to date under such Contract; and (D) the estimate to complete computed
in dollar amounts based on actual xxxx rates.
(f) With respect to each Contract: (i) assuming it is a valid and
binding Contract of the other party thereto, the Contract is legal, valid,
binding and enforceable against the Company or its Subsidiary and in full force
and effect; (ii) to the knowledge of the Company, the Contract is legal, valid,
binding and enforceable against the other party thereto; (iii) the Contract will
continue to be legal, valid, binding and enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof as
in effect prior to the Closing against the Company or its Subsidiary and, to the
knowledge of the Company, against the other party thereto; and (iv) neither the
Company nor, to the knowledge of the Company, any other party to a Contract is
in material breach or default, and no event has occurred which with notice or
lapse of time (or both) would constitute a material breach or default or permit
termination, modification or acceleration, under the Contract.
(g) Neither the Company nor any of its Subsidiaries is a party to any
oral contract, agreement or other arrangement which, if reduced to written form,
would be required to be listed in Sections 3.10 (a) or 3.10(b) of the Company
Disclosure Schedule under the terms of this Section 3.10. Neither the Company
nor any of its Subsidiaries is a party to any written or oral arrangement (i) to
perform services or sell products which is expected to be performed at, or to
result in, a loss or (ii) for which the customer has already been billed or paid
that have not been fully accounted for on the Company Balance Sheet.
3.11 Litigation. Except as disclosed in the Company SEC Reports filed prior
----------
to the date of this Agreement, (a) there is no material action, suit,
proceeding, claim, arbitration or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
21
Subsidiaries and (b) neither the Company nor any of its Subsidiaries is the
subject of any material proceeding asserting that the Company or any of its
Subsidiaries has committed an unfair labor practice or any proceeding seeking to
compel it to bargain with any labor union or labor organization. There are no
material judgments, orders or decrees outstanding against the Company or any of
its Subsidiaries.
3.12 Environmental Matters.
---------------------
(a) Except as disclosed in Section 3.12(a) of the Company Disclosure
Schedule and except for such matters which, individually or in the aggregate,
have not had, and were not reasonably likely to have a Company Material Adverse
Effect:
(i) the Company and each of its Subsidiaries have at all times
complied with, and are not currently in violation of, any applicable
Environmental Laws;
(ii) the Company and each of its Subsidiaries have all permits,
licenses and approvals required under Environmental Laws to operate and conduct
their respective businesses as currently operated and conducted;
(iii) there is no Contamination of or at the properties currently
owned, leased or operated by the Company or any of its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures);
(iv) to the Company's knowledge, there was no Contamination of or
at the properties formerly owned, leased or operated by the Company or any of
its Subsidiaries prior to or during the period of time such properties were
owned, leased or operated by the Company or any of its Subsidiaries;
(v) neither the Company nor any of its Subsidiaries is subject to
liability for a Release of any Hazardous Substance or Contamination on the
property of any third party;
(vi) neither the Company nor any of its Subsidiaries is
responsible for any release of any Hazardous Substance to the environment;
(vii) neither the Company nor any of its Subsidiaries has received
any notice, demand, letter, claim or request for information, nor is the Company
or any of its Subsidiaries aware of any pending or threatened notice, demand,
letter, claim or request for information, alleging that the Company or any of
its Subsidiaries may be in violation of, liable under or have obligations under
any Environmental Law;
(viii) neither the Company nor any of its Subsidiaries is subject
to any orders, decrees, injunctions or other arrangements with any Governmental
Entity or is subject to any indemnity or other agreement with any third party
relating to liability or obligation under any Environmental Law or relating to
Hazardous Substances;
22
(ix) there are no circumstances or conditions involving the Company
or any of its Subsidiaries that could reasonably be expected to result in any
claims, liability, obligations, investigations, costs or restrictions on the
ownership, use or transfer of any property of the Company or any of its
Subsidiaries pursuant to any Environmental Law;
(x) none of the properties currently or formerly owned, leased or
operated by the Company or any of its Subsidiaries is listed in the National
Priorities List or any other list, schedule, log, inventory or record maintained
by any federal, state or local governmental agency with respect to sites from
which there is or has been a Release of any Hazardous Substance or any
Contamination;
(xi) none of the properties currently or formerly owned, leased or
operated by the Company or any of its Subsidiaries is used, nor was ever used,
(A) as a landfill, dump or other disposal, storage, transfer or handling area
for Hazardous Substances, excepting, however, for the routine storage and use of
Hazardous Substances from time to time in the Ordinary Course of Business, in
compliance with Environmental Laws and in compliance with good commercial
practice; (B) for industrial, military or manufacturing purposes; or (C) as a
gasoline service station or a facility for selling, dispensing, storing,
transferring or handling petroleum and/or petroleum products;
(xii) there are no underground or above ground storage tanks
(whether or not currently in use), urea-formaldehyde materials, asbestos,
asbestos-containing materials, polychlorinated biphenyls (PCBs), nuclear fuels,
radioactive wastes or solid wastes, located on or under any of the properties
currently or formerly owned, leased or operated by the Company or any of its
Subsidiaries, and no underground tank previously located on these properties has
been removed therefrom; and
(xiii) there are no liens against any of the properties currently
owned, leased or operated by the Company or any of its Subsidiaries arising
under any Environmental Law, and the Company has complied with all environmental
transfer statutes applicable to this Agreement, if any.
(b) For purposes of this Agreement, "Environmental Law" means any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement of any jurisdiction
relating to: (i) the protection, investigation or restoration of the
environment, human health and safety, or natural resources; (ii) the handling,
use, storage, treatment, manufacture, transportation, presence, disposal,
release or threatened release of any Hazardous Substance; or (iii) noise, odor,
wetlands, pollution, contamination or any injury or threat of injury to persons
or property.
(c) For purposes of this Agreement, "Contamination" means the presence
of, or Release on, under, from or to, any property of any Hazardous Substance,
except the routine storage and use of Hazardous Substances from time to time in
the Ordinary Course of Business, in compliance with Environmental Laws and in
compliance with good commercial practice.
23
(d) For purposes of this Agreement, "Release" or "Released" means the
spilling, leaking, disposing, discharging, emitting, depositing, injecting,
leaching, escaping or any other release, however defined, and whether
intentional or unintentional, of any Hazardous Substance. The term "Release"
shall include any threatened release.
(e) For purposes of this Agreement, "Hazardous Substance" means any
substance that is: (i) listed, classified, regulated or which falls within the
definition of a "hazardous substance," "hazardous waste" or "hazardous material"
pursuant to any Environmental Law; (ii) any petroleum product or by-product,
asbestos-containing material, lead-containing paint, pipes or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (iii) any other
substance which is the subject of regulatory action by any Governmental Entity
pursuant to any Environmental Law.
(f) Section 3.12(f) of the Company Disclosure Schedule sets forth a
complete and accurate list of all documents (whether in hard copy or electronic
form) that contain any environmental, human health and safety, or natural
resources reports, investigations and audits relating to premises currently or
previously owned or operated by the Company or any of its Subsidiaries (whether
conducted by or on behalf of the Company or any of its Subsidiaries or a third
party, and whether done at the initiative of the Company or any of its
Subsidiaries or directed by a Governmental Entity or other third party) which
were issued or conducted since January 1, 1997 and of which the Company or any
of its Subsidiaries has possession or to which the Company or any of its
Subsidiaries has access. A complete and accurate copy of each such document has
been provided to the Buyer.
3.13 Employee Benefit Plans.
----------------------
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company, any of the Company's Subsidiaries or any of
their ERISA Affiliates (together, the "Company Employee Plans"). For purposes of
this Agreement, the following terms shall have the following meanings: (i)
"Employee Benefit Plan" means any "employee pension benefit plan" (as defined in
Section 3(2) of ERISA), any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation and all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of the Company or any of its
Subsidiaries or any ERISA Affiliate; (ii) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended; and (iii) "ERISA Affiliate" means any
entity which is, or at any applicable time was, a member of (A) a controlled
group of corporations (as defined in Section 414(b) of the Code), (B) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code) or (C) an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code), any of which includes
or included the Company or a Subsidiary.
24
(b) With respect to each Company Employee Plan, the Company has
furnished to the Buyer a complete and accurate copy of (i) such Company Employee
Plan (or a written summary of any unwritten plan), (ii) the most recent annual
report (Form 5500) filed with the Internal Revenue Service, (iii) each trust
agreement, group annuity contract and summary plan description, if any, relating
to such Company Employee Plan, (iv) the most recent financial statements for
each Company Employee Plan that is funded, (v) all personnel, payroll and
employment manuals and policies and (vi) all employee handbooks.
(c) Each Company Employee Plan has been administered in all material
respects in accordance with ERISA, the Code and all other applicable laws and
the regulations thereunder (including without limitation Section 4980 B of the
Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and
Section 701 et seq. of ERISA) and in accordance with its terms and each of the
Company, the Company's Subsidiaries and their ERISA Affiliates has in all
material respects met its obligations with respect to such Company Employee Plan
and has made all required contributions thereto (or reserved such contributions
on the Company Balance Sheet). All material filings and reports as to each
Company Employee Plan required to have been submitted to the Internal Revenue
Service or to the United States Department of Labor have been timely submitted.
With respect to the Company Employee Plans, no event has occurred, and, to the
knowledge of the Company, there exists no condition or set of circumstances in
connection with which the Company or any of its Subsidiaries could be subject to
any material liability under ERISA, the Code or any other applicable law.
(d) With respect to the Company Employee Plans, there are no material
benefit obligations for which contributions have not been made or properly
accrued and there are no material benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
GAAP, on the financial statements of the Company. The assets of each Company
Employee Plan which is funded are reported at their fair market value on the
books and records of such Employee Benefit Plan.
(e) All the Company Employee Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Employee Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and, to the Company's knowledge,
revocation has not been threatened, and no such Employee Benefit Plan has been
amended or operated since the date of its most recent determination letter or
application therefor in any respect, and, to the Company's knowledge, no act or
omission has occurred, that would adversely affect its qualification or
materially increase its cost. Each Company Employee Plan which is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies in all material respects the requirements of
Section 401(k)(3) and Section 401(m)(2) of the Code, as the case may be, for
each plan year ending prior to the Closing Date.
