EXHIBIT 1
______________________________________________________________________________
______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
BEACH ACQUISITION CORPORATION
and
GLOBALINK, INC.
DATED: JULY 20, 1998
______________________________________________________________________________
______________________________________________________________________________
--------------------------------------------------------------------------------
Agreement and Plan of Merger
Execution Copy
TABLE OF CONTENTS
ARTICLE I THE MERGER............................................................ 1
1.1 The Merger.................................................................. 1
1.2 The Closing................................................................. 1
1.3 Actions at the Closing...................................................... 2
1.4 Additional Actions.......................................................... 2
1.5 Conversion of Shares........................................................ 2
1.7 Exchange of Shares.......................................................... 3
1.8 Dividends................................................................... 4
1.9 Convertible Securities...................................................... 5
1.10 Certificate of Incorporation............................................... 7
1.11 Bylaws..................................................................... 7
1.12 Directors and Officers..................................................... 7
1.13 No Further Rights.......................................................... 7
1.14 Closing of Transfer Books.................................................. 7
1.15 Tax Consequences........................................................... 7
1.16 Rule 145................................................................... 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 8
2.1 Organization and Qualification of the Company............................... 8
2.2 Capitalization.............................................................. 8
2.3 Subsidiaries................................................................ 9
2.4 Authorization of Transaction................................................ 9
2.5 Present Compliance with Obligations and Laws................................ 10
2.6 No Conflict of Transaction With Obligations and Laws........................ 10
2.7 Reports and Financial Statements............................................ 11
2.8 Absence of Undisclosed Liabilities.......................................... 11
2.9 Absence of Certain Changes.................................................. 12
2.10 Payment of Taxes........................................................... 13
2.11 Title to Properties; Liens; Condition of Properties........................ 14
2.12 Inventories; Collectibility of Accounts Receivable......................... 14
2.13 Intellectual Property Rights............................................... 15
2.14 Contracts and Commitments.................................................. 16
2.15 Labor and Employee Relations............................................... 17
2.16 Employee Benefits and ERISA................................................ 18
2.17 Environmental Matters...................................................... 20
2.18 Permits.................................................................... 20
2.19 Warranty or Other Claims................................................... 20
2.20 Claims and Legal Proceedings............................................... 21
2.21 Borrowings and Guarantees.................................................. 21
2.22 Financial Service Relations and Powers of Attorney......................... 21
2.23 Insurance.................................................................. 21
2.24 Government Contracts....................................................... 21
2.25 Corporate Books, Records and Accounts...................................... 22
2.26 Transaction Fee............................................................ 22
2.27 Transactions with Interested Persons....................................... 22
2.28 Absence of Sensitive Payments.............................................. 22
2.29 Year 2000.................................................................. 23
2.30 Disclosure of Material Information......................................... 23
2.31 Regulatory Correspondence.................................................. 23
2.32 Company Action............................................................. 23
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page i
Execution Copy
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE ACQUISITION
SUBSIDIARY........................................................................................ 24
3.1 Organization of Xxxxxx and Acquisition Subsidiary............................................ 25
3.2 Capitalization............................................................................... 25
3.3 Authorization of Transaction................................................................. 25
3.4 No Conflict of Transaction With Obligations and Laws......................................... 26
3.5 Reports and Financial Statements............................................................. 26
3.6 Claims and Legal Proceedings................................................................. 27
3.7 Present Compliance with Obligations and Laws................................................. 27
3.8 Permits...................................................................................... 27
3.9 Disclosure of Material Information........................................................... 27
3.10 Parent Action................................................................................ 28
3.11 Liquidation.................................................................................. 28
ARTICLE IV COVENANTS.............................................................................. 28
4.1 Reasonable Best Efforts...................................................................... 28
4.2 Notices and Consents......................................................................... 28
