EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
CADENCE DESIGN SYSTEMS, INC.,
a Delaware corporation;
HARBOR ACQUISITION SUB, INC.,
a Delaware corporation; and
HIGH LEVEL DESIGN SYSTEMS, INC.,
a Delaware corporation
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Dated as of October 3, 1996
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TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION. . . . . . . . . . . . . . . . . 2
1.1 Merger of Merger Sub into the Company . . . . . . . . . . . 2
1.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Shares. . . . . . . . . . . . . . . . . . . . 3
1.6 Closing of the Company's Transfer Books . . . . . . . . . . 4
1.7 Exchange of Certificates. . . . . . . . . . . . . . . . . . 4
1.8 Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . 5
1.9 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . 6
1.10 Further Action. . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . 7
2.1 Due Organization; Subsidiary; Etc.. . . . . . . . . . . . . 7
2.2 Certificate of Incorporation and Bylaws; Records. . . . . . 7
2.3 Capitalization, Etc.. . . . . . . . . . . . . . . . . . . . 8
2.4 VSE/BCSC Filings; Financial Statements. . . . . . . . . . . 9
2.5 Absence of Changes. . . . . . . . . . . . . . . . . . . . . 10
2.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Receivables, Loans and Advances.. . . . . . . . . . . . . . 12
2.8 Equipment; Leasehold. . . . . . . . . . . . . . . . . . . . 13
2.9 Proprietary Assets. . . . . . . . . . . . . . . . . . . . . 13
2.10 Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.11 Liabilities.. . . . . . . . . . . . . . . . . . . . . . . . 16
2.12 Compliance with Legal Requirements. . . . . . . . . . . . . 16
2.13 Certain Business Practices. . . . . . . . . . . . . . . . . 16
2.14 Governmental Authorizations.. . . . . . . . . . . . . . . . 16
2.15 Tax Matters.. . . . . . . . . . . . . . . . . . . . . . . . 17
2.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 18
2.17 Environmental Matters.. . . . . . . . . . . . . . . . . . . 18
2.18 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.19 Related Party Transactions. . . . . . . . . . . . . . . . . 19
2.20 Legal Proceedings; Orders.. . . . . . . . . . . . . . . . . 19
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement.. . . . . . . . . . . . . . . . . . . . 20
2.22 DGCL Section 203. . . . . . . . . . . . . . . . . . . . . . 20
2.23 Inapplicability of Xxxx-Xxxxx-Xxxxxx Act. . . . . . . . . . 20
2.24 Vote Required . . . . . . . . . . . . . . . . . . . . . . . 20
2.25 Non-Contravention; Consents . . . . . . . . . . . . . . . . 21
2.26 Fairness Opinion. . . . . . . . . . . . . . . . . . . . . . 22
2.27 Financial Advisor . . . . . . . . . . . . . . . . . . . . . 22
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.28 Full Disclosure.. . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB . . 23
3.1 Organization, Standing and Power. . . . . . . . . . . . . . 23
3.2 SEC Filings; Financial Statements.. . . . . . . . . . . . . 23
3.3 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 24
3.4 Absence of Certain Changes or Events. . . . . . . . . . . . 24
3.5 Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . 24
3.6 Authority; Binding Nature of Agreement. . . . . . . . . . . 24
3.7 Valid Issuance. . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4. CERTAIN COVENANTS OF THE COMPANY. . . . . . . . . . . . . . 24
4.1 Access and Investigation. . . . . . . . . . . . . . . . . . 24
4.2 Operation of the Company's Business.. . . . . . . . . . . . 25
4.3 No Solicitation.. . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . 28
5.1 Registration Statement; Prospectus/Proxy Statement. . . . . 28
5.2 Company Stockholders' Meeting.. . . . . . . . . . . . . . . 29
5.3 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . 30
5.4 Stock Options.. . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Indemnification of Officers and Directors.. . . . . . . . . 31
5.6 Additional Agreements.. . . . . . . . . . . . . . . . . . . 32
5.7 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Affiliate Agreements. . . . . . . . . . . . . . . . . . . . 33
5.9 Tax Matters.. . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Resignation of Officers and Directors.. . . . . . . . . . . 33
5.11 Employee Benefits.. . . . . . . . . . . . . . . . . . . . . 33
5.12 FIRPTA Matters. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB 34
6.1 Accuracy of Representations.. . . . . . . . . . . . . . . . 34
6.2 Performance of Covenants. . . . . . . . . . . . . . . . . . 34
6.3 Effectiveness of Registration Statement . . . . . . . . . . 34
6.4 Stockholder Approval. . . . . . . . . . . . . . . . . . . . 34
6.5 Agreements and Documents. . . . . . . . . . . . . . . . . . 34
6.6 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 No Material Adverse Change. . . . . . . . . . . . . . . . . 35
6.8 No Restraints . . . . . . . . . . . . . . . . . . . . . . . 35
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.9 No Governmental Litigation. . . . . . . . . . . . . . . . . 35
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. . . . . 35
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . 36
7.2 Performance of Covenants. . . . . . . . . . . . . . . . . . 36
7.3 Effectiveness of Registration Statement . . . . . . . . . . 36
7.4 Documents . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 No Restraints . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 No Material Adverse Change. . . . . . . . . . . . . . . . . 36
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 38
8.3 Transactions and Expenses; Termination Fee. . . . . . . . . 38
SECTION 9. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 39
9.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.3 No Survival of Representations and Warranties . . . . . . . 39
9.4 Entire Agreement; Counterparts; Applicable Law. . . . . . . 39
9.5 Disclosure Schedule . . . . . . . . . . . . . . . . . . . . 39
9.6 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 39
9.7 Assignability . . . . . . . . . . . . . . . . . . . . . . . 40
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.9 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 42
9.10 Certain Terms.. . . . . . . . . . . . . . . . . . . . . . . 42
9.11 Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Certificate of Incorporation of Surviving Corporation
Exhibit C - Certain employees
Exhibit D - Certain additional employees
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of October 3, 1996, by and among: CADENCE DESIGN SYSTEMS,
INC., a Delaware corporation ("Parent"); HARBOR ACQUISITION SUB, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
HIGH LEVEL DESIGN SYSTEMS, INC., a Delaware corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the Delaware General
Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub
will cease to exist, and the Company will become a wholly owned subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. The respective boards of directors of Parent, Merger Sub and the
Company have approved this Agreement and the Merger.
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AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement and in accordance with the provisions
of applicable law, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company, and the separate existence of Merger
Sub shall cease. The Company will continue as the surviving corporation in the
Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, Five Palo Alto Square, 0000 Xx Xxxxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx, at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to the satisfaction or waiver of the conditions set forth
in Sections 6 and 7) shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections 6.3,
6.4 and 7.5. Contemporaneously with or as promptly as practicable after the
Closing, a properly executed certificate of merger conforming to the
requirements of the DGCL (the "Certificate of Merger") shall be filed with the
Secretary of State of the State of Delaware. The Merger shall take effect at
the time the Certificate of Merger is filed with the Secretary of State of the
State of Delaware (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to
Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as
in effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals
who are directors and officers of Merger Sub immediately prior to the
Effective Time.
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1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.5(d) and 1.8, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any stockholder of the Company:
(i) any shares of Company Capital Stock then held by the Company
or any subsidiary of the Company (or held in the Company's treasury) shall
be canceled;
(ii) any shares of Company Capital Stock then held by Parent,
Merger Sub or any other subsidiary of Parent shall be canceled;
(iii) except as provided in clauses "(i)" and "(ii)" above
and subject to Section 1.5(b), (A) each share of Company Common Stock then
outstanding shall be converted into the right to receive twenty-two
hundredths (0.22) of a share of Parent Common Stock, and (B) each share of
Company Preferred Stock then outstanding shall be converted into the right
to receive twenty-two hundredths (0.22) of a share of Parent Common Stock,
in each case upon surrender of the certificate representing such share of
Company Common Stock or Company Preferred Stock (as the case may be) in the
manner provided in Section 1.7 (or in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 1.7); and
(iv) each share of the common stock, par value $.001 per share,
of Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock into which each
outstanding share of Company Common Stock is to be converted pursuant to Section
1.5(a)(iii)(A) (as such fraction may be adjusted in accordance with this Section
1.5(b)) is referred to as the "Common Stock Exchange Ratio," and the fraction of
a share of Parent Common Stock into which each outstanding share of Company
Preferred Stock is to be converted pursuant to Section 1.5(a)(iii)(B) (as such
fraction may be adjusted in accordance with this Section 1.5(b)) is referred to
as the "Preferred Stock Exchange Ratio". If, between the date of this Agreement
and the Effective Time, the outstanding shares of Company Common Stock, Company
Preferred Stock or Parent Common Stock are changed into a different number or
class of shares by reason of any stock split, stock dividend, reverse stock
split, reclassification, recapitalization or other similar transaction, then the
Common Stock Exchange Ratio and/or the Preferred Stock Exchange Ratio shall be
appropriately adjusted.
(c) If any shares of Company Capital Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Capital Stock
will also be unvested and subject to the same repurchase option, risk of
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forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of Company
Capital Stock who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
closing price of a share of Parent Common Stock on the NYSE on the date the
Merger becomes effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time: (a)
all shares of Company Capital Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Capital
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Capital Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Capital Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of Company Capital Stock
(a "Company Stock Certificate") is presented to the Exchange Agent or to the
Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) Prior to the Closing Date, Parent shall select a reputable bank
or trust company to act as exchange agent in the Merger (the "Exchange Agent").
Promptly after the Effective Time, Parent shall deposit with the Exchange Agent
(i) certificates representing the shares of Parent Common Stock issuable
pursuant to this Section 1 and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 1.5(d). The shares of Parent
Common Stock and cash amounts so deposited with the Exchange Agent, together
with any dividends or distributions received by the Exchange Agent with respect
to such shares, are referred to collectively as the "Exchange Fund."