25
(f) Neither the Company, any of the Company's Subsidiaries nor any of
their ERISA Affiliates has (i) ever maintained a Company Employee Plan which was
ever subject to Section 412 of the Code or Title IV of ERISA or (ii) ever been
obligated to contribute to a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA). No Company Employee Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code. No Company Employee Plan holds securities
issued by the Company, any of the Company's Subsidiaries or any of their ERISA
Affiliates.
(g) Each Company Employee Plan is amendable and terminable unilaterally
by the Company and any of the Company's Subsidiaries party thereto or covered
thereby at any time without liability to the Company or any of its Subsidiaries
as a result thereof, and no Company Employee Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits the Company or any of the
Company's Subsidiaries party thereto or covered thereby from amending or
terminating any such Company Employee Plan.
(h) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, neither the Company nor any of its Subsidiaries is a
party to any oral or written (i) agreement with any shareholder, director,
executive officer or other key employee of the Company or any of its
Subsidiaries (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of its Subsidiaries of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of employment of such director, executive officer or key employee or
(ii) agreement or plan binding the Company or any of its Subsidiaries, including
any stock option plan, stock appreciation right plan, restricted stock plan,
stock purchase plan or severance benefit plan, any of the benefits of which
shall be increased, or the vesting of the benefits of which shall be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which shall be calculated on
the basis of any of the transactions contemplated by this Agreement.
(i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person, except as required by
applicable law.
(j) There is no action, suit, proceeding, claim, arbitration, audit or
investigation pending or, to the knowledge of the Company, threatened, with
respect to any Company Employee Plan, other than claims for benefits in the
ordinary course, that would reasonably be expected to result in material
liability to the Company or to such Company Employee Plan.
(k) The Company has no liability for benefits under any Company
Employee Plan, except as set forth in the Company's financial statements.
26
(l) Section 3.13(l) of the Company Disclosure Schedule lists each
Company Employee Plan which provides benefits after termination of employment
(other than medical benefits required to be continued under Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA) and the amount by which the
present value of benefits accrued under each such Company Employee Plan exceeds
the fair market value of the assets of each such Company Employee Plan.
(m) Section 3.13(m) of the Company Disclosure Schedule lists each
country in which the Company or any of its Affiliates has operations and the
number of employees in each such country.
(n) The Company has provided to the Buyer such accurate information as
shall be necessary to enable the Buyer to calculate any excise tax due under
Section 4999 of the Code as a result of the transactions contemplated by this
Agreement for which the Company or the Buyer may directly or indirectly become
liable, and the amount of deductions that may be disallowed under Section 280G
of the Code as a result of the transactions contemplated by this Agreement.
3.14 Compliance With Laws. The Company and each of its Subsidiaries have
--------------------
complied in all respects with, are not in violation of, and have not received
any notice alleging any violation with respect to, any provisions of any
foreign, federal, state or local statute, law or regulation applicable to the
conduct of its business, or the ownership or operation of its properties or
assets, except for such failures to comply, violations and notices as would not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
3.15 Permits. The Company and each of its Subsidiaries have all permits,
-------
licenses and franchises from Governmental Entities material to the conduct of
their businesses as now being conducted or as presently contemplated to be
conducted by the Company and its Subsidiaries (the "Company Permits"). The
Company and each of its Subsidiaries are in material compliance with the terms
of the Company Permits. No Company Permit shall cease to be effective as a
result of the consummation of transactions contemplated by this Agreement.
3.16 Labor Matters. Neither the Company nor any of its Subsidiaries is a
-------------
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization. There
is no pending or, to the knowledge of the Company, threatened, labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving the Company or
any of its Subsidiaries. Section 3.16 of the Company Disclosure Schedule lists
all employees of the Company and its Subsidiaries who are employed pursuant to a
work permit or visa.
3.17 Insurance. Each of the Company and its Subsidiaries maintains
---------
insurance policies (the "Insurance Policies") with reputable insurance carriers
against all risks of a character and in such amounts as, to the Company's
knowledge, are usually insured against by similarly situated companies in the
same or similar businesses. Section 3.17 of the Company Disclosure Schedule sets
27
forth the insurance coverages maintained by the Company and its Subsidiaries and
a history of any claims made and claims paid since January 1, 1999. Each
Insurance Policy is in full force and effect and is valid, outstanding and
enforceable, and all premiums due thereon have been paid in full. None of the
Insurance Policies shall terminate or lapse (or be affected in any other
materially adverse manner) by reason of the transactions contemplated by this
Agreement. The Company and each of 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 provided the
Company or any Subsidiary with written notice of cancellation or a written
notice generally disclaiming liability under any such policy or indicated in
writing any intent to do so or not to renew any such policy.
3.18 Assets. The Company or one of its Subsidiaries owns or leases all
------
tangible assets material to the conduct of their businesses as presently
conducted and as presently proposed to be conducted by the Company and its
Subsidiaries. All of such tangible assets which are owned, are owned free and
clear of all mortgages, security interest, pledges, liens and encumbrances
("Liens") except for (a) Liens which are disclosed in the Company SEC Reports
filed prior to the date of this Agreement and (b) other Liens which,
individually and in the aggregate, do not materially interfere with the ability
of the Company or its Subsidiaries to conduct their business as currently
conducted and as presently proposed to be conducted by the Company and its
Subsidiaries and have not resulted in, and are not reasonably likely to result
in, a Company Material Adverse Effect. The tangible assets of the Company and
its Subsidiaries, taken as a whole, are free from defects, have been maintained
in accordance with normal industry practice, are in good operating condition and
repair (subject to normal wear and tear) and are suitable for the purpose for
which they are presently used, except for any existing defects or needed repairs
which would not, individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect. Other than general office
supplies, neither the Company nor any of its Subsidiaries maintains any
inventory.
3.19 Customers and Suppliers. Section 3.19 of the Company Disclosure
-----------------------
Schedule accurately identifies, and provides an accurate and complete breakdown
of the recognized revenues from, the largest 100 customers of the Company and
its Subsidiaries (calculated on the basis of revenues) in the twelve-month
period ended June 30, 2001. No such customer has indicated in writing to the
Company or any of its Subsidiaries that it will stop buying services or products
from the Company or any of its Subsidiaries nor has any of the largest 50
customers (calculated on the basis of revenues) indicated in writing to the
Company or any of its Subsidiaries that it will materially decrease the rate of
buying services or products from the Company or any of its Subsidiaries. No
material supplier or exclusive supplier of the Company or any of its
Subsidiaries has indicated to the Company or any of its Subsidiaries that it
will stop, or materially decrease the rate of, supplying materials, products or
services to them.
3.20 Accounts Receivable. All accounts receivable of the Company and its
-------------------
Subsidiaries reflected on the Company Balance Sheet are valid receivables and
are collectible in the Ordinary Course of Business, net of the applicable
reserve for bad debts on the Company Balance Sheet. All accounts receivable
reflected in the financial or accounting records of the Company or any of its
28
Subsidiaries that have arisen since the date of the Company Balance Sheet are
valid receivables and are collectible in the Ordinary Course of Business, net of
a reserve for bad debts in an amount proportionate to the reserve shown on the
Company Balance Sheet. Section 3.20 of the Company Disclosure Schedule sets
forth a complete and accurate list of the Company's accounts receivable and the
aging thereof as of the date specified therein.
3.21 Prepayments, Prebilled Invoices and Deposits. Section 3.21 of the
--------------------------------------------
Company Disclosure Schedule sets forth (a) all prepayments, prebilled invoices
and deposits in amounts, on a per customer basis, greater than $25,000 that have
been received by the Company or any of its Subsidiaries as of the date of this
Agreement from customers for products to be shipped, or services to be
performed, after the Closing Date, and (b) with respect to each such prepayment,
prebilled invoice or deposit, (i) the party and contract credited and (ii) the
date received or invoiced. All such prepayments, prebilled invoices and deposits
are properly accrued for on the Company Balance Sheet in accordance with GAAP
applied on a consistent basis with the past practice of the Company and its
Subsidiaries.
3.22 Government Contracts. Neither the Company nor any of its Subsidiaries
--------------------
has been suspended or debarred from bidding on contracts or subcontracts with
any Governmental Entity ("Government Contracts"); no such suspension or
debarment has been initiated or, to the knowledge of the Company, threatened;
and the consummation of the transactions contemplated by this Agreement will not
result in any such suspension or debarment. Neither the Company nor any of its
Subsidiaries has been audited or investigated nor is it now being audited or, to
the knowledge of the Company, investigated by the U.S. Government Accounting
Office, the U.S. Department of Defense or any of its agencies, the Defense
Contract Audit Agency, the U.S. Department of Justice, the Inspector General of
any U.S. Governmental Entity, any similar agencies or instrumentalities of any
state or foreign Governmental Entity, or any prime contractor with a
Governmental Entity nor, to the knowledge of the Company, has any such audit or
investigation been threatened. To the knowledge of the Company, there is no
valid basis for (a) the suspension or debarment of the Company or any of its
Subsidiaries from bidding on any Government Contracts, or (b) any claim pursuant
to an audit or investigation by any of the entities named in the foregoing
sentence. Neither the Company nor any of its Subsidiaries has any agreements,
contracts or commitments which require it to obtain or maintain a security
clearance with any Governmental Entity.
3.23 No Existing Discussions. As of the date of this Agreement, neither the
-----------------------
Company nor any of its Subsidiaries is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal.
3.24 Opinion of Financial Advisor. The financial advisor of the Company,
----------------------------
Xxxxxx X. Xxxxx & Co. Incorporated, has delivered to the Company an opinion
dated the date of this Agreement to the effect, as of such date, that the
Exchange Ratio is fair to the holders of the Company Common Stock from a
financial point of view. A signed copy of such opinion has been delivered to
the Buyer.
29
3.25 Articles 14 and 14.1 of the VSCA Not Applicable. The Company Board has
-----------------------------------------------
taken all actions necessary so that the provisions of Articles 14 and 14.1 of
the VSCA, applicable to "affiliated transactions" (as defined in Section 13.1-
725 of the VSCA) and "control share acquisitions" (as defined in Section 13.1-
728.1 of the VSCA), respectively, shall not apply to the Company, the Buyer, the
Transitory Subsidiary or any Affiliate of any of them in connection with the
execution, delivery or performance of this Agreement, the Shareholder's
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement or the Shareholder's Agreement.