4.3 Special Meeting, Prospectus/Proxy Statement and Registration Statement; Fairness Opinion..... 28
4.4 Operation of Business........................................................................ 30
4.5 Conduct of Parent Business................................................................... 32
4.6 Access....................................................................................... 32
4.7 Notice of Breaches and Updates............................................................... 32
4.8 Exclusivity.................................................................................. 32
4.9 Listing of Merger Shares..................................................................... 33
4.10 Xxxx-Xxxxx-Xxxxxx............................................................................ 33
4.11 Options; Warrants; Convertible Debentures; Preferred Stock................................... 34
4.12 Indemnification.............................................................................. 34
4.13 Employees W.................................................................................. 35
4.14 Convertible Debentures....................................................................... 35
4.15 Tax-Free Merger.............................................................................. 35
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER.................................................... 35
5.1 Conditions to Each Party's Obligations........................................................ 35
5.2 Conditions to Obligations of the Parent and the Acquisition Subsidiary........................ 36
5.3 Conditions to Obligations of the Company...................................................... 37
ARTICLE VI TERMINATION AND ABANDONMENT............................................................ 38
6.1 Termination................................................................................... 39
6.2 Termination by the Parent..................................................................... 39
6.3 Termination by the Company.................................................................... 40
6.4 Procedure for Termination..................................................................... 40
6.5 Effect of Termination and Abandonment......................................................... 40
ARTICLE VII MISCELLANEOUS......................................................................... 42
7.1 Reset Election................................................................................ 42
7.1 Fees and Expenses............................................................................. 43
7.2 Notices....................................................................................... 43
7.3 Publicity and Disclosures..................................................................... 44
7.4 Entire Agreement.............................................................................. 44
7.5 Severability.................................................................................. 44
7.6 Assignability................................................................................. 44
7.7 Amendments and Waivers........................................................................ 44
7.8 Governing Law; Venue.......................................................................... 45
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page ii
Execution Copy
7.9 Remedies.................................................................. 45
7.10 Counterparts.............................................................. 45
7.11 Effect of Table of Contents and Headings.................................. 45
7.12 No Third Party Beneficiaries.............................................. 45
7.13 Knowledge................................................................. 45
7.14 Nonsurvival of Representations and Warranties............................. 45
7.15 Integration of Exhibits................................................... 45
SIGNATURES..................................................................... 47
LIST OF EXHIBITS............................................................... 48
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page iii
Execution Copy
AGREEMENT AND PLAN OF MERGER
AGREEMENT entered into as of the 20th day of July, 1998, by and among Lernout
& Hauspie Speech Products N.V., a Belgian corporation (the "Parent"), Beach
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the
Parent (the "Acquisition Subsidiary"), and Globalink, Inc., a Delaware
corporation (the "Company"). The Parent, the Acquisition Subsidiary and the
Company are referred to collectively herein as the "Parties."
WHEREAS, the Boards of Directors of each of the Parties have agreed that it
is in their best interests for the Acquisition Subsidiary to merge with and into
the Company upon the terms and conditions set forth herein. The Boards of
Directors of the Parent, Acquisition Subsidiary and the Company have approved
the merger.
WHEREAS, this Agreement contemplates a merger of the Acquisition Subsidiary
with and into the Company and in such merger, the stockholders of the Company
will receive capital stock of the Parent in exchange for their capital stock of
the Company.
WHEREAS, for Federal income tax purposes, the Parties intend that such merger
qualify as a reorganization under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the Parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
----------
Agreement and in accordance with the Delaware General Corporation Law ("DGCL"),
the Acquisition Subsidiary shall be merged with and into the Company (with such
merger referred to herein as the "Merger") at the Effective Time (as defined
below). From and after the Effective Time, the separate corporate existence of
the Acquisition Subsidiary shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which the Company and the Acquisition
Subsidiary file a certificate of merger in substantially the form attached
hereto as Exhibit A (the "Certificate of Merger") in accordance with the
---------
relevant provisions of the DGCL, with the Secretary of State of the State of
Delaware. The Merger shall have the effects set forth in Sections 251 and 259
of the DGCL.