(b) As soon as practicable after the Effective Time, the Exchange
Agent will mail to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify (including a provision confirming that delivery of Company
Stock Certificates shall be effected, and risk of loss and title to Company
Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates
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to the Exchange Agent), and (ii) instructions for use in effecting the surrender
of Company Stock Certificates in exchange for certificates representing Parent
Common Stock. Subject to Section 1.5(d), upon surrender of a Company Stock
Certificate to the Exchange Agent for exchange, together with a duly executed
letter of transmittal and such other documents as may be reasonably required by
the Exchange Agent or Parent, (1) the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of Section 1.5(a)(iii), and (2) the Company
Stock Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.7, each Company Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive shares of Parent Common Stock (and cash in lieu of any fractional share
of Parent Common Stock) as contemplated by this Section 1. If any Company Stock
Certificate shall have been lost, stolen or destroyed, Parent may, in its
discretion and as a condition precedent to the issuance of any certificate
representing Parent Common Stock, require the owner of such lost, stolen or
destroyed Company Stock Certificate to provide an appropriate affidavit and to
deliver a bond (in such sum as Parent may reasonably direct) as indemnity
against any claim that may be made against the Exchange Agent, Parent or the
Surviving Corporation with respect to such Company Stock Certificate.
(c) Any portion of the Exchange Fund that remains undistributed to
former stockholders of the Company as of the date 180 days after the date on
which the Merger becomes effective shall be delivered to Parent upon demand, and
any former stockholders of the Company who have not theretofore surrendered
their Company Stock Certificates in accordance with this Section 1.7 shall
thereafter look only to Parent for payment of their claims for Parent Common
Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(d) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Capital Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of Company Common Stock for any shares of Parent
Common Stock (or dividends or distributions with respect thereto), or for any
cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.8 APPRAISAL RIGHTS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, Appraisal Shares (as defined in Section 1.8(c)) shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5(a) (or cash in lieu of fractional
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shares in accordance with Section 1.5(d)), and each holder of Appraisal Shares
shall be entitled only to such rights with respect to such Appraisal Shares as
may be granted to such holder in Section 262 of the DGCL and (if the Company is
subject to Section 2115 of the California Corporations Code) such rights as may
be granted to such holder in Chapter 13 of the California General Corporation
Law. From and after the Effective Time, a holder of Appraisal Shares shall not
have and shall not be entitled to exercise any of the voting rights or other
rights of a stockholder of the Surviving Corporation. If any holder of
Appraisal Shares shall fail to perfect or shall waive, rescind, withdraw or
otherwise lose such holder's right of appraisal under Section 262 of the DGCL
and such holder's rights (if any) under Chapter 13 of the California General
Corporation Law, then (i) any right of such holder to require the Company to
purchase the Appraisal Shares for cash shall be extinguished and (ii) such
shares shall automatically be converted into and shall represent only the right
to receive (upon the surrender of the certificate or certificates representing
such shares) Parent Common Stock in accordance with Section 1.5(a) (and cash in
lieu of any fractional share in accordance with Section 1.5(d)).
(b) The Company (i) shall give Parent prompt written notice of any
demand by any stockholder of the Company for appraisal of such stockholder's
shares of Company Capital Stock pursuant to the DGCL and of any other notice,
demand or instrument delivered to the Company pursuant to the DGCL or the
California General Corporation Law, and (ii) shall give Parent's Representatives
the opportunity to participate in all negotiations and proceedings with respect
to any such notice, demand or instrument. The Company shall not make any
payment or settlement offer with respect to any such notice or demand unless
Parent shall have consented in writing to such payment or settlement offer.
(c) For purposes of this Agreement, "Appraisal Shares" shall refer to
any shares of Company Capital Stock outstanding immediately prior to the
Effective Time that (i) are held by stockholders who are entitled to demand and
who properly demand appraisal of such shares pursuant to, and who comply with
the applicable provisions of, Section 262 of the DGCL or (ii) are or may become
"dissenting shares" within the meaning of Chapter 13 of the California General
Corporation Law. Notwithstanding anything to the contrary contained in this
Agreement, no holder of any shares of Company Capital Stock shall be entitled to
exercise any rights under Chapter 13 of the California General Corporation Law
unless the Company is subject to Section 2115 of the California Corporations
Code.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.10 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the officers and directors of the Surviving Corporation
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and Parent shall be fully authorized (in the name of Merger Sub, in the name of
the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except
as set forth in the disclosure schedule delivered by the Company to Parent on
the date of this Agreement and signed by the President of the Company (the
"Company Disclosure Schedule"):
2.1 DUE ORGANIZATION; SUBSIDIARY; ETC.
(a) The Company owns no shares of capital stock of, or equity
interest of any nature in, any Entity, other than High Level Design Systems
Limited, a corporation organized under the laws of England (the "Subsidiary").
(The Company and the Subsidiary are referred to collectively in this Agreement
as the "Acquired Corporations"). Neither of the Acquired Corporations has
agreed or is obligated to make any future investment in or capital contribution
to any Entity. Neither of the Acquired Corporations has, at any time, been a
general partner of any general partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted;(ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as
a foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect on the
Acquired Corporations.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of the certificate of
incorporation, bylaws and other charter and organizational documents of the
respective Acquired Corporations, including all amendments thereto. The Company
has made available to Parent accurate and complete copies in all material
respects of the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the stockholders of each of the Acquired Corporations, the boards of
directors of each of the Acquired Corporations and all committees of the boards
of directors of each of the Acquired Corporations. There have been no formal
meetings or other proceedings of the stockholders of either of the Acquired
Corporations, the board of directors of either of the Acquired Corporations or
any committee of the board of directors of either of the Acquired Corporations
that are not fully reflected in such minutes or other records. The books of
account, stock records, minute books and other records of each of
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the Acquired Corporations are accurate, up-to-date and complete in all material
respects, and have been maintained in accordance with prudent business
practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of: (i)
35,000,000 shares of Company Common Stock, of which 11,333,956 shares (less
300,000 shares of Company Common Stock held in treasury) have been issued and
are outstanding as of the date of this Agreement; and (ii) 5,000,000 shares of
Company Preferred Stock, 800,000 of which have been designated "Series A
Preferred Stock," of which 600,000 shares have been issued and are outstanding
as of the date of this Agreement. Each outstanding share of Series A Preferred
Stock is convertible into one share of Company Common Stock. All of the
outstanding shares of Company Capital Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. Part 2.3(a)(i) of the
Company Disclosure Schedule sets forth a listing of the record stockholders of
the Company as of the most recent practicable date and the number of shares of
Company Capital Stock held by each such stockholder. Part 2.3(a)(ii) of the
Company Disclosure Schedule identifies each Contract pursuant to which the
Company has the right to repurchase, redeem or otherwise reacquire shares of
Company Capital Stock, and, with respect to each such Contract, sets forth: (i)
the effective date of such Contract; (ii) the number of shares of Company
Capital Stock subject to such Contract; and (iii) the terms of each repurchase
option contained in such Contract. Upon consummation of the Merger, the shares
of Parent Common Stock issued in exchange for the shares of Company Capital
Stock subject to a Contract that is, or is required to be, identified in Part
2.3(a)(ii) of the Company Disclosure Schedule will, without any further act of
Parent, the Company or any other Person, become subject to the restrictions,
conditions and other provisions contained in such Contract. The Company has
delivered to Parent an accurate and complete copy of each Contract identified in
Part 2.3(a)(ii) of the Company Disclosure Schedule.
(b) As of the date of this Agreement: (i) 2,929,107 shares of Company
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under the Company's 1993 Stock Option Plan; and (ii) 300,000
shares of Company Common Stock are reserved for future issuance pursuant to
stock options granted and outstanding under the Company's 1995 Special
Nonstatutory Stock Option Plan. (Stock options granted by the Company pursuant
to its stock option plans are referred to in this Agreement as "Company
Options.") Part 2.3(b)(i) of the Company Disclosure Schedule sets forth the
following information with respect to each Company Option outstanding as of the
date of this Agreement: (i) the particular plan pursuant to which such Company
Option was granted; (ii) the name of the optionee; (iii) the number of shares of
Company Common Stock subject to such Company Option; (iv) the exercise price of
such Company Option; (v) the date on which such Company Option was granted; (vi)
the extent to which such Company Option is vested as of September 18, 1996; and
(vii) the date on which such Company Option expires. No Company Option has ever
been granted under the Company's Incentive Stock Option Plan, and the Company
has received from each potential beneficiary under the Incentive Stock Option
Plan a clarification confirming that the Company has not granted any option or
other right to acquire any shares of Company Capital Stock under the
8
Incentive Stock Option Plan. The Incentive Stock Option Plan has been (or will
be within ten days after the date of this Agreement) validly terminated and is,
or within ten days after the date of this Agreement will be, no longer in
effect. Neither the "1995 Director Option Plan" nor the "1995 Employee
Qualified Stock Purchase Plan" referred to in the footnotes to the Company's
audited financial statements as of and for the year ended December 31, 1995 ever
became effective, and no option or right to purchase shares of Company Common
Stock has ever been granted or issued pursuant to either of such plans. The
Company has delivered to Parent accurate and complete copies of all stock option
plans pursuant to which the Company has ever granted stock options.
(c) Except as set forth in Part 2.3(b) of the Company Disclosure
Schedule there is no:(i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company;(ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company (except
for the 600,000 shares of Company Preferred Stock outstanding as of the date of
this Agreement, which are convertible into 600,000 shares of Company Common
Stock);(iii) Contract under which the Company is or may become obligated to sell
or otherwise issue any shares of its capital stock or any other securities; or
(iv) to the best of the knowledge of the Company, condition or circumstance that
may give rise to or provide a basis for the assertion of a claim by any Person
to the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of the Company.
(d) All outstanding shares of Company Capital Stock, all outstanding
Company Options, and all outstanding shares of capital stock of the Subsidiary
have been issued and granted in material compliance with (i) all applicable
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of the Subsidiary
are validly issued, fully paid and nonassessable and are owned beneficially and
of record by the Company, free and clear of any Encumbrances.