3.26 Brokers; Schedule of Fees and Expenses.
--------------------------------------
(a) No agent, broker, investment banker, financial advisor or other
firm or person is or shall be entitled, as a result of any action, agreement or
commitment of the Company or any of its Affiliates, to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with any of
the transactions contemplated by this Agreement, except Xxxxxx X. Xxxxx & Co.
Incorporated, whose fees and expenses shall be paid by the Company. The Company
has delivered to the Buyer a complete and accurate copy of all agreements
pursuant to which Xxxxxx X. Xxxxx & Co. Incorporated is entitled to any fees and
expenses in connection with any of the transactions contemplated by this
Agreement.
(b) Section 3.26(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of the estimated fees and expenses incurred and to be
incurred by the Company and any of its Subsidiaries in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees and expenses of Xxxxxx X. Xxxxx & Co. Incorporated and of the Company's
legal counsel and accountants), absent protracted negotiations with the SEC and
other unforeseen circumstances which may materially delay the consummation of
the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary jointly and severally represent and
warrant to the Company that the statements contained in this Article IV are true
and correct, except as expressly set forth herein or in the disclosure schedule
delivered by the Buyer and the Transitory Subsidiary to the Company on or before
the date of this Agreement (the "Buyer Disclosure Schedule"). The Buyer
Disclosure Schedule shall be arranged in sections and paragraphs corresponding
to the numbered and lettered sections and paragraphs contained in this Article
IV, and the disclosure in any section or paragraph shall qualify (1) the
corresponding section or paragraph in this Article IV and (2) such other
sections and paragraphs in this Article IV only to the extent that it is clear
from a reading of such document that it also qualifies or applies to such other
sections or paragraphs.
30
4.1 Organization, Standing and Power. Each of the Buyer and the Transitory
--------------------------------
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted and as proposed
to be conducted, and is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures to be so organized, qualified
or in good standing, individually or in the aggregate, which have not had and
are not reasonably likely to have a Buyer Material Adverse Effect. For purposes
of this Agreement, the term "Buyer Material Adverse Effect" means any change,
event, circumstance or effect that is or is reasonably likely to be materially
adverse to the business, assets, liabilities, capitalization, prospects,
condition (financial or other), or results of operations of the Buyer and its
Subsidiaries, taken as a whole, or to have a material adverse effect on the
ability of the Buyer or the Transitory Subsidiary to consummate the transactions
contemplated by this Agreement; provided, however, that for purposes of this
Agreement, the following shall not be taken into account in determining whether
there has been or would be a "Buyer Material Adverse Effect": (x) any adverse
change in the stock price or trading volume of the Buyer in and of itself, as
quoted on AMEX, and (y) changes or effects relating to the economy or the IT
services business as a whole not substantially disproportionately affecting the
Buyer and its Subsidiaries taken as a whole. For the avoidance of doubt, the
parties hereto agree that the terms "material," "materially" or "materiality" as
used in this Agreement with an initial lower case "m" shall have their
respective customary and ordinary meanings, without regard to the meaning
ascribed to Buyer Material Adverse Effect in the prior sentences of this
paragraph.
4.2 Capitalization. All issued and outstanding shares of capital stock of
--------------
the Transitory Subsidiary are held by the Buyer. The authorized capital stock of
the Buyer consists of (a) 200,000,000 shares of Buyer Common Stock, (b) 503,797
shares of class B common stock, $0.10 par value per share ("Buyer Class B Common
Stock"), and (c) 2,000,000 shares of preferred stock, $0.01 par value per share
("Buyer Preferred Stock"). The rights and privileges of each class of Buyer's
capital stock are set forth in the Buyer's Articles of Organization. As of the
close of business on August 17, 2001, (i) 67,796,076 shares of Buyer Common
Stock were issued and outstanding, (ii) 4,650,025 shares of Buyer Common Stock
were held in the Buyer's treasury, (iii) 284,891 shares of Buyer Class B Common
Stock were issued and outstanding, (iv) no shares of Buyer Class B Common Stock
were held in the Buyer's treasury and (v) no shares of Buyer Preferred Stock
were issued or outstanding. All shares of Buyer Common Stock issuable pursuant
to Section 2.1(c) in connection with the Merger, when issued on the terms and
conditions of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the Massachusetts Business
Corporation Law, the Buyer's Articles of Organization or Bylaws or any agreement
to which the Buyer is a party or is otherwise bound. As of August 17, 2001, the
Buyer had reserved an aggregate of 7,000,000 shares of Buyer Common Stock for
issuance pursuant to the Buyer's 2001 Stock Incentive Plan, under which options
31
are outstanding for no shares of Buyer Common Stock and 7,000,000 shares of
Buyer Common Stock are available for additional grants as of August 17, 2001.
4.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Each of the Buyer and the Transitory Subsidiary 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 by the Buyer and the Transitory Subsidiary have been duly authorized
by all necessary corporate action on the part of each of the Buyer and the
Transitory Subsidiary (including the approval of the Plan of Merger by the Buyer
in its capacity as the sole shareholder of the Transitory Subsidiary). This
Agreement has been duly executed and delivered by each of the Buyer and the
Transitory Subsidiary and constitutes the valid and binding obligation of each
of the Buyer and the Transitory Subsidiary, enforceable in accordance with its
terms.
(b) The execution and delivery of this Agreement by each of the Buyer
and the Transitory Subsidiary does not, and the consummation by the Buyer and
the Transitory Subsidiary of the transactions contemplated by this Agreement
will not, (i) conflict with, or result in any violation or breach of, any
provision of the Articles of Organization or By-laws of the Buyer or the
Articles of Incorporation or Bylaws of the Transitory Subsidiary, (ii) conflict
with, or 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, require a consent or waiver under, constitute a change in
control under, require the payment of a penalty under or result in the
imposition of any Lien on the Buyer's or the Transitory Subsidiary's assets
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract or other agreement, instrument or obligation
to which the Buyer or the Transitory Subsidiary is a party or by which any of
them or any of their properties or assets may be bound, or (iii) subject to
compliance with the requirements specified in clause (i), (ii), (iii), (iv), (v)
and (vi) of Section 4.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, injunction, order, decree, statute, law,
ordinance, rule or regulation applicable to the Buyer or the Transitory
Subsidiary or any of its or their properties or assets, except in the case of
clauses (ii) and (iii) of this Section 4.3(b) for any such conflicts,
violations, breaches, defaults, terminations, cancellations, accelerations or
losses which, individually or in the aggregate, are not reasonably likely to be
material to the Buyer and its Subsidiaries taken as a whole.
(c) No consent, approval, license, permit, order or authorization of,
or registration, declaration, notice or filing with, any Governmental Entity is
required by or with respect to the Buyer or the Transitory Subsidiary in
connection with the execution and delivery of this Agreement by the Buyer or the
Transitory Subsidiary or the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated by this Agreement, except for (i)
the pre-merger notification requirements under the HSR Act, (ii) the filing of
the Articles of Merger with the SCC and appropriate corresponding documents with
the Secretaries of State of other states in which the Company is qualified as a
32
foreign corporation to transact business, (iii) the filing of the Registration
Statement and Proxy Statement/Prospectus with the SEC in accordance with the
Securities Act and the Exchange Act, (iv) the filings of such reports, schedules
or materials under Section 13 or Rule 14a-12 of the Exchange Act and materials
under Rule 165 and Rule 425 of the Securities Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (v)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state securities laws, (vi) any
consents, authorizations, approvals, filings or exemptions required by the rules
of AMEX with respect to the shares of Buyer Common Stock issuable in connection
with the Merger and (vii) such other consents, licenses, permits, orders,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely, individually or in the aggregate, to be
material to the Buyer and its Subsidiaries taken as a whole.
4.4 SEC Filings; Financial Statements; Information Provided.
-------------------------------------------------------
(a) The Buyer has filed all registration statements, forms, reports
and other documents required to be filed by the Buyer with the SEC since January
1, 1998 and has made available to the Company copies of all registration
statements, forms, reports and other documents filed by the Buyer with the SEC
since such date. All such registration statements, forms, reports and other
documents (including those that the Buyer may file after the date hereof until
the Closing) are referred to herein as the "Buyer SEC Reports." The Buyer SEC
Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
were or will be prepared in compliance in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Buyer SEC Reports, and (iii) did not or will not at the time they were or are
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Buyer SEC Reports or necessary in
order to make the statements in such Buyer SEC Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the Buyer
SEC Reports at the time filed (i) complied or will comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) were or will be
prepared in accordance with GAAP 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 by the SEC on
Form 10-Q under the Exchange Act) and (iii) fairly presented or will fairly
present in accordance with GAAP the consolidated financial position of the Buyer
and its Subsidiaries as of the dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Buyer and its Subsidiaries, except that the unaudited interim
financial statements were or are subject to normal year-end adjustments which
were not or are not expected to be material in amount.
33
(c) The Registration Statement to be filed by Buyer pursuant to this
Agreement will comply as to form in all material respects with the Securities
Act (except to the extent relating to information supplied by or on behalf of
the Company for inclusion or incorporation by reference in the Registration
Statement, as to which the Buyer makes no representation). The information in
the Registration Statement (except for information supplied by or on behalf of
the Company for inclusion or incorporation by reference in the Registration
Statement, as to which the Buyer makes no representation and which shall not
constitute part of the Buyer SEC Reports for purposes of this Agreement) 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 not misleading. If at any
time prior to the Effective Time any event relating to the Buyer or any of its
Affiliates, officers or directors should be discovered by the Buyer which should
be set forth in an amendment to the Registration Statement, the Buyer shall
promptly inform the Company.
4.5 Tax Matters. To the Buyer's knowledge, after consulting with its
-----------
advisors, neither the Buyer nor any of its Affiliates has taken or agreed to
take any action which would prevent the Merger from constituting a transaction
qualifying as a reorganization under Section 368(a) of the Code.
4.6 Operations of the Transitory Subsidiary. The Transitory Subsidiary 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. During the period from
the date of this Agreement through the Closing Date, the Transitory Subsidiary
shall not engage in any activities except as provided in or contemplated by this
Agreement.
4.7 Brokers. No agent, broker, investment banker, financial advisor or
-------
other firm or person is or shall be entitled as a result of any action,
agreement or commitment of the Buyer or the Transitory Subsidiary, to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with any of the transactions contemplated by this Agreement, except
Xxxxxx Xxxxxxx & Co. Incorporated, whose fees and expenses shall be paid by the
Buyer.