1.2 The Closing. The closing of the Merger (the "Closing") shall take
-----------
place at the offices of Brown, Rudnick, Freed & Gesmer, commencing at 9:00 a.m.
local time on the first business day after the receipt of Requisite Stockholder
Approval (as defined in Section 2.4), provided that on or prior thereto, all the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby as set forth in Article V have been satisfied or waived, or
on such other mutually agreeable later date as soon as practicable after the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (the "Closing Date"); provided,
--------
however, that the Closing Date shall be no later than November 30, 1998.
-------
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 1
Execution Copy
1.3 Actions at the Closing. At the Closing, subject to the satisfaction
----------------------
or waiver of all of the conditions set forth in Article V not theretofore
satisfied or waived, (a) the Company and the Acquisition Subsidiary shall file
with the Secretary of State of the State of Delaware the Certificate of Merger
and (b) the Acquisition Subsidiary shall deliver the Merger Consideration (as
defined in Section 1.5(e) below) to ChaseMellon Shareholder Services or such
other entity reasonably satisfactory to the Company and the Parent to act as the
exchange agent (the "Exchange Agent") in accordance with Section 1.6.
1.4 Additional Actions. The Surviving Corporation may, at any time after
------------------
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Acquisition
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares.
--------------------
(a) For purposes hereof, the following terms shall have the meanings
set forth below:
"Per Share Consideration" shall equal $5.60.
"Average Market Value" shall mean the arithmetic average (rounded to the
nearest five decimal places) of the closing price per share of the Parent
Common Stock as reported on the Nasdaq National Market for the twenty (20)
consecutive trading days ending with the third to last trading day prior to
the date of the Special Meeting (as defined in Section 4.3(a)).
"Conversion Ratio" shall equal 0.095726; provided, however, that:
-------- -------
(i) if the Average Market Value exceeds $64.35, then the Conversion
Ratio shall be reduced such that the Conversion Ratio multiplied by the Average
Market Value shall equal $6.16; and
(ii) if the Average Market Value is less than $52.65, then the
Conversion Ratio shall be increased such that the Conversion Ratio multiplied by
the Average Market Value shall equal $5.04;
(b) At the Effective Time, by virtue of the Merger and without any action
on the part of any Party or the holder of any of the following securities, each
share of common stock, $.01 par value per share, of the Company ("Company
Shares") issued and outstanding immediately prior to the Effective Time (other
than (i) Company Shares owned by the Parent or the Acquisition Subsidiary and
(ii) Company Shares held in the Company's treasury) and each Conversion Company
Share (as defined in Section 1.8) shall be converted into and represent the
right to receive, after conversion as provided in clause (c) below, such number
of shares of common stock, no par value per share, of the Parent ("Parent Common
Stock") as is equal to the Conversion Ratio (the "Merger Shares").