2.4 VSE/BCSC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent a complete and accurate copy
of each report, schedule, registration statement, information circular,
definitive proxy statement or similar document filed by the Company with the
BCSC or the VSE on or after January 1, 1993 (the "Company Reports"), which are
all the forms, reports and documents required to be filed by the Company with
the BCSC or the VSE since January 1, 1993. The Company Reports (i) complied in
all material respects with the requirements of applicable Canadian securities
laws and regulations and applicable regulations of the BCSC and the VSE at and
as of the times they were filed (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) and (ii) did not
at and as of the time they were filed (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
9
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the audited consolidated balance sheets of the Company as of
December 31, 1995 and 1994, and the related audited consolidated income
statements, statements of stockholders' equity and statements of cash flows
of the Company for the years ended December 31, 1995, 1994 and 1993,
together with the notes thereto and the unqualified report and opinion of
Xxxxxx Xxxxxxxx LLP relating thereto; and
(ii) the unaudited consolidated balance sheet of the Company as
of June 30, 1996 (the "Unaudited Interim Balance Sheet"), and the related
unaudited consolidated income statement and statement of cash flows of the
Company for the six months then ended.
(c) The Company Financial Statements present fairly the consolidated
financial position of the Acquired Corporations as of the respective dates
thereof and the consolidated results of operations and cash flows of the
Acquired Corporations for the periods covered thereby. The Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
that the financial statements referred to in Section 2.4(b)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which will not, individually or in the aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Between June 30, 1996 and the date of this
Agreement:
(a) there has not been any material adverse change in the business,
condition, assets, liabilities, operations or financial performance of
either of the Acquired Corporations, and no event has occurred that could
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the assets of either of
the Acquired Corporations (whether or not covered by insurance);
(c) neither of the Acquired Corporations has (i) declared, accrued,
set aside or paid any dividend or made any other distribution in respect of
any shares of capital stock, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities (except pursuant
to rights of repurchase of any such shares under any employee or consultant
stock plan or arrangement applicable to either of the Acquired
Corporations);
10
(d) neither of the Acquired Corporations has sold, issued or
authorized the issuance of (i) any capital stock or other security (except
for Company Common Stock issued upon the exercise of outstanding Company
Options), (ii) any option or right to acquire any capital stock or any
other security (except for Company Options granted under the Company's 1993
Stock Option Plan consistent with past practices), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of
the Company's stock option plans, (ii) any provision of any agreement
evidencing any outstanding Company Option, or (iii) any restricted stock
purchase agreement;
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of either of the
Acquired Corporations, and neither of the Acquired Corporations has
effected or been a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction or received any
Acquisition Proposal;
(g) neither of the Acquired Corporations has formed any subsidiary or
acquired any equity interest or other interest in any other Entity;
(h) neither of the Acquired Corporations has made any capital
expenditure which, when added to all other capital expenditures made on
behalf of the Acquired Corporations since June 30, 1996, exceeds $100,000
in the aggregate;
(i) except as disclosed in Part 2.10 of the Company Disclosure
Schedule, neither of the Acquired Corporations has (i) entered into or
permitted any of the material assets owned or used by it to become bound by
any Material Contract, or (ii) amended or prematurely terminated, or waived
any material right or remedy under, any Material Contract;
(j) neither of the Acquired Corporations has (i) acquired, leased or
licensed any right or other asset from any other Person, (ii) sold or
otherwise disposed of, or leased or licensed, any right or other asset to
any other Person, or (iii) waived or relinquished any right, except for
immaterial rights or other immaterial assets acquired, leased, licensed or
disposed of in the ordinary course of business and consistent with past
practices;
(k) neither of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to,
any account receivable or other indebtedness;
(l) neither of the Acquired Corporations has made any pledge of any
of its assets or otherwise permitted any of its material assets to become
subject to any
11
Encumbrance, except for (i) any lien for current taxes not yet due and
payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (individually or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair
the operations of either of the Acquired Corporations;
(m) neither of the Acquired Corporations has (i) lent money to any
Person, or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) neither of the Acquired Corporations has (i) established or
adopted any Plan, (ii) caused or permitted any Plan to be amended in any
material respect, or (iii) paid any bonus or made any profit-sharing or
similar payment to or for the benefit of any of its directors, officers or
employees in excess of $5,000 in any single case or $25,000 in the
aggregate, or materially increased the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable
to any of its directors or officers or employees;
(o) neither of the Acquired Corporations has changed any of its
methods of accounting or accounting practices in any respect;
(p) neither of the Acquired Corporations has made any material Tax
election;
(q) neither of the Acquired Corporations has commenced any Legal
Proceeding or settled any Legal Proceeding involving payments in excess of
$10,000 or involving any material asset of either of the Acquired
Corporations;
(r) neither of the Acquired Corporations has entered into any
material transaction or taken any other material action outside the
ordinary course of business or inconsistent with its past practices; and
(s) neither of the Acquired Corporations has agreed or committed to
take any of the actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS. The Acquired Corporations own, and have good, valid
and marketable title to, all assets purported to be owned by them and which are
material to either of the Acquired Corporations or to the conduct of their
business, including: (i) all assets owned by either of the Acquired Corporations
and reflected on the Unaudited Interim Balance Sheet; and (ii) all assets
referred to in Parts 2.7(b), 2.8 and 2.9 of the Company Disclosure Schedule and
all rights under the Contracts identified in Part 2.10 of the Company Disclosure
Schedule. All of said assets are owned by the Acquired Corporations free and
clear of any Encumbrances, except for (x) any lien for current taxes not yet due
and payable, and (y) minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of either of the Acquired Corporations.
12
2.7 RECEIVABLES, LOANS AND ADVANCES.
(a) All existing accounts receivable of the Acquired Corporations
(including those accounts receivable reflected on the Unaudited Interim Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since June 30, 1996 and have not yet been collected) (i) represent valid
obligations of customers of the Acquired Corporations arising from bona fide
transactions entered into in the ordinary course of business, (ii) are current
and will be collected in full when due, without any counterclaim or set off (net
of an allowance for doubtful accounts not to exceed $50,000 in the aggregate).
(b) Part 2.7(b) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of all loans and
advances made by, and note receivables and other receivables of, either of the
Acquired Corporations, including loans and advances made by either of the
Acquired Corporations to any employee, director, consultant or independent
contractor of such Acquired Corporation, other than trade receivables in excess
of $25,000 that have arisen in the ordinary course of business consistent with
past practices or routine travel advances made to employees in the ordinary
course of business.
2.8 EQUIPMENT; LEASEHOLD. Part 2.8 of the Company Disclosure Schedule
accurately identifies all material items of equipment leased by the Acquired
Corporations. All material items of equipment and other tangible assets owned
by or leased to the Acquired Corporations are adequate for the uses to which
they are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the business of the Acquired
Corporations in the manner in which such business is currently being conducted.
Neither of the Acquired Corporations owns any real property or any interest in
real property, except for the leaseholds created under the real property leases
identified in Part 2.8 of the Company Disclosure Schedule.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned by the Acquired Corporations and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.9(a)(ii) of the Company Disclosure Schedule identifies
and provides a brief description of all other Proprietary Assets owned by the
Acquired Corporations that are material to the business of the Acquired
Corporations. Part 2.9(a)(iii) of the Company Disclosure Schedule identifies
and provides a brief description of each Proprietary Asset that is licensed or
otherwise made available to the Acquired Corporations by any Person and is
material to the business of the Acquired Corporations (except for any
Proprietary Asset that is licensed to the Acquired Corporations under any third
party software license generally available to the public), identifies the
Contract under which such Proprietary Asset is being licensed or otherwise made
available to such Acquired Corporation. The Acquired Corporations have good,
valid and marketable title to all of the Acquired Corporation Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) of the Company Disclosure Schedule,
free and clear of all Encumbrances,
13
except for (i) any lien for current taxes not yet due and payable, and (ii)
minor liens that have arisen in the ordinary course of business and that do not
(individually or in the aggregate) materially detract from the value of the
assets subject thereto or materially impair the operations of either of the
Acquired Corporations. The Acquired Corporations have a valid right to use,
license and otherwise exploit all Proprietary Assets identified in Part
2.9(a)(iii) of the Company Disclosure Schedule. Except as set forth in Part
2.9(a)(iv) of the Company Disclosure Schedule, neither of the Acquired
Corporations has developed jointly with any other Person any Acquired
Corporation Proprietary Asset that is material to the business of the Acquired
Corporations with respect to which such other Person has any rights. Except as
set forth in Part 2.9(a)(v) of the Company Disclosure Schedule, there is no
Acquired Corporation Contract (with the exception of end user license agreements
in the form previously delivered by the Company to Parent) pursuant to which any
Person has any right (whether or not currently exercisable) to use, license or
otherwise exploit any Acquired Corporation Proprietary Asset. Without limiting
the generality of the foregoing, no Person has any right or license to use,
sell, manufacture or cause to be manufactured any product embodying any
invention or discovery made, conceived or actually reduced to practice in
connection with the performance of any Contract, except that the distributors of
the Acquired Corporations have the non-exclusive right to sell products
manufactured by the Acquired Corporations pursuant to their distribution
agreements with the Acquired Corporations.
(b) The Acquired Corporations have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Acquired Corporation Proprietary Assets (except Acquired
Corporation Proprietary Assets whose value would be unimpaired by public
disclosure). No current or former officer, director, stockholder, employee,
consultant or independent contractor has any right, claim or interest in or with
respect to any Acquired Corporation Proprietary Asset.
(c) To the best of the knowledge of the Company, all patents,
trademarks, service marks and copyrights that are registered with any
Governmental Body and held by either of the Acquired Corporations are valid and
subsisting. To the best of the knowledge of the Company, none of the Acquired
Corporation Proprietary Assets and no Proprietary Asset that is currently being
developed by either of the Acquired Corporations (either by itself or with any
other Person) infringes, misappropriates or conflicts with any Proprietary Asset
owned or used by any other Person. To the best of the knowledge of the Company,
none of the products that are or have been designed, created, developed,
assembled, manufactured or sold by either of the Acquired Corporations is
infringing, misappropriating or making any unlawful or unauthorized use of, and
none of such products has at any time infringed, misappropriated or made any
unlawful or unauthorized use of, and neither of the Acquired Corporations has
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful or unauthorized use of, any Proprietary Asset owned or used by any
other Person. To the best of the knowledge of the Company, no other Person is
infringing, misappropriating or making any unlawful or unauthorized use of, and
no Proprietary Asset owned or used by any other Person infringes or conflicts
with, any material Acquired Corporation Proprietary Asset.