4.8 Litigation. Except as disclosed in the Buyer SEC Reports filed before
----------
the date of this Agreement, there is no material action, suit, proceeding,
claim, arbitration or investigation pending or, to the knowledge of the Buyer
and the Transitory Subsidiary, threatened against or affecting the Buyer or the
Transitory Subsidiary which would reasonably be expected to have a material
adverse effect on the ability of the Buyer and/or the Transitory Subsidiary to
perform their respective obligations under this Agreement.
4.9 Absence of Certain Changes or Events. Except as disclosed in the Buyer
------------------------------------
SEC Reports filed prior to the date of this Agreement, since December 31, 2000
there has not been (i) any change, event, circumstance, development or effect
that would, individually or in the aggregate, reasonably be expected to result
34
in a Buyer Material Adverse Effect or (ii) any material change by the Buyer in
its accounting methods not required pursuant to GAAP.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided herein, as
------------------------
required by law, as described in Section 5.1 of the Company Disclosure Schedule
or as consented to in writing by the Buyer, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with its terms or the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, act and carry on its business in the usual, regular and
ordinary course in substantially the same manner as previously conducted, pay
its debts and Taxes and perform its other obligations when due (subject to good
faith disputes over such debts, Taxes or obligations), comply with all
applicable laws, rules and regulations, and use commercially reasonable efforts,
consistent with past practices, to maintain and preserve its and each
Subsidiary's business organization, assets and properties, keep available the
services of its present officers and employees and preserve its advantageous
business relationships with customers, strategic partners, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as expressly provided herein, as
required by law or as described in Section 5.1 of the Company Disclosure
Schedule, from and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, do any of the following without the prior written
consent of the Buyer:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its capital stock (other than dividends and distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent); (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or any of its other securities; or (iii)
purchase, redeem or otherwise acquire any shares of its capital stock or any
other of its securities or any rights, warrants or options to acquire any such
shares or other securities;
(b) except as permitted by Section 5.1(n), issue, deliver, sell,
grant, pledge or otherwise dispose of or encumber any shares of its capital
stock, or any securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible or exchangeable securities (other than the issuance of shares of
Company Common Stock upon the exercise of Company Stock Options outstanding on
the date of this Agreement in accordance with their present terms);
35
(c) amend or propose to amend its articles of incorporation, bylaws or
other comparable charter or organizational documents, except as expressly
provided by this Agreement;
(d) acquire (i) by merging or consolidating with, or by purchasing all
or a substantial portion of the assets or any stock of, or by any other manner,
any business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or (ii)
any assets that are material, in the aggregate, to the Company and its
Subsidiaries, taken as a whole, except purchases of assets in the Ordinary
Course of Business;
(e) pledge or encumber (except for Permitted Liens), sell, lease,
license, dispose of or otherwise transfer any assets material to the Company and
its Subsidiaries, taken as a whole (including any accounts, leases, contracts or
intellectual property or any assets or the stock of any of its Subsidiaries)
other than, in the case of pledges, encumbrances and leases, in connection with
the purchase of equipment subject to capital lease or other similar financing
arrangements in the Ordinary Course of Business consistent with the Company's
past practice;
(f) adopt or implement any shareholder rights plan;
(g) except for a confidentiality agreement as permitted by Section
6.1, enter into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or disposition of all or
substantially all of the assets or securities of the Company or any of its
Subsidiaries;
(h) (i) incur or suffer to exist any indebtedness for borrowed money
in an aggregate amount greater than $80 million, or guarantee any indebtedness
of another person, (ii) issue, sell or amend any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, (iii) make any loans, advances (other than routine advances to
employees in the Ordinary Course of Business) or capital contributions to, or
investment in, any other person, other than the Company or any of its direct or
indirect wholly owned Subsidiaries, or (iv) except in the Ordinary Course of
Business, enter into any hedging agreement or other financial agreement or
arrangement designed to protect the Company or its Subsidiaries against
fluctuations in commodities prices or exchange rates;
(i) make any capital expenditures or other expenditures with respect
to property, plant or equipment for the Company and its Subsidiaries, in excess
of the aggregate amounts, or for other than the types of expenditures, set forth
in Section 5(i) of the Company Disclosure Schedule;
(j) make any changes in accounting methods, principles or practices,
except insofar as may have been required by a change in GAAP or as directed by
36
the SEC or, except as so required, change any assumption underlying, or method
of calculating, any bad debt, contingency or other reserve;
(k) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the Ordinary Course of Business or in accordance with their terms as in effect
on the date of this Agreement, of claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Company SEC Reports filed prior to the date of this Agreement (to the extent so
reflected or reserved against) or incurred since the date of such financial
statements in the Ordinary Course of Business or (ii) waive any material
benefits of, modify in any adverse respect, fail to enforce, or consent to any
matter with respect to which its consent is required under, any confidentiality,
standstill or similar agreements to which the Company or any of its Subsidiaries
is a party;
(l) except in the Ordinary Course of Business, modify, amend or
terminate any contract or agreement which is or, if in existence on the date of
this Agreement, would have been, a Company Material Contract to which the
Company or any of its Subsidiaries is party, or knowingly waive, release or
assign any material rights or claims (including any write-off or other
compromise of any material accounts receivable of the Company or any of its
Subsidiaries);
(m) (i) enter into any contract or agreement which, if in existence on
the date of this Agreement, would have constituted a Company Material Contract,
other than fixed price contracts for $100,000 or less entered into in the
Ordinary Course of Business, or (ii) except on a non-exclusive basis in the
Ordinary Course of Business, license any material intellectual property rights
to or from any third party;
(n) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (i) take any action with
respect to, adopt, enter into, terminate or amend any employment, severance or
similar agreement or benefit plan for the benefit or welfare of any current or
former director, officer, employee or consultant or any collective bargaining
agreement except for (x) terminations of at will employment arrangements in the
Ordinary Course of Business and (y) executing the severance arrangements as
described in Sections 6.6(b) and (c) of this Agreement, (ii) increase the
compensation or fringe benefits of, or pay any bonus to, any director, officer,
employee, advisor or consultant (except for salary increases of non-officer
employees in the Ordinary Course of Business), (iii) amend or accelerate the
payment, right to payment or vesting of any compensation or benefits, including
any outstanding options or restricted stock awards (except for salary increases
of non-officer employees in the Ordinary Course of Business), (iv) pay any
material benefit not provided for as of the date of this Agreement under any
benefit plan, (v) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or benefit plan, including the grant of
stock options, stock appreciation rights, stock-based or stock-related awards,
performance units or restricted stock, or the removal of existing restrictions
in any benefit plans or agreements or awards made thereunder except for the
37
continuation of the Company's Employee Stock Purchase Plan (the "Company ESPP")
through the business day immediately prior to the Closing Date, or (vi) take any
action other than in the Ordinary Course of Business to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or benefit plan;
(o) make or rescind any Tax election, settle or compromise any
material Tax liability or amend any Tax return;
(p) initiate, compromise or settle any material litigation or
arbitration proceeding;
(q) open or close any material facility or office;
(r) fail to maintain insurance at levels substantially comparable to
levels existing as of the date of this Agreement;
(s) fail to pay accounts payable and other obligations in the Ordinary
Course of Business; or
(t) authorize any of, or commit or agree, in writing or otherwise, to
take any of, the foregoing actions or any action which would make any
representation or warranty of the Company in this Agreement untrue or incorrect
in any material respect, or would materially impair or prevent the satisfaction
of any conditions in Article VII hereof.
5.2 Employee Stock Purchase Plan. The Company shall take whatever action is
----------------------------
necessary, including without limitation the amendment of the Company ESPP, to
terminate the Company ESPP and any offering periods thereunder on the business
day immediately prior to the Closing Date.
5.3 Confidentiality. The parties acknowledge that the Buyer and the Company
---------------
previously executed a confidentiality agreement, dated as of May 23, 2001 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
---------------
(a) No Solicitation or Negotiation. Except as set forth in this
Section 6.1, the Company shall not, nor shall it authorize or permit any of its
Subsidiaries or any of its or their directors, officers, employees, investment
bankers, attorneys, accountants or other advisors or representatives (such
38
directors, officers, employees, investment bankers, attorneys, accountants,
other advisors and representatives being hereinafter referred to collectively as
"Representatives") to directly or indirectly:
(i) solicit, initiate, encourage or take any other action to
facilitate any inquiries or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to, any Acquisition
Proposal, including without limitation (A) approving any "affiliated
transaction" under Article 14 of the VSCA, (B) approving any person (other than
the Buyer, the Transitory Subsidiary or any Affiliate of either of them)
becoming an "interested shareholder" under Article 14 of the VSCA, (C) taking
any action under Article 14.1 of the VSCA (other than to comply with Section
3.26 of this Agreement) or (D) amending or granting any waiver or release under
any standstill or similar agreement with respect to any Company Common Stock; or
(ii) enter into, continue or otherwise participate in any
discussions or negotiations regarding, furnish to any person any information
with respect to, assist or participate in any effort or attempt by any person
with respect to, or otherwise cooperate in any way with, any Acquisition
Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in this Section 6.1(a) by any Representative of the
Company or any of its Subsidiaries, whether or not such person is purporting to
act on behalf of the Company or otherwise, shall be deemed to be a breach of
this Section 6.1(a) by the Company.
Notwithstanding the foregoing, prior to the adoption and approval of this
Agreement and the Plan of Merger at the Company Shareholders Meeting (the
"Specified Time"), the Company may, to the extent required by the fiduciary
obligations of the Company Board, as determined in good faith by the Company
Board after consultation with outside counsel (I) in response to a Superior
Proposal that did not result from a breach by the Company of this Section 6.1,
and subject to compliance with Section 6.1(c), (x) furnish information with
respect to the Company to the person making such Superior Proposal and its
Representatives pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement (including,
but not limited to, the standstill provision set forth therein) (a "Third Party
Confidentiality Agreement") and (y) participate in discussions or negotiations
with such person and its Representatives regarding any Superior Proposal, and
(II) in response to an Acquisition Proposal that did not result from a breach by
the Company of this Section 6.1, and subject to compliance with Section 6.1(c),
request clarifications regarding the terms and conditions of any Acquisition
Proposal from the person making such Acquisition Proposal for the purpose of
ascertaining whether such Acquisition Proposal is a Superior Proposal, without,
in the case of this clause (II), providing additional information to such
person.