(c) The number of shares of Parent Common Stock issuable pursuant to this
Section 1.5 and other numbers and amounts set forth herein shall be subject to
equitable adjustment in the event that the Parent changes the number of shares
of Parent Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend or similar recapitalization with respect
to the Parent Common Stock. Stockholders of record of the Company together with
persons deemed to hold Conversion Company Shares (determined pursuant to Section
1.8(a)), in each case as of the Effective Time ("Company Stockholders"), shall
be entitled to receive all of the Merger Shares into which their Company Shares
and Conversion Company Shares were converted pursuant to this Section 1.5 upon
tender of their Company Shares or Convertible Securities (as defined in Section
1.8(a)) as set forth in Section 1.6 below.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 2
Execution Copy
(d) At the Closing, the Exchange Agent, as agent for and for the benefit
of the Company Stockholders, shall contribute to the capital of Parent the right
of the Company Stockholders under this Agreement to receive Parent Common Stock
in return for that number of duly authorized, validly issued, fully paid and
non-assessable shares of Parent Common Stock to be issued in connection with the
Merger pursuant to this Section 1.5; provided, however, that such number of
-------- -------
shares shall be rounded to the nearest whole number. To effectuate the
foregoing, at the Closing the Exchange Agent, or such other party as shall be
mutually acceptable to the Company and the Parent, shall represent the Company
Stockholders before a public notary in Belgium to effect the issuance of shares
of Parent Common Stock on the Closing Date as set forth in this Section 1.5 and
Section 1.8(a);
(e) No certificates representing fractional Merger Shares shall be issued
to former Company Stockholders upon the surrender for exchange of Certificates
(as defined in Section 1.6(a)) or Convertible Securities), and such former
Company Stockholders shall not be entitled to any voting rights, rights to
receive any dividends or distributions or other rights as a stockholder of the
Parent with respect to any fractional Merger Shares that would otherwise be
issued to such former Company Stockholders. In lieu of any fractional Merger
Shares that would otherwise be issued, each former Company Stockholder that
would have been entitled to receive a fractional Merger Share shall, upon proper
surrender of such person's Certificates or Convertible Securities representing
such fractional Merger Shares, receive cash in an amount equal to such
fractional Merger Share multiplied by the Average Market Value. The Merger
Shares and the cash to be received in lieu of fractional Merger Shares are
collectively referred to herein as the "Merger Consideration."
(f) Each Company Share held in the Company's treasury immediately prior to
the Effective Time and each Company Share owned by the Parent or the Acquisition
Subsidiary shall, by virtue of the Merger and without any further action, be
canceled and retired without payment of any consideration therefor.
(g) Each share of common stock, $.01 par value per share, of the
Acquisition Subsidiary ("Acquisition Subsidiary Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
thereafter evidence the number of shares of common stock, $.01 par value per
share, of the Surviving Corporation, as is equal to the sum of the number of
Company Shares and Conversion Company Shares outstanding or deemed outstanding
under this Agreement, immediately prior to the Effective Time.
1.7 Exchange of Shares.
------------------
(a) Prior to the Effective Time, the Parent and the Company shall
mutually appoint the Exchange Agent (or such other Exchange Agent as the parties
shall mutually agree) to effect the exchange for the Merger Consideration of (i)
certificates that, immediately prior to the Effective Time, represented Company
Shares ("Certificates"), and (ii) Convertible Securities that, at the Effective
Time, will be deemed to be converted into Conversion Company Shares. As soon as
practicable after the Effective Time and no later than five (5) business days
thereafter, the Parent shall cause the Exchange Agent to send a notice and a
transmittal form to each holder of a Certificate or Convertible Security (other
than those surrendered and paid for at the Closing) advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent such Certificate or Convertible Security in exchange for the Merger
Consideration. Each holder of a Certificate or Convertible Security, upon proper
surrender thereof to the Exchange Agent in accordance with the instructions in
such notice, shall be entitled to receive in exchange therefor the Merger
Consideration, without interest, determined pursuant to Section 1.5. Until
properly
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 3
Execution Copy
surrendered, each such Certificate or Convertible Security shall be deemed for
all purposes to evidence only the right to receive the Merger Consideration
determined pursuant to Section 1.5. Holders of Certificates or Convertible
Securities shall not be entitled to receive certificates for the Merger Shares
or cash payments to which they would otherwise be entitled until such
Certificates or Convertible Securities are properly surrendered, or an affidavit
is delivered pursuant to Section 1.6(c).
(b) If any Merger Consideration is to be issued or paid in the name of a
person other than the person in whose name the Certificate or Convertible
Security surrendered in exchange therefor is registered, it shall be a condition
to the issuance and payment of such Merger Consideration that (i) the
Certificate or Convertible Security so surrendered shall be transferable, and
shall be properly assigned, endorsed or accompanied by appropriate stock powers,
(ii) such transfer shall otherwise be proper and (iii) the person requesting
such transfer shall pay to the Exchange Agent any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not required to be paid.