14
(d) The Acquired Corporation Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Acquired Corporations to conduct
their business in the manner in which such business has been and is being
conducted. Neither of the Acquired Corporations has (i) licensed any of the
Acquired Corporation Proprietary Assets to any Person on an exclusive basis, or
(ii) entered into any covenant not to compete or Contract limiting its ability
to exploit fully any material Acquired Corporation Proprietary Assets or to
transact business in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.9(e) of the Company Disclosure
Schedule, neither of the Acquired Corporations has (other than pursuant to
license or escrow agreements identified in Part 2.10 of the Company Disclosure
Schedule) disclosed or delivered to any Person, or permitted the disclosure or
delivery to any escrow agent or other Person, of the source code, or any portion
or aspect of the source code, or any proprietary information or algorithm
contained in any source code, of any material Acquired Corporation Proprietary
Asset. No event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will, or could reasonably be expected
to, result in the disclosure or delivery to any other Person of the source code,
or any portion or aspect of the source code, or any proprietary information or
algorithm contained in any source code, of any material Acquired Corporation
Proprietary Asset. Part 2.9(e) of the Company Disclosure Schedule identifies
each Contract pursuant to which the Company has deposited or is required to
deposit with an escrowholder or any other Person the source code, or any portion
or aspect of the source code, or any proprietary information or algorithm
contained in or relating to any source code, of any material Acquired
Corporation Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10 of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a Material Contract.
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Company Disclosure
Schedule, including all amendments thereto. Each Contract identified in Part
2.10 of the Company Disclosure Schedule is valid and in full force and effect,
and is enforceable by the Company in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Company Disclosure
Schedule:
(i) neither of the Acquired Corporations has violated or
breached, or committed any default under, any Acquired Corporation
Contract, and, to the best of the knowledge of the Company, no other Person
has violated or breached, or committed any default under, any Company
Contract, except where such violations, breaches or defaults,
15
individually or in the aggregate, have not had and will not have a Material
Adverse Effect on the Acquired Corporations;
(ii) to the best of the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or could reasonably be expected to, (A)
result in a material violation or breach of any of the provisions of any
Acquired Corporation Contract, (B) give any Person the right to declare a
material default or exercise any material remedy under any Acquired
Corporation Contract, (C) give any Person the right to a material rebate,
chargeback, penalty or change in delivery schedule under any Acquired
Corporation Contract, (D) give any Person the right to accelerate the
maturity or performance of any Acquired Corporation Contract, or (E) give
any Person the right to cancel, terminate or modify any Acquired
Corporation Contract;
(iii) since December 31, 1993, neither of the Acquired
Corporations has received any notice or other communication regarding any
actual or possible violation or breach of, or default under, any Acquired
Corporation Contract; and
(iv) neither of the Acquired Corporations has waived any of its
material rights under any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Acquired Corporation Contract to renegotiate, any amount paid or payable
to any Acquired Corporation under any Material Contract or any other material
term or provision of any Material Contract.
2.11 LIABILITIES. Neither of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured (of
the type required to be reflected in a balance sheet of the Acquired
Corporations prepared in accordance with generally accepted accounting
principles, except for: (a) liabilities identified as such in the "liabilities"
column of the Unaudited Interim Balance Sheet; and (b) liabilities that have
been incurred by the Acquired Corporations since June 30, 1996 in the ordinary
course of business and consistent with past practices.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired Corporations
is, and has at all times since December 31, 1993 been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and will not have a Material Adverse Effect on
the Acquired Corporations. Since December 31, 1993, except as disclosed in Part
2.15 of the Company Disclosure Schedule, neither of the Acquired Corporations
has received any notice or other communication from any Governmental Body
regarding any actual or possible violation of, or failure to comply with, any
Legal Requirement.
2.13 CERTAIN BUSINESS PRACTICES. Neither of the Acquired Corporations nor
any director, officer, agent or employee of either of the Acquired Corporations
has (i) used any funds
16
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
2.14 GOVERNMENTAL AUTHORIZATIONS. The Acquired Corporations hold all
material Governmental Authorizations necessary to enable the Acquired
Corporations to conduct their respective businesses in the manner in which such
businesses are currently being conducted. All such Governmental Authorizations
are valid and in full force and effect. Each Acquired Corporation is, and at
all times since December 31, 1993 has been, in substantial compliance with the
terms and requirements of such Governmental Authorizations. Since December 31,
1993, neither of the Acquired Corporations has received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any material
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization.
2.15 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the "Acquired Corporation
Returns") (i) have been or will be filed on or before the applicable due date
(including any extensions of such due date), and (ii) have been, or will be when
filed, prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Acquired Corporation Returns to be due
on or before the Closing Date have been or will be paid on or before the Closing
Date.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. Each
Acquired Corporation will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from June 30, 1996 through the Closing Date. As of
December 31, 1995, the Company had a net operating loss carryforward for federal
income tax purposes in the amount of $2,000,000.
(c) No Acquired Corporation Return relating to income Taxes has ever
been examined or audited by any Governmental Body. There have been no
examinations or audits of any Acquired Corporation Return. No extension or
waiver of the limitation period applicable to any of the Acquired Corporation
Returns has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the best of the
knowledge of the Company, has been threatened against or with respect to any
Acquired Corporation in respect of any material Tax. There are no unsatisfied
liabilities for material Taxes (including
17
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by any Acquired Corporation with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Acquired Corporations
and with respect to which adequate reserves for payment have been established).
There are no liens for material Taxes upon any of the assets of either of the
Acquired Corporations except liens for current Taxes not yet due and payable.
Neither of the Acquired Corporations has entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Neither of the
Acquired Corporations has been, and neither of the Acquired Corporations will
be, required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of either of the Acquired Corporations that, considered
individually or collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Section 162
of the Code. Neither of the Acquired Corporations is, or has ever been, a party
to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract.
2.16 EMPLOYEE BENEFIT PLANS
(a) With respect to each material employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") maintained or contributed to by the Acquired
Corporations (the "Plans"), the Acquired Corporations have made available to
Parent an accurate and complete copy of, to the extent applicable, (i) such
Plan, (ii) the most recent annual report (Form 5500) for such Plan, (iii) each
trust agreement related to such Plan, (iv) the most recent summary plan
description for such Plan, and (v) the most recent Internal Revenue Service (the
"IRS") determination letter issued with respect to such Plan.
(b) Each Plan which is intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the IRS covering the
provisions of the Tax Reform Act of 1986 stating that such Plan is so qualified
and nothing has occurred since the date of such letter that could reasonably be
expected to affect the qualified status of such Plan. Each Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law. Neither of the Acquired Corporations has
incurred or is reasonably expected to incur any material liability under Title
IV of ERISA in connection with any Plan.
2.17 ENVIRONMENTAL MATTERS. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Corporations of
all permits and other Governmental Xxxxxxx-
00
zations required under applicable Environmental Laws, and compliance with the
terms and conditions thereof. Neither of the Acquired Corporations has received
any notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
either of the Acquired Corporations is not in compliance with any Environmental
Law, and, to the best of the knowledge of the Company, there are no
circumstances that may prevent or interfere with the compliance by either of the
Acquired Corporations with any Environmental Law in the future. To the best of
the knowledge of the Company, no current or prior owner of any property leased
or controlled by either of the Acquired Corporations has received any notice or
other communication (in writing or otherwise), whether from a Government Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or either of the Acquired Corporations is not in compliance with any
Environmental Law. (For purposes of this Section 2.17: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
2.18 INSURANCE. The Company has delivered to Parent a copy of each
material insurance policy and each material self insurance program relating to
the business, assets or operations of either of the Acquired Corporations. Each
such insurance policy is in full force and effect. Since December 31, 1993,
neither of the Acquired Corporations has received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy, (b) refusal of any coverage or rejection of any
material claim under any insurance policy, or (c) material adjustment in the
amount of the premiums payable with respect to any insurance policy. There is
no pending material claim (including any workers' compensation claim) under or
based upon any insurance policy of either of the Acquired Corporations; and, to
the best of the knowledge of the Company, no event has occurred and no condition
or circumstance exists, that might (with or without notice or lapse of time)
directly or indirectly give rise to or serve as a basis for any such claim.
2.19 RELATED PARTY TRANSACTIONS. No Related Party has any direct or
indirect interest in any material asset used in or otherwise relating to the
business of either of the Acquired Corporations. No Related Party has any
direct or indirect financial interest in, any material Contract, transaction or
business dealing involving either of the Acquired Corporations. No Related
Party is competing directly or indirectly with either of the Acquired
Corporations. No Related Party has any claim or right against either of the
Acquired Corporations (other than rights under Company Options and rights to
receive compensation for services performed as an employee of an Acquired
Corporation). (For purposes of this Section 2.19 each of the following shall be
deemed to be a "Related Party": (i) each individual who is an officer or
director of
19
either of the Acquired Corporations; (ii) each member of the immediate family
of each of the individuals referred to in clause "(i)" above; and (iii) any
trust or other Entity (other than an Acquired Corporation) in which any one of
the individuals referred to in clauses "(i)" and "(ii)" above holds (or in which
more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.)
2.20 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the best of the
knowledge of the Company) no Person has threatened to commence any Legal
Proceeding: (i) that involves either of the Acquired Corporations or any of the
assets owned or used by either of the Acquired Corporations; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the best of the knowledge of the Company, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that will, or that could reasonably be expected to, give rise to or
serve as a basis for the commencement of any such Legal Proceeding. Without
limiting the generality of the foregoing, to the best of the knowledge of the
Company, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, cause
or provide a basis for a director, officer or other Representative of either of
the Acquired Corporations to seek indemnification from, or commence a Legal
Proceeding against or involving, either of the Acquired Corporations.
(b) There is no order, writ, injunction, judgment or decree to which
either of the Acquired Corporations, or any of the assets owned or used by
either of the Acquired Corporations, is subject. To the best of the knowledge
of the Company, no officer or other employee of either of the Acquired
Corporations is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of either of the Acquired
Corporations.
2.21 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES; BINDING NATURE
OF AGREEMENT. The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement.