Notwithstanding the foregoing, at no time prior to the termination of this
Agreement shall the Company or the Company Board release or agree to release any
person or entity from a standstill provision contained in any Third Party
Confidentiality Agreement or any other standstill agreement with any third
party.
39
(b) No Change in Recommendation or Alternative Acquisition Agreement.
----------------------------------------------------------------
The Company Board shall not:
(i) except as set forth in this Section 6.1, withdraw or modify, or
propose to withdraw or modify, in a manner adverse to the Buyer or the
Transitory Subsidiary, the approval or recommendation by the Company Board of
this Agreement or the Merger;
(ii) cause or permit the Company to enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement or similar agreement (an "Alternative Acquisition
Agreement") constituting or relating to any Acquisition Proposal (other than a
confidentiality agreement referred to in Section 6.1(a) entered into in the
circumstances referred to in Section 6.1(a)); or
(iii) adopt, approve or recommend, or propose to adopt, approve or
recommend, any Acquisition Proposal.
Notwithstanding the foregoing, the Company Board may, in response to a
Superior Proposal that did not result from a breach by the Company of this
Section 6.1, withdraw or modify the recommendation by the Company Board or any
committee thereof of this Agreement and the Merger, if the Company Board
determines in good faith (after consultation with outside counsel) that its
fiduciary obligations require it to do so, but only at a time that is prior to
the Specified Time and is after the third business day following the Buyer's
receipt of written notice advising the Buyer that the Company Board desires to
withdraw or modify the recommendation due to the existence of a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. Nothing in this
Section 6.1 shall be deemed to (A) permit the Company to take any action
described in clauses (ii) or (iii) of the first sentence of this Section 6.1(b),
although the Company Board may recommend a Superior Proposal to its shareholders
under the circumstances described in the immediately preceding sentence, (B)
affect any obligation of the Company under this Agreement or (C) limit the
Company's obligation to call, give notice of, convene and hold the Company
Shareholders Meeting, regardless of whether the Company Board has withdrawn or
modified its recommendation of this Agreement and the Merger.
(c) Notices to the Buyer; Additional Negotiations. The Company shall
---------------------------------------------
advise the Buyer as promptly as practicable, and in any event within 24 hours,
orally and in writing, of any Acquisition Proposal or any request for nonpublic
information in connection with any Acquisition Proposal, or of any inquiry with
respect to, or that could reasonably be expected to lead to, any Acquisition
Proposal, the material terms and conditions of any such Acquisition Proposal or
inquiry and the identity of the person making any such Acquisition Proposal or
inquiry. The Company shall not provide any information to or participate in
discussions or negotiations with the person or entity making any Superior
Proposal until three business days after the Company has first notified the
Buyer of such Acquisition Proposal as required by the preceding sentence. The
Company shall (i) keep the Buyer fully informed, on a current basis to the
extent practicable and, in any event, as promptly as practicable, of the status
40
and details (including any change to the terms) of any such Acquisition Proposal
or inquiry, (ii) provide to the Buyer as soon as practicable after receipt or
delivery thereof copies of all correspondence and other written material sent or
provided to the Company from any third party in connection with any Acquisition
Proposal or sent or provided by the Company to any third party in connection
with any Superior Proposal, and (iii) if the Buyer shall make a counterproposal,
consider and cause its financial and legal advisors to negotiate on its behalf
in good faith with respect to the terms of such counterproposal.
Contemporaneously with providing any information to a third party in connection
with any such Superior Proposal or inquiry, the Company shall furnish a copy of
such information to the Buyer.
(d) Certain Permitted Disclosure. Nothing contained in this Section
----------------------------
6.1 or in Section 6.5 shall be deemed to prohibit the Company from taking and
disclosing to its shareholders a position with respect to a tender offer
contemplated by Rule 14e-2(a) promulgated under the Exchange Act if, in the good
faith judgment of the Company Board, based on the opinion of outside counsel,
failure to so disclose would be inconsistent with its obligations under
applicable law.
(e) Cessation of Ongoing Discussions. The Company shall, and shall
--------------------------------
cause its Subsidiaries and its and their Representatives to, cease immediately
all discussions and negotiations regarding any proposal that constitutes, or
could reasonably be expected to lead to, an Acquisition Proposal. The Company
shall use commercially reasonable efforts to have all copies of all nonpublic
information it or its Subsidiaries and its and their Representatives have
distributed on or prior to the date of this Agreement to other potential
purchasers returned to the Company as soon as possible.
(f) Definitions. For purposes of this Agreement:
-----------
"Acquisition Proposal" means (i) any inquiry, proposal or offer
for a merger, consolidation, dissolution, sale of substantial assets, tender
offer, recapitalization, share exchange or other business combination involving
the Company or any of its Subsidiaries, (ii) any proposal for the issuance by
the Company or any of its Subsidiaries of over 25% of its equity securities or
(iii) any proposal or offer to acquire in any manner, directly or indirectly,
over 50% of the equity securities or consolidated total assets of the Company,
in each case other than the Merger contemplated by this Agreement.
"Superior Proposal" means any unsolicited, bona fide written
proposal made by a third party to acquire substantially all the equity
securities or assets of the Company, pursuant to a tender or exchange offer, a
merger, a consolidation or a sale of its assets, (i) on terms that the Company
Board determines in its good faith judgment to be materially more favorable from
a financial point of view to the holders of Company Common Stock than the
transactions contemplated by this Agreement (based on the written advice of a
recognized independent financial advisor) taking into account all the terms and
41
conditions of such proposal and this Agreement (including any proposal by the
Buyer to amend the terms of this Agreement) and (ii) that is reasonably capable
of being completed on the terms proposed, taking into account all financial,
regulatory, legal and other aspects of such proposal; provided, however, that no
Acquisition Proposal shall be deemed to be a Superior Proposal if any financing
required to consummate the Acquisition Proposal is not committed.
6.2 Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
the Buyer and the Company shall prepare and the Company shall file with the SEC
the Proxy Statement/Prospectus, and the Buyer shall prepare and file with the
SEC the Registration Statement, in which the Proxy Statement/Prospectus shall be
included as a prospectus. Each of the Buyer and the Company shall respond to any
comments of the SEC and shall use its respective reasonable best efforts to have
the Proxy Statement/Prospectus cleared by the SEC and the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filings, and the Company shall cause the Proxy Statement/Prospectus to be
mailed to its shareholders at the earliest practicable time after both the Proxy
Statement/Prospectus is cleared by the SEC and the Registration Statement is
declared effective under the Securities Act. Each of the Buyer and the Company
shall notify the other promptly upon the receipt of any comments from the SEC or
its staff or any other government officials and of any request by the SEC or its
staff or any other government officials for amendments or supplements to the
Registration Statement, the Proxy Statement/Prospectus or any filing pursuant to
Section 6.2(b) or for additional information and shall supply the other with
copies of all correspondence between such party or any of its representatives,
on the one hand, and the SEC, or its staff or any other government officials, on
the other hand, with respect to the Registration Statement, the Proxy
Statement/Prospectus, the Merger or any filing pursuant to Section 6.2(b). Each
of the Buyer and the Company shall use its reasonable best efforts to cause all
documents that it is responsible for filing with the SEC or other regulatory
authorities under this Section 6.2 to comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement/Prospectus, the Registration
Statement or any filing pursuant to Section 6.2(b), the Buyer or the Company, as
the case may be, shall promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to shareholders of the Company, of such amendment or supplement.
(b) The Buyer and the Company shall promptly make all necessary
filings with respect to the Merger under the Securities Act, the Exchange Act,
applicable state blue sky laws and the rules and regulations thereunder.
6.3 Nasdaq Quotation. The Company agrees to use its best efforts to
----------------
continue the quotation of the Company Common Stock on The Nasdaq National Market
during the term of this Agreement.
6.4 Access to Information. The Company shall (and shall cause each of its
---------------------
Subsidiaries to) afford to the Buyer's officers, employees, accountants, counsel
and other representatives, reasonable access, during normal business hours
42
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries to) furnish promptly to
the Buyer (a) 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 or state securities laws and (b) all other information concerning its
business, properties, assets and personnel as the Buyer may reasonably request.
The Buyer will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section or otherwise 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.
6.5 Company Shareholders Meeting.
----------------------------
(a) The Company, acting through the Company Board, shall take all
actions in accordance with applicable law (including without limitation all
applicable requirements of the Code and ERISA with respect to the shares of
Company Common Stock held by any Company Employee Plan) and its Articles of
Incorporation and Bylaws to promptly and duly call, give notice of, convene and
hold as promptly as practicable, and in any event within 45 days after the
declaration of effectiveness of the Registration Statement, the Company
Shareholders Meeting for the purpose of considering and voting upon the Company
Voting Proposal. Subject to Section 6.1(b), to the fullest extent permitted by
applicable law, (i) the Company Board shall recommend approval and adoption of
the Company Voting Proposal by the shareholders of the Company and include in
the Proxy Statement/Prospectus such recommendation, and (ii) neither the Company
Board nor any committee thereof shall withdraw or modify, or propose or resolve
to withdraw or modify in a manner adverse to the Buyer, the recommendation of
the Company Board that the Company's shareholders vote in favor of the Company
Voting Proposal. The Company shall take all action that is both reasonable and
lawful to solicit from its shareholders proxies in favor of the Company Voting
Proposal and shall take all other action necessary or advisable to secure the
vote or consent of the Company Shareholders required by the rules of The Nasdaq
Stock Market or the VSCA to obtain such approvals. Notwithstanding anything to
the contrary contained in this Agreement, after consultation with the Buyer, the
Company may adjourn or postpone the Company Shareholders Meeting to the extent
necessary to ensure that any required supplement or amendment to the Proxy
Statement/Prospectus is provided to the Company's shareholders or, if as of the
time for which the Company Shareholders Meeting is originally scheduled (as set
forth in the Proxy Statement/Prospectus) there are insufficient shares of
Company Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company Shareholders Meeting.
(b) The Company shall call, give notice of, convene and hold the
Company Shareholders Meeting in accordance with this Section 6.5 for the purpose
of voting upon the Company Voting Proposal and shall submit the Company Voting
Proposal to the Company's shareholders for the purpose of acting upon its
adoption whether or not (i) the Company Board at any time subsequent to the date
hereof determines, in the manner permitted by Section 6.1(b), that this
43
Agreement is no longer advisable or recommends that the Company Shareholders
reject it, or (ii) any actual, potential or purported Acquisition Proposal or
Superior Proposal has been commenced, disclosed, announced or submitted to the
Company.