Notwithstanding the foregoing, neither the Exchange Agent nor any Party shall be
liable to a holder of Company Shares for any Merger Consideration issuable or
payable to such holder that is delivered to a public official in accordance with
applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate or Convertible Security has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate or Convertible Security to be lost, stolen or
destroyed, the Parent shall direct the Exchange Agent to issue in exchange for
such Certificate or Convertible Security the Merger Consideration issuable or
payable in exchange therefor pursuant to Section 1.5. The Board of Directors of
the Parent may, in its discretion and as a condition precedent to the issuance
or payment thereof, require the owner of such Certificate or Convertible
Security to give the Parent a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against the Parent with respect to
the Certificate or Convertible Security alleged to have been lost, stolen or
destroyed.
(d) Promptly following the date which is twelve (12) months after the
Closing Date, the Exchange Agent shall return all shares of Parent Common Stock
included in the Merger Consideration then in its possession and not theretofore
claimed by a holder of Company Shares or Convertible Securities to the Belgian
Caisse des depots et Consignations or any similar institution. Thereafter, the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate or Convertible Security may surrender such Certificate or
Convertible Security to the Parent and, subject to applicable abandoned
property, escheat and similar laws, receive in exchange therefor the Merger
Consideration (with the cash portion of such consideration, in the case of
fractional shares, to be provided by the Parent and the Parent Common Stock
portion of such consideration to be provided by the Belgian Caisse des depots et
Consignations or such other institution that holds such shares of Parent Common
Stock), without interest.
1.8 Dividends. No dividends or other distributions that are payable to
---------
the holders of record of Parent Common Stock as of a date on or after the
Effective Time shall be paid to former Company Stockholders entitled by reason
of the Merger to receive Merger Shares until such holders surrender their
Certificates or Convertible Securities in accordance with Section 1.6. Upon such
surrender, the Parent shall pay or deliver to the persons in whose name the
certificates representing such Merger Shares are issued any dividends or other
distributions that are payable to the holders of record of Parent Common Stock
as of a date on or after the Effective Time and which were paid or delivered
between the Effective Time and the time of such surrender provided that no such
person shall be entitled to receive any interest on such dividends or other
distributions.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 4
Execution Copy
1.9 Convertible Securities.
----------------------
(a) At the Effective Time, (i) warrants and options to purchase Company
securities identified on Schedule 1.8(a) ("Subject Warrants"), (ii) the
---------------
Company's 10% Convertible Debentures ("Convertible Debentures"), excluding any
interest due thereon, and (iii) the Company's Series A-2 Convertible Stock ("A-2
Preferred Stock") (collectively "Convertible Securities") shall be, to the
extent permitted by the terms thereof or agreed to by the holder thereof,
converted into shares of Parent Common Stock as set forth in this Section 1.8.
(i) Each holder of Subject Warrants, shall receive therefor Merger
Consideration determined in accordance with Section 1.5, based upon the number
of Company Shares equal to the quotient of (A) the number of Company Shares
subject to each such Subject Warrant held by such holder multiplied by the
positive difference, if any, obtained by subtracting the exercise price of each
such Subject Warrant from $5.60, divided by (B) $5.60. For purposes of this
Section 1.8, (x) the purchase option issued to Xxxxxxxx (as hereinafter defined)
in October 1997 to purchase 72,727 Units at $1.51 per Unit shall represent (1)
Subject Warrants to purchase 72,727 Company Shares at $1.51 per share and (2)
Subject Warrants to purchase 72,727 Company Shares at $1.75 per share; and (y)
the warrants issued to X. Xxxxxxx Xxxxxxx, Inc. in April 1997 to purchase 5,810
Units at $28.12 per Unit shall represent (a) Subject Warrants to purchase 5,810
shares of A-2 Preferred Stock at $28.12 per share, convertible into 58,105
Company Shares, and (b) Subject Warrants to purchase 58,105 Company Shares at
$3.2403 per share or, in each case, such other amounts and prices as the Parties
may agree.