The board of directors of the Company (at a meeting duly called and held) has
(a) unanimously determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders, (b) unanimously approved the
execution, delivery and performance of this Agreement by the Company and has
unanimously approved the Merger, (c) unanimously recommended the adoption and
approval of this Agreement and the Merger by the holders of Company Capital
Stock and directed that this Agreement and the Merger be submitted for
consideration by the Company's stockholders at the Company Stockholders' Meeting
(as defined in Section 5.2), and (d) adopted a resolution having the effect of
causing the Company not to be subject to any state takeover law or similar Legal
Requirement that might otherwise apply to the Merger or any of the other
transactions contepplated by this Agreement. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of general
20
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.22 DGCL SECTION 203. As of the date hereof and at all times on or prior
to the Effective Date, Section 203 of the DGCL is, and will be, inapplicable to
the Merger and the other transactions contemplated by this Agreement.
2.23 INAPPLICABILITY OF XXXX-XXXXX-XXXXXX ACT. No stockholder of the
Company directly or indirectly beneficially owns or has the right to vote 50% or
more of the outstanding voting securities of the Company, or, directly or
indirectly, has the right (whether by Contract or otherwise) to elect 50% or
more of the members of the Board of Directors of the Company. Accordingly, the
Company is the "ultimate parent entity" of the Acquired Corporations for
purposes of the HSR Act. The total assets (within the meaning of the HSR Act)
of the Acquired Corporations are less than $10,000,000 in the aggregate, and
accordingly no notification form or other document is required to be filed under
the HSR Act with respect to the Merger or any of the other transactions
contemplated by this Agreement.
2.24 VOTE REQUIRED. The Required Vote (as hereinafter defined) is the only
vote of the holders of any class or series of the Company's capital stock
necessary to adopt and approve this Agreement, the Merger and the other
transactions contemplated by this Agreement. For purposes of this Agreement,
"Required Vote" shall mean the affirmative vote of the holders of a majority of
the outstanding shares of Company Capital Stock (voting together as a single
class); PROVIDED, HOWEVER, that if the Company is subject to Section 2115 of the
California Corporations Code, then "Required Vote" shall mean the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock and the holders of a majority of the outstanding shares of Company
Preferred Stock.
2.25 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the certificate of incorporation, bylaws or other charter
or organizational documents of either of the Acquired Corporations, or (ii)
any resolution adopted by the stockholders, the board of directors or any
committee of the board of directors of either of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person
21
the right to challenge the Merger or any of the other transactions
contemplated by this Agreement or to exercise any remedy or obtain any
relief under, any Legal Requirement or any order, writ, injunction,
judgment or decree to which either of the Acquired Corporations, or any
22
of the assets owned or used by either of the Acquired Corporations, is
subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any material
Governmental Authorization that is held by either of the Acquired
Corporations or that otherwise relates to the business of either of the
Acquired Corporations or to any of the assets owned or used by either of
the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute a Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy under any
such Acquired Corporation Contract, (ii) a rebate, chargeback, penalty or
change in delivery schedule under any such Acquired Corporation Contract,
(iii) accelerate the maturity or performance of any such Acquired
Corporation Contract, or (iv) cancel, terminate or modify any term of such
Acquired Corporation Contract, except for any such violations, breaches,
defaults or other occurrences that would not have a Material Adverse Effect
on the Acquired Corporations;
(e) result in the imposition or creation of any Encumbrance upon or
with respect to any asset owned or used by either of the Acquired
Corporations (except for minor liens that will not, in any case or in the
aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of either of the Acquired
Corporations); or
(f) result in, or increase the likelihood of, the disclosure or
delivery to any escrowholder or other Person (other than Parent or Merger
Sub) of the source code, or any portion or aspect of the source code, or
any proprietary information or algorithm contained in or relating to any
source code, of any material Acquired Corporation Proprietary Asset, or the
transfer of any material asset of either of the Acquired Corporations to
any Person (other than Parent or Merger Sub).
23
Except as may be required by the DGCL, neither of the Acquired Corporations is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement. The Company does not know of any
reason why any required Consent will not be obtained.
2.26 FAIRNESS OPINION. The Company has received the written opinion of DMG
Technology Group, financial advisor to the Company, dated the date of this
Agreement, to the effect that the consideration to be received by the Company's
stockholders in the Merger is fair to the stockholders of the Company from a
financial point of view.
2.27 FINANCIAL ADVISOR. Except for DMG Technology Group, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
either of the Acquired Corporations. The total of all fees, commissions and
other amounts that have been paid and that may become payable to DMG Technology
Group by the Company if the Merger is consummated will not exceed that amount
disclosed in writing to Parent on or before the date of this Agreement.
2.28 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule) does
not, and the certificate referred to in Section 6.7(j) will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein (in the light of the circumstances under which such
representations, warranties and information were or will be made or provided)
not false or misleading.
(b) None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the registration statement on
Form S-4 to be filed with the SEC by Parent in connection with the issuance of
Parent Common Stock in the Merger (the "S-4 Registration Statement") will, at
the time the S-4 Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the Prospectus/Proxy Statement
filed as part of the S-4 Registration Statement (the "Prospectus/Proxy
Statement"), will, at the time the Prospectus/Proxy Statement is mailed to the
stockholders of the Company, at the time of the Company Stockholders' Meeting or
as of the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
24
which they are made, not misleading. The Prospectus/Proxy Statement will comply
as to form in all material respects with the provisions of applicable Legal
Requirements.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company that, except as
set forth in the Parent SEC Documents (as defined in Section 3.2(a)):
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby.
3.2 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Parent with the SEC
between January 1, 1996 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby.
3.3 DISCLOSURE. None of the information to be supplied by Parent for
inclusion in the S-4 Registration Statement will, at the time the S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
25
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. None of the information to be supplied by Parent for inclusion in
the Prospectus/Proxy Statement will, at the time the Prospectus/Proxy Statement
is mailed to the stockholders of the Company, at the time of the Company
Stockholders' Meeting or as of the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
3.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Between June 30, 1996 and the
date of this Agreement, there has not been: (i) any event that had a Material
Adverse Effect on Parent; or (ii) any material change by Parent in its
accounting methods, principles or practices, except as required by changes in
generally accepted accounting principles.
3.5 LEGAL PROCEEDINGS. There is no pending Legal Proceeding and (to the
best of the knowledge of Parent) no Person has threatened to commence any Legal
Proceeding that involves Parent or any of the assets owned or used by Parent and
would have a Material Adverse Effect on Parent.
3.6 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. This Agreement constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against them
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
3.7 VALID ISSUANCE. The Parent Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives and the Subsidiary's Representatives
to: (a) provide Parent and Parent's Representatives with reasonable access to
the Acquired Corporations' Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and (b) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations, and with such additional
26
financial, operating and other data and information regarding the Acquired
Corporations, as Parent may reasonably request. Without limiting the generality
of the foregoing, during the Pre-Closing Period, the Company shall promptly
provide Parent with copies of:
(i) all material operating and financial reports prepared by the
Company for its senior management, including copies of the unaudited
monthly consolidated balance sheets of the Acquired Corporations and the
related unaudited monthly consolidated income statements, statements of
changes in stockholders' equity and statements of cash flows;
(ii) any written materials or communications sent by the Company to
its stockholders; and
(iii) any notice, report or other document filed with or sent to
any Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Corporations conducts its business and operations (A) in
the ordinary course and in accordance with prudent business practices and (B) in
compliance with all applicable Legal Requirements and the requirements of all
Material Contracts; (ii) the Company shall use reasonable efforts to ensure that
each of the Acquired Corporations preserves intact its current business
organization, keeps available the services of its current officers and employees
and maintains its relations and goodwill with all suppliers, customers,
landlords, creditors, licensors, licensees, employees and other Persons having
business relationships with the respective Acquired Corporations; (iii) the
Company shall keep in full force all insurance policies referred to in Section
2.18; (iv) the Company shall provide all notices, assurances and support
required by any Acquired Corporation Contract relating to any Proprietary Asset
in order to ensure that no condition under such Acquired Corporation Contract
occurs which could result in, or could increase the likelihood of, a release
from any escrow of any source code materials or other Proprietary Assets which
have been deposited or are required to be deposited in escrow under the terms
of such Acquired Corporation Contract; and (v) the Company shall (to the extent
requested by Parent) cause its officers to report regularly to Parent concerning
the status of the Company's business.
(b) During the Pre-Closing Period, the Company shall not (without
the prior written consent of Parent), and shall not permit the Subsidiary to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
27
(ii) sell, issue, grant or authorize the issuance or grant of (i) any
capital stock or other security, (ii) any option, call, warrant or right to
acquire, or relating to, any capital stock or other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security (except that the Company may (1) issue up to 600,000 shares of
Company Common Stock upon the valid conversion of shares of outstanding
Company Preferred Stock, and (2) issue Company Common Stock upon the valid
exercise of Company Options outstanding as of the date of this Agreement);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or
any restricted stock purchase agreement, or otherwise modify any of the
terms of any outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any amendment to its certificate
of incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(v) form any subsidiary or acquire any equity interest or other
interest in any other Entity;
(vi) make any capital expenditure (except that the Acquired
Corporations may make capital expenditures that, when added to all other
capital expenditures made on behalf of the Acquired Corporations during the
Pre-Closing Period, do not exceed $100,000 in the aggregate);
(vii) enter into or become bound by, or permit any of the assets
owned or used by it to become bound by, any Material Contract, or amend or
prematurely terminate, or waive any material right or remedy under, any
Material Contract;
(viii) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with prudent business practices), or
waive or relinquish any material right;
(ix) lend money to any Person, or incur or guarantee any indebtedness
(except that the Company may make routine borrowings in the ordinary course
of business and in accordance with prudent business practices under its
line of credit with Coast Commercial Bank);
28
(x) establish, adopt or amend any employee benefit plan, pay any
bonus or make any profit-sharing or similar payment (except pursuant to
existing plans or programs consistent with past practices) to, or increase
by more than 5% the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its
directors, officers or employees;
(xi) hire any new employees, or engage any consultant or independent
contractor for a period exceeding 30 days;
(xii) change any of its methods of accounting or accounting
practices in any respect;
(xiii) make any material Tax election;
(xiv) commence any Legal Proceeding, or enter into any settlement
of any Legal Proceeding involving payments in excess of $10,000 or
involving any material asset of either of the Acquired Corporations;
(xv) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with prudent
business practices; or
(xvi) agree or commit to take any of the actions described in
clauses "(i)" through "(xv)" of this Section 4.2(b).