6.6 Additional Agreements.
---------------------
(a) Xxxx X. Xxxx has executed and delivered the Shareholder's
Agreement to the Buyer concurrently with the signing of this Agreement.
(b) Each of the employees of the Company listed on Section 6.6(b) of
the Company Disclosure Schedule has executed and delivered an Executive
Retention Agreement in the form attached hereto as Exhibit C and on the terms
and conditions set forth in Section 6.6(b) of the Company Disclosure Schedule.
(c) The Buyer shall, following the Effective Time, cause the Surviving
Corporation to effect and honor the retention and severance arrangements
described in Section 6.6(c) of the Company Disclosure Schedule.
6.7 Legal Conditions to the Merger.
------------------------------
(a) Subject to the terms hereof, including Section 6.7(b), each of the
Company and the Buyer shall use its commercially reasonable efforts to (i) take,
or cause to be taken, all actions, and do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby
as promptly as practicable, (ii) as promptly as practicable, obtain from any
Governmental Entity or any other third party any consents, licenses, permits,
waivers, approvals, authorizations, or orders required to be obtained or made by
the Company or the Buyer or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, (iii) as promptly as practicable, make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder and (C) any
other applicable law and (iv) execute or deliver any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. The Company and the Buyer shall cooperate with
each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith. The Company and the Buyer shall
use their respective commercially reasonable efforts to furnish to each other
all information required for any application or other filing to be made pursuant
to the rules and regulations of any applicable law (including all information
required to be included in the Proxy Statement/Prospectus and the Registration
Statement) in connection with the transactions contemplated by this Agreement.
For the avoidance of doubt, the Buyer and the Company agree that nothing
contained in this Section 6.7(a) shall modify or affect their respective rights
and responsibilities under Section 6.7(b).
44
(b) Subject to the terms hereof, the Buyer and the Company agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use their
respective commercially reasonable efforts to obtain any government clearances
or approvals required for Closing under the HSR Act, the Xxxxxxx Act, as
amended, the Xxxxxxx Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign law or, regulation or decree
designed to prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"), to
respond to any government requests for information under any Antitrust Law, and
to contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Antitrust Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any Antitrust Law.
The Buyer shall be entitled to direct any proceedings or negotiations with any
Governmental Entity relating to any of the foregoing, provided that it shall
afford the Company a reasonable opportunity to participate therein.
Notwithstanding anything in this Agreement to the contrary, neither the Buyer
nor any of its Affiliates shall be under any obligation to (i) make proposals,
execute or carry out agreements or submit to orders providing for the sale or
other disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of the Buyer, any of its
Affiliates or the Company or any of its Subsidiaries or the holding separate of
the shares of Company Common Stock (or shares of stock of the Surviving
Corporation) or imposing or seeking to impose any material limitation on the
ability of the Buyer or any of its subsidiaries or Affiliates to conduct their
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation) or (ii) take any action under this Section if the United
States Department of Justice or the United States Federal Trade Commission
authorizes its staff to seek a preliminary injunction or restraining order to
enjoin consummation of the Merger.
(c) Each of the Company and the Buyer shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, their commercially reasonable
efforts to obtain any third party consents related to or required in connection
with the Merger that are (i) necessary to consummate the transactions
contemplated hereby, (ii) disclosed or required to be disclosed in the Company
Disclosure Schedule or the Buyer Disclosure Schedule, as the case may be, or
(iii) required to prevent a Company Material Adverse Effect or a Buyer Material
Adverse Effect from occurring prior to or after the Effective Time.
6.8 Public Disclosure. Except as may be required by law or stock market
-----------------
regulations, (a) the press release announcing the execution of this Agreement
shall be issued only in such form as shall be mutually agreed upon by the
Company and the Buyer and (b) each of the Buyer and the Company shall use its
commercially reasonable efforts to consult with the other party before issuing
45
any other 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 using such efforts.
6.9 Reorganization. Each of the Buyer and the Company shall use its
--------------
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code. The parties
hereto hereby adopt this Agreement as a plan of reorganization.
6.10 Affiliate Agreements. Schedule 6.10 of the Company Disclosure Schedule
--------------------
sets forth a list of those persons who are, in the Company's reasonable
judgment, Rule 145 Affiliates. The Company shall provide to the Buyer such
information and documents as the Buyer shall reasonably request for purposes of
reviewing such list and shall notify the Buyer in writing regarding any change
in the identity of its Rule 145 Affiliates prior to the Closing Date. The
Company shall use its commercially reasonable efforts to deliver or cause to be
delivered to the Buyer as soon as practicable after the date of this Agreement
(and in any case prior to the mailing of the Proxy Statement/Prospectus) from
each of its Rule 145 Affiliates, an executed Affiliate Agreement, in
substantially the form appended hereto as Exhibit D (the "Affiliate Agreement").
---------
The Buyer shall be entitled to place appropriate legends on the certificates
evidencing any shares of Buyer Common Stock to be received by Rule 145
Affiliates of the Company pursuant to the terms of this Agreement and, subject
to the terms of the Shareholder's Agreement, to issue appropriate stop transfer
instructions to the transfer agent for the Buyer Common Stock.
6.11 AMEX Listing. The Buyer shall use its best efforts to cause the shares
------------
of Buyer Common Stock to be issued in the Merger to be listed on AMEX, subject
to official notice of issuance, on or prior to the Closing Date.
6.12 Company Stock Plans.
-------------------
(a) At the Effective Time, each Company Stock Option (other than
options granted under the Company ESPP) that is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares of
Company Common Stock and shall be converted automatically into an option to
purchase shares of Buyer Common Stock in an amount and at an exercise price
determined as provided in this Section 6.12(a) (and otherwise subject to the
terms of the Company Stock Plans (other than the Company ESPP) and the
agreements evidencing grants thereunder) (a "Buyer Stock Option"). The number of
shares of Buyer Common Stock to be subject to each Buyer Stock Option shall be
equal to the product of (i) the number of shares of Company Common Stock subject
to such Company Stock Option immediately prior to the Effective Time and (ii)
the Exchange Ratio; provided that any fractional shares resulting from such
multiplication shall be rounded down to the nearest whole number. The exercise
price per share of Buyer Common Stock under each Buyer Stock Option shall be
equal to (y) the exercise price per share of Company Common Stock at which such
46
Company Stock Option was exercisable immediately prior to the Effective Time
divided by (z) the Exchange Ratio; provided that such exercise price shall be
rounded up to the nearest whole cent.
(b) As soon as practicable after the Effective Time, the Buyer shall
deliver to the participants in the Company Stock Plans (other than the Company
ESPP) appropriate notice setting forth such participants' rights pursuant
thereto. All grants made pursuant to the Company Stock Plans (other than the
Company ESPP) shall continue in effect on the same terms and conditions (subject
to the provisions of Section 6.12(a)).
(c) The Buyer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery upon
exercise of the Buyer Stock Options. As soon as practicable after the Effective
Time, the Buyer shall file a registration statement on Form S-8 (or any
successor form) with respect to the shares of Buyer Common Stock subject to such
Buyer Stock Options that are eligible for registration on Form S-8, and shall
use its commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
Buyer Stock Options remain outstanding.
(d) Before the Effective Time, the Buyer shall take whatever action is
necessary with respect to its Amended and Restated 1992 Employee Stock Purchase
Plan (the "Buyer ESPP") to provide for a special offering period commencing at
or as soon as reasonably practicable after the Effective Time and ending on
December 31, 2001 (the "Special ESPP Period") pursuant to which the Buyer shall
allow the Company's employees otherwise eligible to participate in the Buyer
ESPP (based on an adjusted date of hire to coincide with the date of hire by the
Company) to participate in the Special ESPP Period. For the avoidance of doubt,
the parties hereto acknowledge and agree that the Buyer is not assuming the
Company ESPP.
6.13 Shareholder Litigation. Until the earlier of the termination of this
----------------------
Agreement in accordance with its terms and the Effective Time, the Company
agrees that the Buyer shall have the right to participate in the defense or
settlement of any shareholder litigation against the Company or the Company
Board relating to this Agreement or any of the transactions contemplated by this
Agreement. The Company shall not settle any such litigation without the Buyer's
prior written consent, which consent shall not be unreasonably withheld or
delayed. The Company and the Buyer agree to enter into a mutually agreeable
joint defense agreement promptly after the Buyer receives notice from the
Company of such shareholder litigation.
6.14 Indemnification.
---------------
(a) From and after the Effective Time, the Buyer shall, to the fullest
extent permitted by law, cause the Surviving Corporation, for a period of six
years from the Effective Time, to honor all of the Company's obligations under
Article VII of the Articles of Incorporation of the Company to indemnify and
hold harmless each present and former director and officer of the Company (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
47
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the extent that such obligations to indemnify and hold harmless exist
on the date of this Agreement.
(b) For a period of six years after the Effective Time, the Buyer
shall cause the Surviving Corporation to maintain (to the extent available in
the market) in effect a directors' and officers' liability insurance policy
covering those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a complete and accurate copy of which has
been delivered to the Buyer prior to the date of this Agreement) with coverage
in amount and scope at least as favorable to such persons as the Company's
existing coverage; provided, that in no event shall the Buyer or the Surviving
Corporation be required to expend in excess of 200% of the annual premium
currently paid by the Company for such coverage, which current annual premium is
set forth in Section 6.14(b) of the Company Disclosure Schedule.
6.15 Notification of Certain Matters. The Buyer shall give prompt notice to
-------------------------------
the Company, and the Company shall give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or warranty
of such party contained in this Agreement that is qualified as to materiality to
be untrue or inaccurate in any respect or (ii) any other representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect, in each case at any time from and after the date of this
Agreement until the Effective Time, or (b) any material failure of the Buyer and
the Transitory Subsidiary or the Company, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this Section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice or the conditions to such party's obligation
to consummate the Merger.