(ii) Each holder of such Convertible Debentures and Shares of A-2
Preferred Stock shall receive therefor Merger Consideration determined in
accordance with Section 1.5 based upon the number of Company Shares issuable
upon conversion thereof immediately prior to the Effective Time. Parent shall
cause the Surviving Corporation to pay any interest due on such Convertible
Debentures promptly after the Effective Time.
(iii) The Company Shares into which the holders of Convertible
Securities shall be deemed to have converted pursuant to this Section 1.8 and
Section 1.5 are referred to herein as the "Conversion Company Shares."
(b) Subject to the terms of this Sections 1.8(b), 4.11(a) and 4.13, at the
Effective Time, the Parent shall substitute substantially equivalent warrants to
purchase Parent Common Stock for all options outstanding under the Company's
employee stock option plan at the Effective Time (the "Employee Options") to the
extent permitted by the terms thereof or agreed to by the holder thereof.
Subject to the foregoing, immediately after the Effective Time, each such
Employee Option shall be deemed to constitute a warrant to acquire such number
of shares of Parent Common Stock as is equal to the number of Company Shares
subject to the unexercised portion of the Employee Option multiplied by the
Conversion Ratio (except as otherwise provided in the applicable instrument,
with any fraction resulting from such multiplication to be paid in cash upon the
exercise of such substitute option or warrant based upon the closing price of
Parent Common Stock on the Nasdaq National Market on the date of exercise). The
exercise price per share of each such substituted Employee Option shall be equal
to the Belgian franc equivalent of the exercise price of the Employee Option at
the Effective Time, divided by the Conversion Ratio. The terms of substituted
warrants otherwise shall be substantially in the form of the Parent's standard
form of warrant agreement with such changes thereto as are reasonably requested
by the Company. Without limiting the foregoing, for the purposes of determining
vesting of the substituted warrants and otherwise,
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 5
Execution Copy
employees of the Company will be credited for their full term during which they
were employed by the Company.
(c) As soon as practicable after the execution of this Agreement, the
Parent and the Company shall consult with each other with respect to all
outstanding securities of the Company exercisable or convertible, directly or
indirectly, into Company Shares, other than those described above ("derivative
securities"). To the extent holders of derivative securities agree to convert
same into Merger Shares on the same terms as Subject Warrants (which they shall
be afforded the opportunity to do), such derivative securities shall be deemed
to be Convertible Securities for all purposes hereof. Without limiting the
foregoing, to the extent that there are outstanding immediately after the
Effective Time any derivative securities or Employee Options which are not
converted into Parent Common Stock or warrants to purchase Parent Common Stock
pursuant to the foregoing, such securities, to the extent permitted by the DGCL
and Belgium Company Law, shall be converted into substantially equivalent rights
to purchase or acquire the number of shares of Parent Common Stock equal to the
number of Company Shares subject (directly or indirectly) to the unexercised or
unconverted portion of the derivative security at the Effective Time multiplied
by the Conversion Ratio (except as otherwise provided in the applicable
instrument, with any fraction resulting from such multiplication to be paid in
cash upon the exercise or conversion of such derivative security based upon the
closing price of Parent Common Stock on the Nasdaq National Market on the date
of exercise), at a conversion or exercise price (as applicable) equal to the
conversion or exercise price of such derivative securities immediately prior to
the Effective Time divided by the Conversion Ratio.
(d) As soon as practicable after the Effective Time, and in any event
within thirty (30) days thereafter, the Parent shall file a Registration
Statement on Form S-8 (or any successor form) under the Securities Act of 1933,
as amended (the "Securities Act") with respect to all shares of Parent Common
Stock subject to substituted Employee Options and to options referred to in the
Employment Agreements (as defined in Section 2.32(a)) that may be registered on
Form S-8, and shall use commercially reasonable efforts to maintain the
effectiveness of such Registration Statement for so long as such substituted
Employee Options remain outstanding.