Parent agrees that it will not unreasonably withhold its consent to any proposal
by the Company to repurchase shares of Company Common Stock pursuant to rights
of repurchase existing as of the date of this Agreement under any employee or
consultant stock plan or arrangement.
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement, which
inaccuracy or breach, considered together with all other such inaccuracies and
breaches, would have a Material Adverse Effect on the Acquired Corporations;
(ii) any event, condition, fact or circumstance that occurs, arises or exists
after the date of this Agreement, that (together with all other such events,
conditions, facts and circumstances) would have a Material Adverse Effect on the
Acquired Corporations and that would cause or constitute an inaccuracy in or
breach of any representation or warranty made by the Company in this Agreement
if (A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Section 6 or Section 7
29
impossible or unlikely or that has had or could reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations.
4.3 NO SOLICITATION.
(a) The Company shall not directly or indirectly, and shall instruct
its Representatives and the Subsidiary's Representatives not to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal or take any action that could
reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any
information regarding the Company or the Subsidiary to any Person in connection
with or in response to an Acquisition Proposal, (iii) negotiate or engage in
discussions with any Person with respect to any Acquisition Proposal, (iv)
approve, endorse or recommend any Acquisition Proposal or (v) enter into any
letter of intent or Contract contemplating or otherwise relating to any
Acquisition Proposal; PROVIDED, HOWEVER, that this Section 4.3(a) shall not
prohibit the Company or its Board of Directors from furnishing nonpublic
information regarding the Acquired Corporations to, or entering into discussions
with, any Person in response to an unsolicited bona fide written Acquisition
Proposal submitted by such Person if (1) the Board of Directors of the Company
concludes in good faith, based upon the advice of its financial advisor, that
such Acquisition Proposal could result in a transaction that is more favorable
to the Company's stockholders from a financial point of view than the Merger,
(2) the Board of Directors of the Company concludes in good faith, based upon
the advice of its outside legal counsel, that such action is required in order
for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under applicable law, and (3) prior to
furnishing such nonpublic information to, or entering into discussions with,
such Person, the Board of Directors of the Company receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all written and oral information furnished to such Person on
behalf of the Company.
(b) The Company shall promptly advise Parent orally and in writing of
any Acquisition Proposal that is made or submitted by any Person during the
Pre-Closing Period.
(c) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any Person that relate to any
Acquisition Proposal.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; PROSPECTUS/PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent shall prepare and cause to be filed with the SEC the S-4
Registration Statement, together with the Prospectus/Proxy Statement and any
other documents required by the Securities Act or the Exchange Act in connection
with the Merger. Each of Parent and the Company shall use all reasonable
efforts to cause the S-4 Registration Statement to comply with the rules and
30
regulations promulgated by the SEC, to respond promptly to any comments of the
SEC or its staff and to have the S-4 Registration Statement declared effective
under the Securities Act as promptly as practicable after it is filed with the
SEC. Each of Parent and the Company shall promptly furnish to the other all
information that may be required or reasonably requested in connection with any
action contemplated by this Section 5.1. If any event relating to either of the
Acquired Corporations or relating to Parent occurs, or if the Company or Parent
discovers any information, that should be set forth in an amendment or
supplement to the S-4 Registration Statement or the Prospectus/Proxy Statement,
then the Company or Parent (as the case may be) shall promptly inform the other
thereof and shall cooperate with the other in filing such amendment or
supplement with the SEC and, if appropriate, in mailing such amendment or
supplement to stockholders of the Company. Each of the Company and Parent shall
(after consulting with the other) use all reasonable efforts to ensure that any
applicable rules, regulations or requirements of the VSE or the BCSC relating to
the S-4 Registration Statement or the Prospectus/Proxy Statement are complied
with in all respects.
(b) Prior to the Effective Time, Parent shall use reasonable efforts
to obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be qualified under the securities law of every
jurisdiction of the United States and Canada in which any registered holder of
Company Capital Stock has an address of record on the record date for
determining the stockholders entitled to notice of and to vote on the Merger.
5.2 COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of, convene and hold a meeting of the
holders of Company Capital Stock (the "Company Stockholders' Meeting") to
consider, act upon and vote upon the adoption of this Agreement and approval of
the Merger. The Company Stockholders' Meeting will be held as promptly as
practicable and (subject to all applicable laws and regulations) in any event
within 45 days after the S-4 Registration Statement is declared effective by the
SEC. The Company shall ensure that the Company Stockholders' Meeting is called,
noticed, convened, held and conducted, and that all proxies solicited in
connection with the Company Stockholders' Meeting are solicited, in compliance
with all applicable Legal Requirements (including any applicable regulations of
the VSE). The Company's obligation to call, give notice of, convene and hold
the Company Stockholders' Meeting in accordance with this Section 5.2(a) shall
not be limited or otherwise affected by the commencement, disclosure,
announcement or submission to the Company of any Acquisition Proposal.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the
Company shall recommend that the Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the Company Stockholders'
Meeting; (ii) the Prospectus/Proxy Statement shall include a statement to the
effect that the Board of Directors of the Company has recommended that the
Company's stockholders vote in favor of and adopt and approve this Agreement and
the Merger at the Company Stockholders' Meeting; and (iii) neither the Board of
Directors of the Company nor any committee thereof shall withdraw, amend or
modify, or
31
propose or resolve to withdraw, amend or modify, in a manner adverse to Parent,
the recommendation of the Board of Directors of the Company that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger.
(c) Nothing in this Agreement shall prevent the Board of Directors of
the Company from withdrawing, amending or modifying its recommendation in favor
of the Merger if (i) the Company shall not have violated any of the restrictions
set forth in Section 4.3, and (ii) the Board of Directors of the Company
concludes in good faith, based upon the advice of its outside counsel, that the
withdrawal, amendment or modification of such recommendation is required in
order for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company's stockholders under applicable law. Nothing
contained in this Section 5.2 shall limit the Company's obligation to hold and
convene the Company Stockholders' Meeting (regardless of whether the
recommendation of the Board of Directors of the Company shall have been
withdrawn, amended or modified).
5.3 REGULATORY APPROVALS. The Company and Parent shall use all reasonable
efforts to file as soon as practicable after the date of this Agreement all
notices, reports and other documents required by law to be filed with any
Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement and to submit promptly any additional information
requested by any such Governmental Body. Each of the Company and Parent shall
(i) give the other party prompt notice of the commencement of any material Legal
Proceeding by or before any court or other Governmental Body with respect to the
Merger or any of the other transactions contemplated by this Agreement, (ii)
keep the other party informed as to the status of any such Legal Proceeding and
(iii) except as may be prohibited by any Governmental Body or by any Legal
Requirement, permit the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document filed with or provided to any Governmental Body in
connection with any such Legal Proceeding.
5.4 STOCK OPTIONS.
(a) As soon as practicable after the date of this Agreement, the
Company shall (after consulting with Parent) make arrangements to cause each
outstanding Company Option with a per share exercise price exceeding the
Specified Price (as defined below) to be modified by reducing such exercise
price to an amount equal to the Specified Price. The "Specified Price" shall be
determined by multiplying the Common Stock Exchange Ratio by the closing price
of a share of Parent Common Stock on the NYSE on the second trading day
following the date of this Agreement. The Company shall not be permitted to
implement such arrangements unless Parent shall have notified the Company in
writing that all documentation to be used for the purpose of implementing such
arrangements is satisfactory to Parent.
(b) Subject to Section 5.4(c), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such
32
Company Option in accordance with the terms (as in effect as of the date of this
Agreement) of the stock option plan under which it was issued and the stock
option agreement by which it is evidenced. From and after the Effective Time,
(i) each Company Option assumed by Parent may be exercised solely for shares of
Parent Common Stock, (ii) the number of shares of Parent Common Stock subject to
each such Company Option shall be equal to the number of shares of Company
Common Stock subject to such Company Option immediately prior to the Effective
Time multiplied by the Common Stock Exchange Ratio, rounding down to the nearest
whole share (with cash, less the applicable exercise price (as adjusted as set
forth in clause "(iii)" of this sentence), being payable for any fraction of a
share), (iii) the per share exercise price under each such Company Option shall
be adjusted by dividing the per share exercise price under such Company Option
by the Common Stock Exchange Ratio and rounding up to the nearest cent and (iv)
any restriction on the exercise of any such Company Option shall continue in
full force and effect and the term, exercisability, vesting schedule and other
provisions of such Company Option shall otherwise remain unchanged; PROVIDED,
HOWEVER, that each such Company Option shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction subsequent to the Effective Time. After the Effective Time,
Parent will deliver to each holder of an outstanding Company Option a notice
describing the assumption of such Company Option. It is the intention of the
parties that Company Stock Options assumed by Parent qualify as incentive stock
options as defined in Section 422 of the Code to the extent that they qualified
as incentive stock options immediately prior to the Effective Time. Parent
agrees to file with the SEC a Registration Statement on Form S-8 relating to the
shares of Parent Common Stock issuable with respect to the assumed Company
Options no later than ten business days after the Closing Date.
(c) Notwithstanding anything to the contrary contained in this
Section 5.4, in lieu of assuming outstanding Company Options in accordance with
Section 5.4(b), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing reasonably equivalent replacement stock
options in substitution therefor.
(d) The Company shall take all action that may be necessary (under
the plans pursuant to which Company Options are outstanding and otherwise) to
effectuate the provisions of this Section 5.4 and to ensure that, from and after
the Effective Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section 5.4.
5.5 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of the present
directors and officers of the Company for acts and omissions occurring prior to
the Effective Time, as provided in the Company's Certificate of Incorporation
(as in effect on the date of this Agreement) and the Company's Bylaws (as in
effect as of the date of this Agreement), shall survive the Merger and shall be
observed by the Surviving Corporation for a period of not less than six years
from the Effective Time.