6.16 Exemption from Liability Under Section 16(b).
--------------------------------------------
(a) The board of directors of the Buyer, or a committee thereof
consisting solely of non-employee directors (as such term is defined for
purposes of Rule 16b-3(d) under the Exchange Act), shall adopt a resolution in
advance of the Effective Time providing that the receipt by the Company Insiders
of Buyer Common Stock in exchange for shares of Company Common Stock, and of
options to purchase Buyer Common Stock upon assumption and conversion of Company
Stock Options, in each case pursuant to the transactions contemplated hereby and
to the extent such securities are listed in the Section 16 Information, is
intended to be exempt pursuant to Rule 16b-3 under the Exchange Act.
(b) For purposes of Section 6.16(a), "Section 16 Information" shall
mean information regarding the Company Insiders and the number of shares of
Company Common Stock or other Company equity securities deemed to be
beneficially owned by each such Company Insider and expected to be exchanged for
48
Buyer Common Stock, and options to purchase Buyer Common Stock, in each case, in
connection with the Merger, which shall be provided by the Company to the Buyer
within 10 business days after the date of this Agreement.
(c) For purposes of Section 6.16(a), "Company Insiders" shall mean
those officers and directors of the Company who are subject to the reporting
requirements of Section 16(a) of the Exchange Act as listed in the Section 16
Information.
6.17 Comfort Letters.
---------------
(a) The Company shall use reasonable efforts to cause to be delivered
to the Buyer and the Company a letter of KPMG LLP, the Company's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Buyer, in
form reasonably satisfactory to the Buyer and the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
(b) The Buyer shall use reasonable efforts to cause to be delivered to
the Company and the Buyer a letter of Ernst & Young LLP, the Buyer's independent
auditors, dated a date within two business days before the date on which the
Registration Statement shall become effective and addressed to the Buyer, in
form reasonably satisfactory to the Company and the Buyer and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
6.18 Representation on Buyer Board. The Buyer shall take any and all
-----------------------------
actions necessary or appropriate to cause the number of directors comprising the
Buyer's board of directors at the Effective Time to be sufficient to permit Xxxx
X. Xxxx (the "Shareholder Designee") to serve thereon, and to cause the
Shareholder Designee to be elected to serve on the Buyer's board of directors as
provided in the Shareholder's Agreement.
ARTICLE VII
CONDITIONS TO MERGER
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 or waiver on or prior to the Closing Date
of the following conditions:
(a) Shareholder Approval. The Company Voting Proposal shall have been
--------------------
approved and adopted at the Company Shareholders Meeting, at which a quorum is
present, by the requisite vote of the shareholders of the Company under
applicable law and the Company's Articles of Incorporation and Bylaws.
(b) HSR Act. The waiting period applicable to the consummation of the
-------
Merger under the HSR Act shall have expired or been terminated.
49
(c) Governmental Approvals. Other than the filing of the Articles of
----------------------
Merger, all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity in connection with the Merger and the consummation of the other
transactions contemplated by this Agreement, the failure of which to file,
obtain or occur is reasonably likely to have, directly or indirectly, a Buyer
Material Adverse Effect or a Company Material Adverse Effect shall have been
filed, been obtained or occurred.
(d) Registration Statement; Proxy Statement/Prospectus. The
--------------------------------------------------
Registration Statement shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose, and no similar proceeding
with respect to the Proxy Statement/Prospectus, shall have been initiated or
threatened in writing by the SEC or its staff.
(e) No Injunctions. No Governmental Entity of competent jurisdiction
--------------
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (preliminary or permanent)
or statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger or
the other transactions contemplated by this Agreement.
(f) AMEX. The shares of Buyer Common Stock to be issued in the Merger
----
shall have been approved for listing on AMEX, subject only to official notice
of issuance.
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
--------------------------------------------------------------------
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to
----------
effect the Merger are subject to the satisfaction on or prior to the Closing
Date of each of the following additional conditions, any of which may be waived
in writing exclusively by the Buyer and the Transitory Subsidiary:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company set forth in this Agreement shall be true and correct (i) as of
the date of this Agreement and (ii) as of the Closing Date as though made on and
as of the Closing Date, except (A) in the case of this clause (ii), for changes
contemplated by this Agreement and (B) in the case of both clauses (i) and (ii),
(y) to the extent such representations and warranties are specifically made as
of a particular date, in which case such representations and warranties shall be
true and correct as of such date and (z) where the failures to be true and
correct (without regard to any materiality or Company Material Adverse Effect
qualifications contained therein), individually or in the aggregate, have not
had, and are not reasonably likely to have, a Company Material Adverse Effect);
and the Buyer shall have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer of the Company to
such effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement on or prior to the Closing Date; and the Buyer shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
50
(c) No Company Material Adverse Effect. Since the date of this
----------------------------------
Agreement, there shall not have been any change, event, circumstance,
development or effect that individually or in the aggregate has had, or is
reasonably likely to have, a Company Material Adverse Effect.
(d) Tax Opinion. The Buyer shall have received a written opinion from
-----------
Xxxx and Xxxx LLP, counsel to the Buyer, 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 that if Xxxx and Xxxx LLP does not
render such opinion, this condition shall nonetheless be deemed satisfied if
Williams, Mullen, Xxxxx & Xxxxxxx renders such opinion to the Buyer (it being
agreed that the Buyer and the Company shall each provide reasonable cooperation,
including making reasonable representations, to Xxxx and Xxxx LLP or Williams,
Mullen, Xxxxx & Xxxxxxx, as the case may be, to enable them to render such
opinion).
(e) Third Party Consents. The Company shall have obtained (i) all
--------------------
consents and approvals of third parties referred to in Section 3.3(b) of the
Company Disclosure Schedule and (ii) any other consent or approval of any third
party (other than a Governmental Entity) which is material to the Company and
its Subsidiaries taken as a whole.
(f) No Restraints. There shall not be instituted or pending any action
-------------
or proceeding by any Governmental Entity (i) seeking to restrain, prohibit or
otherwise interfere with the ownership or operation by the Buyer or any of its
Subsidiaries of all or any portion of the business of the Company or any of its
Subsidiaries or of the Buyer or any of its Subsidiaries or to compel the Buyer
or any of its Subsidiaries to dispose of or hold separate all or any portion of
the business or assets of the Company or any of its Subsidiaries or of the Buyer
or any of its Subsidiaries, (ii) seeking to impose or confirm limitations on the
ability of the Buyer or any of its Subsidiaries effectively to exercise full
rights of ownership of the shares of Company Common Stock (or shares of stock of
the Surviving Corporation) including the right to vote any such shares on any
matters properly presented to shareholders or (iii) seeking to require
divestiture by the Buyer or any of its Subsidiaries of any such shares.
(g) Resignations. The Buyer shall have received copies of the
------------
resignations, effective as of the Effective Time, of each director of the
Company and its Subsidiaries.
7.3 Additional Conditions to Obligations of the Company. The obligation of
---------------------------------------------------
the Company to effect the Merger is subject to the satisfaction on or prior to
the Closing Date of each of the following additional conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Buyer and the Transitory Subsidiary set forth in this Agreement shall be
true and correct (i) as of the date of this Agreement and (ii) as of the Closing
Date as though made on and as of the Closing Date, except (A) in the case of
this clause (ii), for changes contemplated by this Agreement and (B) in the case
of both clauses (i) and (ii), (y) to the extent such representations and
warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date and (z)
51
where the failures to be true and correct (without regard to any materiality or
Buyer Material Adverse Effect qualifications contained therein), individually or
in the aggregate, have not had, and are not reasonably likely to have, a Buyer
Material Adverse Effect; and the Company shall have received a certificate
signed on behalf of the Buyer by the chief executive officer or the chief
financial officer of the Buyer to such effect.
(b) Performance of Obligations of the Buyer and the Transitory
----------------------------------------------------------
Subsidiary. The Buyer and the Transitory Subsidiary shall have performed in all
----------
material respects all obligations required to be performed by them under this
Agreement on or prior to the Closing Date; and the Company shall have received a
certificate signed on behalf of the Buyer by the chief executive officer or the
chief financial officer of the Buyer to such effect.
(c) No Buyer Material Adverse Effect. Since the date of this
--------------------------------
Agreement, there shall not have been any change, event, circumstance,
development or effect that individually or in the aggregate has had, or is
reasonably likely to have, a Buyer Material Adverse Effect.
(d) Tax Opinion. The Company shall have received the opinion of
-----------
Williams, Mullen, Xxxxx & Xxxxxxx, counsel to the Company, 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 that if Williams,
Mullen, Xxxxx & Xxxxxxx does not render such opinion, this condition shall
nonetheless be deemed satisfied if Xxxx and Xxxx LLP renders such opinion to the
Company (it being agreed that the Buyer and the Company shall each provide
reasonable cooperation, including making reasonable representations, to
Williams, Mullen, Xxxxx & Xxxxxxx or Xxxx and Xxxx LLP, as the case may be, to
enable them to render such opinion).
(e) Representation on Buyer Board. The Shareholder Designee shall have
-----------------------------
been elected to serve on the Buyer's board of directors effective immediately
following the Effective Time.
(f) No Restraints. There shall not be instituted or pending any action
-------------
or proceeding by any Governmental Entity (i) seeking to restrain, prohibit or
otherwise interfere with the ownership or operation by the Buyer or any of its
Subsidiaries of all or any portion of the business of the Company or any of its
Subsidiaries or of the Buyer or any of its Subsidiaries or to compel the Buyer
or any of its Subsidiaries to dispose of or hold separate all or any portion of
the business or assets of the Company or any of its Subsidiaries or of the Buyer
or any of its Subsidiaries, (ii) seeking to impose or confirm limitations on the
ability of the Buyer or any of its Subsidiaries effectively to exercise full
rights of ownership of the shares of Company Common Stock (or shares of stock of
the Surviving Corporation), including the right to vote any such shares on any
matters properly presented to shareholders, or (iii) seeking to require
divestiture by the Buyer or any of its Subsidiaries of any such shares.