(e) The Company shall use commercially reasonable best efforts to obtain,
prior to the Closing, such consents, exercise notices, or agreements from each
holder of a Convertible Security or Employee Option as either the Company or the
Parent may reasonably deem necessary or advisable to effect the intent of this
Section 1.8 (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
(f) At or prior to the Effective Time, the Parent or the Surviving
Corporation shall deliver to the holders of the Convertible Securities
appropriate notices setting forth, as applicable, such holders' rights pursuant
to such Convertible Securities and instructions for surrendering to the Exchange
Agent such Convertible Securities in exchange for the Merger Consideration or
converting such Convertible Securities into Company Shares immediately prior to
the Effective Time. As soon as practicable after the Effective Time, the Parent
or the Surviving Corporation shall deliver to the holders of Employee Options
subject to substitution under Section 1.8(b) hereof appropriate notices setting
forth such holders' rights pursuant to such substituted warrants, together with
the agreements evidencing such substituted warrants.
1.10 Certificate of Incorporation. The Certificate of Incorporation of the
----------------------------
Surviving Corporation shall be the Certificate of Incorporation of the Company
as amended and restated in the Certificate of Merger.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 6
Execution Copy
1.11 Bylaws. The Bylaws of the Surviving Corporation shall be the Bylaws
------
of the Acquisition Subsidiary immediately prior to the Effective Time, except
that the name of the corporation set forth therein shall be changed to the name
of the Company.
1.12 Directors and Officers. The directors of the Acquisition Subsidiary
----------------------
immediately prior to the Effective Time shall become the directors of the
Surviving Corporation as of the Effective Time. The officers of the Acquisition
Subsidiary immediately prior to the Effective Time shall be the officers of the
Surviving Corporation after the Effective Time, retaining their respective
positions. The directors and executive officers of the Company shall cease to
be directors and executive officers of the Surviving Corporation after the
Effective Time.
1.13 No Further Rights. From and after the Effective Time, no Company
-----------------
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, other than the right to receive
Merger Consideration or as otherwise provided herein or by law.
1.14 Closing of Transfer Books. At the Effective Time, the stock transfer
-------------------------
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, the Parent or the Exchange Agent, they shall be
canceled and exchanged for Merger Consideration in accordance with Section 1.5.
1.15 Tax Consequences. It is intended by the Parties hereto that the
----------------
Merger shall constitute a reorganization of Acquisition Subsidiary and the
Company within the meaning of Section 368 of the Code. The parties hereby adopt
this Agreement as a "plan of reorganization" of Acquisition Subsidiary and the
Company within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United
States Treasury Regulations.
1.16 Rule 145. All Merger Shares issued pursuant to this Agreement to
--------
"affiliates" of the Company listed on Schedule 2.32 of the Company Disclosure
-------------
Schedule will be subject to certain resale restrictions under such Rule and all
certificates representing such Merger Shares shall bear a restrictive legend.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 7
Execution Copy
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule attached hereto (the "Company Disclosure Schedule"). The
Company Disclosure Schedule shall be initialed by the Parties and shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article II, provided, however, that any matter disclosed in
-------- -------
any Section hereof or on any part of the Company Disclosure Schedule shall be
deemed disclosed for purposes of every Section hereof and every part of the
Company Disclosure Schedule; provided, further, that the Company shall make a
-------- -------
good faith effort to include any disclosure (by cross-reference or repeating the
disclosure) that is required by more than one representation and warranty in
each applicable portion of the Company Disclosure Schedule.
2.1 Organization and Qualification of the Company. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to own, lease
and operate its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is conducted
by it. The copies of the Company's Certificate of Incorporation as amended to
date ("Charter"), certified by the Delaware Secretary of State, and of the
Company's Bylaws as amended to date, certified by the Company's Secretary,
copies of which are attached as Schedule 2.1 of the Company Disclosure Schedule,
------------
are, and will be at the Closing, complete and correct. Except as set forth on
Schedule 2.1 of the Company Disclosure Schedule, the Company is duly qualified
------------
to do business and in good standing as a foreign corporation in California and
Virginia and it is not required to be licensed or qualified to conduct its
business or own its property in any other jurisdiction, except where the failure
to be so licensed or qualified would not, individually or in the aggregate, have
a material adverse effect on the business, properties, operations, assets,
revenues or condition (financial or otherwise) of the Company and its
Subsidiaries (as defined below) on a consolidated basis (a "Company Material
Adverse Effect").