33
(b) Commencing as of the Effective Time, for a period of six years
from the Effective Time, Parent shall, and shall cause the Surviving Corporation
to, to the fullest extent permitted under applicable law, indemnify and hold
harmless each of the present directors and officers of the Company
(collectively, the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees, judgments, fines, losses, damages,
liabilities and amounts paid in settlement) incurred by him in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative (a "Third Party Action"), to the extent such
Third Party Action arises out of or pertains to any action or omission in his
capacity as a director or officer of the Company arising out of or pertaining to
the transactions contemplated by this Agreement. In the event of any such Third
Party Action (whether commenced before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time must be reasonably satisfactory to the Surviving Corporation and Parent,
(ii) after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, pay the reasonable fees and expenses of such counsel related to
the defense of such Third Party Action, promptly after statements therefor are
received, and (iii) Parent shall, and shall cause the Surviving Corporation to,
cooperate in the defense of such Third Party Action; PROVIDED, HOWEVER, that
neither Parent nor the Surviving Corporation will be liable for any settlement
effected without the written consent of Parent and the Surviving Corporation
(which consent will not be unreasonably withheld); and PROVIDED, FURTHER, that
in the event any claim for indemnification is asserted or made hereunder by an
Indemnified Party against Parent or the Surviving Corporation within such
six-year period, all rights of such Indemnified Party to indemnification in
respect of such claim will continue until the disposition of such claim. Parent
and the Surviving Corporation shall be entitled to participate in (but not
control) the defense of any such Third Party Action, and shall be entitled to
receive full information with respect to any such Third Party Action. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to any Third Party Action unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) This Section 5.5 is intended to benefit the Indemnified Parties
commencing as of the Effective Time, and will be binding on the successors of
Parent and the Surviving Corporation after the Effective Time.
5.6 ADDITIONAL AGREEMENTS.
(a) Subject to Section 5.6(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, but subject
to Section 5.6(b), each party to this Agreement (i) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, (ii) shall use all reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) shall use all
34
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. The Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by the Company
during the Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in Section
5.6(a) or elsewhere in this Agreement, Parent shall not have any obligation
under this Agreement to (i) dispose or cause any of its subsidiaries to dispose
of any assets, (ii) discontinue offering any product or make any other change to
its operations or proposed operations or to the operations or proposed
operations of any of its subsidiaries or (iii) make any commitment (to any
Governmental Body or otherwise) regarding its future operations, or the future
operations of any of its subsidiaries, or the future operations of the Surviving
Corporation or the Subsidiary (even though the disposition of such assets or the
making of such change or commitment might facilitate the obtaining of a required
Governmental Authorization or might otherwise facilitate the consummation of the
Merger).
5.7 DISCLOSURE. Parent and the Company shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger or any of the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Company shall
not, and shall not permit any of its Representatives to, make any disclosure
regarding the Merger or any of the other transactions contemplated by this
Agreement unless (a) Parent shall have approved such disclosure or (b) the
Company shall have been advised by its outside legal counsel that such
disclosure is required by applicable law.
5.8 AFFILIATE AGREEMENTS. The Company shall deliver to Parent, within ten
days after the date of this Agreement, a letter from the Company identifying all
Persons who may be "affiliates" of the Company as that term is used in Rule 145
under the Securities Act. The Company shall use all reasonable efforts to cause
each Person identified in such letter and each other Person who is or becomes an
"affiliate" of the Company to execute and deliver to Parent, prior to the date
of the mailing of the Prospectus/Proxy Statement, an Affiliate Agreement in a
form reasonably satisfactory to Parent.
5.9 TAX MATTERS. At or prior to the Closing, the Company and Parent shall
execute and deliver to Xxxxxx Godward LLP and to Wilson, Sonsini, Xxxxxxxx &
Xxxxxx, P.C. appropriate tax representation letters (which will be used in
connection with the legal opinions contemplated by Sections 6.5(b) and 7.4(b)).
5.10 RESIGNATION OF OFFICERS AND DIRECTORS. The Company shall use all
reasonable efforts to obtain and deliver to Parent prior to the Closing the
resignation of each officer and director of the Company.
5.11 EMPLOYEE BENEFITS. Parent agrees that, immediately following the
Effective Time, it will make available to each employee of the Company who
continues as an employee of the Surviving Corporation or Parent, employee
benefit plans and policies of Parent that are at least as favorable as the plans
and policies of Parent in effect immediately prior to the Effective Time,
35
and will provide each such employee with credit (for purposes of participation
in Parent's employee benefit plans and policies) for service as an employee of
the Company prior to the Effective Time.
5.12 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
the Company contained in this Agreement shall have been accurate in all respects
as of the date of this Agreement and shall be accurate in all respects as of the
Closing Date as if made on and as of the Closing Date, except that any
inaccuracies in such representations and warranties will be disregarded if the
circumstances giving rise to all such inaccuracies (considered collectively) do
not constitute, and could not reasonably be expected to result in, a Material
Adverse Effect on the Acquired Corporations (it being understood that, for
purposes of determining the accuracy of such representations and warranties, (i)
all "Material Adverse Effect" qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Company Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
6.4 STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted and
the Merger shall have been duly approved by the Required Vote.
6.5 AGREEMENTS AND DOCUMENTS. Parent and the Company shall have received
the following documents, each of which shall be in full force and effect:
36
(a) a legal opinion of Wilson, Sonsini, Xxxxxxxx & Xxxxxx, P.C.,
dated as of the Closing Date, in a form reasonably satisfactory to Parent;
(b) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Code (it being understood that, in
rendering such opinion, Xxxxxx Godward LLP may rely upon the tax
representation letters referred to in Section 5.9);
(c) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1,
6.2, 6.4, 6.6, 6.7, 6.8 and 6.9 have been duly satisfied; and
(d) the written resignations of all officers and directors of the
Company, effective as of the Effective Time.
6.6 EMPLOYEES.
(a) None of the individuals identified on Exhibit C shall have ceased
to be employed by the Company, or shall have expressed a bona fide intention to
terminate his employment with the Company or (provided that Parent has offered
to employ such individual on terms substantially similar to, or at least as
favorable on an overall basis as, the terms set forth in the employment letter
executed by Parent and such individual) a bona fide intention to decline to
accept employment with Parent.
(b) Not more than one of the individuals identified on Exhibit D
shall have ceased to be employed by the Company, or shall have expressed a bona
fide intention to terminate his employment with the Company or (provided that
Parent has offered to employ such individual on terms substantially similar to,
or at least as favorable on an overall basis as, the terms set forth in the
employment letter executed by Parent and such individual) a bona fide intention
to decline to accept employment with Parent.
6.7 NO MATERIAL ADVERSE CHANGE. Except for adverse changes that result
directly from the public announcement of the Merger or from general economic
conditions or conditions affecting the Company's industry generally, there shall
have been no material adverse change in the Company's business since the date of
this Agreement (it being understood that a downturn in the Company's financial
performance shall not, in and of itself, constitute a "material adverse change"
in the Company's business for purposes of this Section 6.7).
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any U.S. or Canadian federal, state or provincial
law or regulation enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
37
6.9 NO GOVERNMENTAL LITIGATION. There shall not be pending any litigation
or administrative action or proceeding in which a U.S. or Canadian federal,
state or provincial Governmental Body is a party: (a) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking to obtain from Parent or any of its subsidiaries any damages that may be
material to Parent; (c) seeking to prohibit or limit in any material respect
Parent's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the Surviving
Corporation; or (d) which would materially and adversely affect the right of
Parent, the Surviving Corporation or any subsidiary of Parent to own the assets
or operate the business of the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement is subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date, except
that any inaccuracies in such representations and warranties will be disregarded
if the circumstances giving rise to all such inaccuracies (considered
collectively) do not constitute, and could not reasonably be expected to result
in, a Material Adverse Effect on Parent (it being understood that, for purposes
of determining the accuracy of such representations and warranties, all
"Material Adverse Effect" and other materiality qualifications contained in such
representations and warranties shall be disregarded).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT. The S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with respect
to the S-4 Registration Statement.
7.4 DOCUMENTS. The Company shall have received the following documents,
each of which shall be in full force and effect:
(a) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing
Date, in a form reasonably satisfactory to the Company;
(b) a legal opinion of Wilson, Sonsini, Xxxxxxxx & Xxxxxx, P.C.,
dated as of the Closing Date, to the effect that the Merger will constitute
a reorganization within the
38
meaning of Section 368 of the Code (it being understood that, in rendering
such opinion, Wilson, Sonsini, Xxxxxxxx & Xxxxxx, P.C. may rely upon the
tax representation letters referred to in Section 5.9); and
(c) a certificate executed on behalf of Parent by an executive
officer of Parent confirming that the conditions set forth in Sections 7.1,
7.2, 7.5, 7.6 and 7.7 have been duly satisfied.
7.5 LISTING. The shares of Parent Common Stock to be issued in the Merger
shall have been approved for listing (subject to notice of issuance) on the
NYSE.
7.6 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any U.S. or Canadian federal, state or
provincial law or regulation enacted or deemed applicable to the Merger that
makes consummation of the Merger by the Company illegal.
7.7 NO MATERIAL ADVERSE CHANGE. Except for adverse changes that result
directly from the public announcement of the Merger or from general economic
conditions or conditions affecting Parent's industry generally, there shall have
been no material adverse change in Parent's business since the date of this
Agreement (it being understood that a decline in Parent's stock price shall not,
in and of itself, constitute a "material adverse change" in Parent's business
for purposes of this Section 7.7).
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by April 30, 1997 (unless the failure to consummate the Merger
is attributable to a failure on the part of the party seeking to terminate
this Agreement to perform any material obligation required to be performed
by such party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
39
(d) by Parent upon the occurrence of a Material Adverse Effect on the
Acquired Corporations;
(e) by the Company upon the occurrence of a Material Adverse Effect
on Parent;
(f) by either Parent or the Company if (i) the Company Stockholders'
Meeting shall have been held and (ii) this Agreement and the Merger shall
not have been adopted and approved at such meeting by the Required Vote;
(g) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the Required Vote) if a Triggering Event shall
have occurred;
(h) by Parent, following a breach of any representation, warranty or
covenant of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become inaccurate, in
either case such that the condition set forth in Section 6.1 or Section 6.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate, PROVIDED, that if
such breach or the inaccuracy in such representation or warranty is curable
by the Company through the exercise of reasonable efforts within 45 days
after the time of such breach or the time such representation or warranty
shall have become inaccurate, then Parent may not terminate this Agreement
under this Section 8.1(h) during such 45-day period provided the Company
continues to exercise such reasonable efforts; or
(i) by the Company, following a breach of any representation,
warranty or covenant of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become inaccurate, in
either case such that the condition set forth in Section 7.1 or Section 7.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become inaccurate, PROVIDED that if
such breach or the inaccuracy in such representation or warranty is curable
by Parent through the exercise of reasonable efforts within 45 days after
the time of such breach or the time such representation or warranty shall
have become inaccurate, then the Company may not terminate this Agreement
under this Section 8.1(i) during such 45-day period provided Parent
continues to exercise such reasonable efforts.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
relieve any party from any liability for any willful and knowing breach of this
Agreement.