52
ARTICLE VIII
TERMINATION AND AMENDMENT
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, subject
to the terms hereof, after adoption of this Agreement by the shareholders of the
Company or the sole shareholder of the Transitory Subsidiary:
(a) by mutual written consent of the Buyer, the Transitory Subsidiary
and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have
been consummated by December 31, 2001 (the "Outside Date") (provided 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 a principal cause of or resulted in the failure of the Merger
to occur on or before the Outside Date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either the Buyer or the Company if at the Company Shareholders
Meeting (including any adjournment or postponement thereof permitted by this
Agreement) at which a vote on the Company Voting Proposal is taken, the
requisite vote of the shareholders of the Company in favor of the Company Voting
Proposal shall not have been obtained (provided that the right to terminate this
Agreement under this Section 8.1(d) shall not be available to the Company if (i)
at such time the Company is in breach of or has failed to fulfill its
obligations under this Agreement or (ii) the failure to obtain the requisite
vote has been caused by a breach of the Shareholder's Agreement by any party
thereto other than the Buyer); or
(e) by the Buyer, if: (i) the Company Board shall have failed to
unanimously recommend approval of the Company Voting Proposal in the Proxy
Statement/Prospectus or shall have withdrawn or modified its recommendation of
the Company Voting Proposal; (ii) the Company Board fails to unanimously
reconfirm its recommendation of the Company Voting Proposal within five days
after the Buyer requests in writing that the Company Board (or such committee
thereof) do so; (iii) the Company Board shall have approved or recommended to
the shareholders of the Company an Acquisition Proposal (other than the Merger
contemplated by this Agreement); (iv) a tender offer or exchange offer for
outstanding shares of the Company Common Stock is commenced (other than by the
Buyer or an Affiliate of the Buyer) and the Company Board (or any committee
thereof) recommends that the shareholders of the Company tender their shares in
such tender or exchange offer or, within 10 business days after such tender or
53
exchange offer, fails to recommend against acceptance of such offer or takes no
position with respect to the acceptance thereof; or (v) the Company shall have
breached Section 6.1 or Section 6.5; or
(f) by the Buyer, if there has been a breach of or failure to perform
any representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement, which breach or failure to perform (i) would cause
the conditions set forth in Section 7.2(a) or 7.2(b) not to be satisfied, and
(ii) shall not have been cured within 20 days following receipt by the Company
of written notice of such breach from the Buyer; or
(g) by the Company, if there has been a breach of or failure to
perform any representation, warranty, covenant or agreement on the part of the
Buyer or the Transitory Subsidiary set forth in this Agreement, which breach or
failure to perform (i) would cause the conditions set forth in Section 7.3(a) or
7.3(b) not to be satisfied, and (ii) shall not have been cured within 20 days
following receipt by the Buyer of written notice of such breach from the
Company.
8.2 Effect of Termination. In the event of termination of this Agreement as
---------------------
provided in Section 8.1, this Agreement shall immediately become void and there
shall be no liability or obligation on the part of the Buyer, the Company, the
Transitory Subsidiary or their respective officers, directors, shareholders or
Affiliates; provided that (i) any such termination shall not relieve any party
from liability for any breach of this Agreement (which includes, without
limitation, the making of any representation or warranty by a party in this
Agreement that was not true and accurate when made) and (ii) the provisions of
Sections 3.27 and 8.3, Article IX of this Agreement and the Confidentiality
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
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 fees and expenses, whether or
not the Merger is consummated; provided however, that the Company and the Buyer
shall share equally (i) the filing fees of the Buyer's and any Company
shareholder's pre-merger notification reports under the HSR Act and (ii) all
fees and expenses, other than accountants' and attorneys' fees, incurred with
respect to the printing, filing and mailing of the Proxy Statement/Prospectus
(including any related preliminary materials) and the Registration Statement and
any amendments or supplements thereto.
(b) The Company shall pay the Buyer up to $1,500,000 as reimbursement
for expenses of the Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, reasonable fees and expenses of the Buyer's counsel, accountants and
financial advisors, but excluding any discretionary fees paid to such financial
advisors), upon the termination of this Agreement (i) by the Buyer or the
Company pursuant to Section 8.1(b) if the failure to satisfy the conditions set
forth in Section 7.1(a) or 7.2(a), (b), (c), (e) or (g) by the Outside Date
shall have resulted in the Closing not occurring; (ii) by the Buyer pursuant to
Section 8.1(e); (iii) by the Buyer pursuant to Section 8.1(f); or (iv) by the
54
Buyer or the Company pursuant to Section 8.1(d). The expenses payable pursuant
to this Section 8.3(b) shall be paid within one business day after demand
therefor following the occurrence of the termination event giving rise to the
payment obligation described in this Section 8.3(b). To the extent any fees paid
under this Section 8.3(b) are paid in conjunction with Section 8.3(c), the Buyer
may not assert at a later date additional fees for reimbursement of the Buyer's
expenses.
(c) The Company shall pay the Buyer a termination fee of $8,100,000
(less any amounts payable by the Company as reimbursement for expenses under
Section 8.3(b)) upon the earliest to occur of the following events:
(i) the termination of the Agreement by the Buyer or the Company
pursuant to Section 8.1(d) as a result of the failure to receive the requisite
vote for approval of the Company Voting Proposal by the shareholders of the
Company at the Company Shareholders Meeting if, at or prior to the time of such
failure, there shall have been announced an Acquisition Proposal relating to the
Company which shall not have been absolutely and unconditionally withdrawn and
abandoned; or
(ii) the termination of this Agreement by the Buyer pursuant to
Section 8.1(e); or
(iii) the termination of this Agreement by the Buyer pursuant to
Section 8.1(f).
Any fee due under Section 8.3(c) shall be paid by wire transfer of same-day
funds within one business day after the date of termination of this Agreement.
(d) The Buyer shall pay the Company up to $1,500,000 as reimbursement
for expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, reasonable fees and expenses of the Company's counsel, accountants and
financial advisors, but excluding any discretionary fees paid to such financial
advisors), upon the termination of this Agreement by the Company pursuant to (i)
Section 8.1(b) as a result of the failure to satisfy the conditions set forth in
Section 7.3(a) or (b) or (ii) Section 8.1(g). The expenses payable pursuant to
this Section 8.3(d) shall be paid within one business day after demand therefor
following the occurrence of the termination event giving rise to the payment
obligation described in this Section 8.3(d). To the extent any fees paid under
this Section 8.3(d) are paid in conjunction with Section 8.3(e), the Company may
not assert at a later date additional fees for reimbursement of the Company's
expenses.
(e) The Buyer shall pay the Company a termination fee of $8,100,000
(less any amounts payable by the Buyer as reimbursement for expenses under
Section 8.3(d)) upon termination of this Agreement by the Company pursuant to
Section 8.1(g). Any fee due under Section 8.3(e) shall be paid by wire transfer
of same-day funds within one business day after the date of termination of this
Agreement.
55
(f) The parties hereto acknowledge that the agreements contained in
this Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties would not enter into
this Agreement. If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including reasonable legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of Fleet Bank, N.A. plus four percent per annum,
compounded quarterly, from the date such expense reimbursement or fee was
required to be paid.
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 shareholders of the Company or the Transitory Subsidiary, provided,
however, that, after any such approval, no amendment shall be made which by law
requires further approval by such shareholders 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.
8.5 Extension; Waiver. At any time prior to the Effective Time, the parties
-----------------
hereto, by action taken or authorized by their respective boards of directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions 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. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties. The respective
---------------------------------------------
representations and warranties of the Company, the Buyer and the Transitory
Subsidiary contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall expire with, and be terminated and extinguished upon,
the Effective Time. This Section 9.1 shall have no effect upon any other
obligations of the parties hereto, whether to be performed before or after the
consummation of the Merger.
9.2 Notices. All notices, requests, claims and demands and other
-------
communications hereunder shall be in writing and shall be deemed duly delivered
(a) four business days after being sent by registered or certified mail, return
receipt requested, postage prepaid, or (b) one business day after being sent for
next business day delivery, fees prepaid, via a reputable nationwide overnight
courier service, in each case to the intended recipient as set forth below:
56
(i) if to the Buyer or the Transitory Subsidiary, to
Xxxxx, Inc.
Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: President and Chief Executive Officer
Telecopy: (000) 000-0000
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxx X. Xxxxxxxxx, Esq.
Telecopy: (000) 000-0000
(ii) if to the Company, to
Metro Information Services, Inc.
Reflections II Office Building
Third Floor
000 Xxxxxx Xxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
Attn: Chairman of the Board and Chief Executive Officer
Telecopy: (000) 000-0000
with a copy to:
Williams, Mullen, Xxxxx & Xxxxxxx
Xxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000-0000
Attn: Xxxx X. Paris, Jr., Esq.
Telecopy: (000) 000-0000
Any party to this Agreement may give any notice or other communication hereunder
using any other means (including personal delivery, messenger service, telecopy
or ordinary mail), but no such notice or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any party to this Agreement may change the address to
which notices and other communications hereunder are to be delivered by giving
the other parties to this Agreement notice in the manner herein set forth.
57
9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits
----------------
hereto and the documents and instruments referred to herein that are to be
delivered at the Closing) constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations by
or among the parties hereto, or any of them, written or oral, with respect to
the subject matter hereof; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.14, this
----------------------------
Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with any
person or to otherwise create any third-party beneficiary hereto.
9.5 Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void, except that the Buyer and/or the
Transitory Subsidiary may assign this Agreement to any direct or indirect wholly
owned Subsidiary of the Buyer without consent of the Company, provided that the
Buyer and/or the Transitory Subsidiary, as the case may be, shall remain liable
for all of its obligations under this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
9.6 Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that shall achieve, to the extent possible,
the economic, business and other purposes of such invalid or unenforceable term.
9.7 Counterparts and Signature. This Agreement may be executed in two or
--------------------------
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
58
9.8 Interpretation. When reference is made in this Agreement to an Article
--------------
or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." No summary of this Agreement prepared by any party shall
affect the meaning or interpretation of this Agreement.
9.9 Governing Law. This Agreement shall be governed by and construed in
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accordance with the internal laws of the Commonwealth of Virginia without giving
effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Virginia or any other jurisdiction) that would cause the
application of laws of any jurisdictions other than those of the Commonwealth of
Virginia.
9.10 Remedies. Except as otherwise provided herein, any and all remedies
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herein expressly conferred upon a party shall be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy shall not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which the parties are entitled at law or in equity.
9.11 WAIVER OF JURY TRIAL. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY AND
--------------------
THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR THE COMPANY IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
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IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
XXXXX, INC.
/s/ Xxxxx X. Xxxxx
--------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
VERITAS ACQUISITION CORP.
/s/ Xxxxx X. Xxxxx
--------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief Executive Officer
METRO INFORMATION SERVICES, INC.
/s/ Xxxx X. Xxxx
------------------
Name: Xxxx X. Xxxx
Title: Chief Executive Officer
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