8.3 TRANSACTIONS AND EXPENSES; TERMINATION FEE.
40
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; PROVIDED, HOWEVER, that Parent and the Company
shall share equally all fees and expenses, other than attorneys' and
accountants' fees, incurred in connection with the printing and filing of the
S-4 Registration Statement and the Prospectus/Proxy Statement and any amendments
or supplements thereto.
(b) The Company shall pay to Parent, in immediately available funds,
a nonrefundable fee in the amount of $2,500,000 (the "Termination Amount") if
either: (i) an Acquisition Proposal is publicly announced (and not publicly
withdrawn) prior to the Company Stockholders' Meeting and this Agreement is
terminated by Parent or the Company pursuant to Section 8.1(f); or (ii) this
Agreement is terminated by Parent pursuant to Section 8.1(g). If payable, the
Termination Amount shall be paid by the Company to Parent within five business
days after the termination of this Agreement. For purposes of this Section
8.3(b), an Acquisition Proposal shall be deemed to have been "publicly
withdrawn" only if: (1) acting in good faith, the Person who made such
Acquisition Proposal publicly announces the withdrawal of such Acquisition
Proposal and (2) it is not reasonably expected that such Acquisition Proposal
will be resubmitted or that such Person will make, submit or announce any other
Acquisition Proposal.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and Parent at any time before or
after approval of this Agreement by the stockholders of the Company; PROVIDED,
HOWEVER, that after any such stockholder approval, no amendment shall be made
which by law requires further approval of the stockholders of the Company
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) Subject to Section 8.2, no party shall be deemed to have waived
any claim arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a
41
written instrument duly executed and delivered on behalf of such party; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and
the other agreements referred to herein and the letter agreement dated as of
September 12, 1996 between Parent and the Company constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among or between any of the parties with respect to the subject matter
hereof and thereof. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument, and shall be governed in all respects by the laws of
the State of Delaware as applied to contracts entered into and to be performed
entirely within Delaware.
9.5 DISCLOSURE SCHEDULE. The Company Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Section 2, and the disclosure in any numbered or lettered part
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in
Section 2, and not any other representation or warranty.
9.6 ATTORNEYS' FEES. In any action at law or suit in equity to enforce
this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for
its attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.7 ASSIGNABILITY. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company without the prior written consent of Parent, and any attempted
assignment by the Company of this Agreement or any of such rights without such
consent shall be void and of no effect. Except as set forth in Section 5.5 with
respect to directors and officers of the Company and as otherwise provided in
this Agreement, nothing in this Agreement is intended to or shall confer upon
any Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
9.8 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
To Parent:
42
Cadence Design Systems, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
To Merger Sub:
Harbor Acquisition Sub, Inc.
c/o Cadence Design Systems, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
43
To the Company:
High Level Design Systems, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: J. Xxxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Wilson, Sonsini, Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized, overnight courier, on the business day following dispatch
and (d) in the case of mailing, on the fifth business day following such
mailing.
9.9 COOPERATION. Each of the Company and Parent agrees to cooperate
fully with the other party and to execute and deliver such further documents,
certificates, agreements and instruments and to take such other actions as may
be reasonably requested by the other party to evidence or reflect the
transactions contemplated by this Agreement and to carry out the intent and
purposes of this Agreement.
9.10 CERTAIN TERMS. As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
9.11 TITLES. The titles and captions of the Sections of this Agreement
are included for convenience of reference only and shall have no effect on the
construction or meaning of this Agreement.
9.12 SECTIONS AND EXHIBITS. Except as otherwise indicated, all references
in this Agreement to "Sections" and "Exhibits" are intended to refer to Sections
of this Agreement and Exhibits to this Agreement.
44
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
CADENCE DESIGN SYSTEMS, INC.
BY: /s/ H. Xxxxxxx Xxxxxxx
------------------------------------------
H. Xxxxxxx Xxxxxxx,
Executive Vice President and
Chief Financial Officer
HARBOR ACQUISITION SUB, INC.
By: /s/ H. Xxxxxxx Xxxxxxx
------------------------------------------
H. Xxxxxxx Xxxxxxx,
Executive Vice President and
Chief Financial Officer
HIGH LEVEL DESIGN SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxxxx,
Executive Vice President and
Chief Operating Officer
45
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract: (a) to which either of the Acquired Corporations is a party; (b)
by which either of the Acquired Corporations or any asset of either of the
Acquired Corporations is or may become bound or under which either of the
Acquired Corporations has, or may become subject to, any obligation; or (c)
under which either of the Acquired Corporations has or may acquire any right or
interest.
ACQUIRED CORPORATION PROPRIETARY ASSET. "Acquired Corporation Proprietary
Asset" shall mean any Proprietary Asset owned by or licensed to either of the
Acquired Corporations or otherwise used by either of the Acquired Corporations.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer or
proposal (other than an offer or proposal by Parent) regarding: (i) any merger,
consolidation, share exchange, business combination or other similar transaction
or series of related transactions involving the Company or any subsidiary of the
Company; (ii) any sale, lease, exchange, transfer, license or disposition of a
substantial portion of the assets of the Company or any subsidiary of the
Company in any one transaction or in a series of related transactions (other
than sales of products in the ordinary course of business); or (iii) any
acquisition (by tender offer or otherwise), in any one transaction or in a
series of related transactions, of record or beneficial ownership of more than
30% of the outstanding securities of any class of voting securities of the
Company or any subsidiary of the Company.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
BCSC. "BCSC" shall mean the British Columbia Securities Commission.
COMPANY CAPITAL STOCK. "Company Capital Stock" shall mean Company Common
Stock and Company Preferred Stock.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
$.001 par value per share, of the Company.
COMPANY PREFERRED STOCK. "Company Preferred Stock" shall mean the
Preferred Stock, $.001 par value per share, of the Company.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
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CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal). The VSE shall be deemed to be a "Governmental Body" for
purposes of this Agreement.
HSR ACT. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
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LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter (or group of matters) will be deemed to have a "Material Adverse
Effect" on the Acquired Corporations if such event, violation, inaccuracy,
circumstance or other matter (or group of matters) would have a material adverse
effect on the business, condition, assets, liabilities, operations or financial
performance of the Acquired Corporations taken as a whole; PROVIDED, HOWEVER,
that (i) any event, violation, inaccuracy, circumstance or other matter
occurring after the date of the Agreement that results directly from the public
announcement of the Merger or from general economic conditions or conditions
affecting the Company's industry generally shall not, in and of itself,
constitute a "Material Adverse Effect" on the Acquired Corporations, and (ii) a
downturn in the Company's financial performance following the date of the
Agreement shall not, in and of itself, constitute a "Material Adverse Effect" on
the Acquired Corporations (it being understood that a downturn in the Company's
financial performance resulting from circumstances that would otherwise cause
any representation or warranty of the Company to be inaccurate may nevertheless
constitute a "Material Adverse Effect" on the Acquired Corporations). An event,
violation, inaccuracy, circumstance or other matter (or group of matters) will
be deemed to have a "Material Adverse Effect" on Parent if such event,
violation, inaccuracy, circumstance or other matter (or group of matters) would
have a material adverse effect on the business, condition, assets, liabilities,
operations or financial performance of Parent and its subsidiaries taken as a
whole; PROVIDED, HOWEVER, that (1) any event, violation, inaccuracy,
circumstance or other matter occurring after the date of the Agreement that
results directly from the public announcement of the Merger or from general
economic conditions or conditions affecting the Company's industry generally
shall not, in an of itself, constitute a "Material Adverse Effect" on Parent and
(2) a decline in Parent's stock price at any time after the date of the
Agreement shall not, in and of itself, constitute a "Material Adverse Effect" on
Parent.
MATERIAL CONTRACT. "Material Contract" shall mean any Acquired Corporation
Contract that is or would be material to either of the Acquired Corporations, to
the business, condition, capitalization or operations of either of the Acquired
Corporations or to any of the transactions contemplated by the Agreement.
NYSE. "NYSE" shall mean the New York Stock Exchange.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$.01 par value per share, of Parent. Unless the context otherwise requires, all
references in the Agreement to Parent Common Stock shall be deemed to refer also
to the associated rights under Parent's Rights Agreement dated as of February 9,
1996 between Parent and Xxxxxx Trust and Savings Bank.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
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PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
TRIGGERING EVENT. A "Triggering Event" shall be deemed to have occurred
if: (i) the Board of Directors of the Company shall have failed to recommend,
or shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its recommendation in favor of, the Merger or approval
or adoption of this Agreement following the making, submission or announcement
of an Acquisition Proposal; (ii) the Company shall have failed to include in the
Prospectus/Proxy Statement the recommendation of the Board of Directors of the
Company in favor of approval and adoption of this Agreement and the Merger;
(iii) the Board of Directors of the Company shall have approved, endorsed or
recommended any Acquisition Proposal; (iv) the Company shall have entered into
any letter of intent or Contract relating to any Acquisition Proposal; (v) the
Company shall have willfully failed to hold the Company Stockholders' Meeting as
promptly as practicable after the S-4 Registration Statement is declared
effective; or (vi) a tender or exchange offer constituting an Acquisition
Proposal relating to securities of the Company shall have been commenced and the
Company shall not have sent to its securityholders, within ten business days
after the commencement of such tender or exchange
A-4
offer, a statement disclosing that the Company recommends rejection of such
tender or exchange offer.
VSE. "VSE" shall mean the Vancouver Stock Exchange.
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