2.2 Capitalization. The authorized capital stock of the Company consists of
--------------
(i) 250,000 shares of preferred stock, $.01 par value, of which 16,507 shares
are issued and outstanding as of the date of this Agreement, and (ii) 20,000,000
shares of common stock, $.01 par value, of which 9,607,932 shares are issued and
outstanding as of the date of this Agreement. No shares of capital stock of
the Company are held in the treasury of the Company. All issued and outstanding
Company Shares are, and all Company Shares that may be issued upon the exercise
or conversion of Convertible Securities, upon issuance in accordance with the
terms and conditions specified in the instruments pursuant to which they are
issuable and upon payment therefor, will be duly authorized and validly issued,
fully paid, nonassessable, free of all preemptive rights. Except as set forth on
Schedule 2.2(a) of the Company Disclosure Schedule, the Company is subject to no
---------------
liability on account of the issuance or sale of any securities, including,
without limitation, all outstanding Company Shares. Except as set forth on
Schedule 2.2(b) of the Company Disclosure Schedule (including as applicable, the
---------------
name of the holders, the number and kind of shares of capital stock subject to
each instrument, the exercise price or conversion rate, as applicable, the term
of such instrument and the extent to which the rights granted under such
instrument are vested or may be exercised), there are no (i) outstanding or
authorized subscriptions, warrants, options or other rights granted by the
Company or binding upon the Company to purchase or acquire, or preemptive rights
with respect to the issuance or sale of, the capital stock of the Company or
which obligate or may obligate the Company to issue any additional shares of its
capital stock or any securities convertible into or evidencing the right to
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 8
Execution Copy
subscribe for any shares of its capital stock, (ii) other securities of the
Company directly or indirectly convertible into or exchangeable for shares of
capital stock of the Company, (iii) restrictions on the transfer of the
Company's capital stock (other than restrictions under the Securities Act and
state securities laws), (iv) voting rights with respect to the capital stock of
the Company, or (v) stock appreciation, phantom stock or similar rights with
respect to the Company. Schedule 2.2(c) shall also indicate whether any
---------------
Convertible Securities are subject to "antidilution" or similar provisions, and
a description of the application of these provisions, if any, upon the terms of
such Convertible Securities.
2.3 Subsidiaries. Schedule 2.3 of the Company Disclosure Schedule sets forth
------------ ------------
for each corporation with respect to which the Company, directly or indirectly,
has the power to vote or direct the voting of sufficient securities to elect all
of the directors (a "Subsidiary") its name and jurisdiction of incorporation.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Except as
disclosed in Schedule 2.3 of the Company Disclosure Schedule, each Subsidiary is
------------
duly qualified to conduct business and is in good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to so qualify would not, individually or in the aggregate, have a Company
Material Adverse Effect. Each Subsidiary has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Company has delivered to the Parent
correct and complete copies of the Certificate of Incorporation and Bylaws of
each Subsidiary, as amended to date. All of the issued and outstanding shares
of capital stock of each Subsidiary are duly authorized and validly issued,
fully paid, nonassessable and free of preemptive rights. All shares of each
Subsidiary that are held of record or owned beneficially by either the Company
or any Subsidiary are held or owned free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), claims, security interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which the Company or any
Subsidiary is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any capital stock of any Subsidiary.
There are no outstanding stock appreciation, phantom stock or similar rights
with respect to any Subsidiary. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary. No Subsidiary is in default under or in violation of any
provision of its Certificate of Incorporation or Bylaws. The Company does not
control directly or indirectly or have any direct or indirect equity or similar
participation in any corporation, joint venture, partnership, trust, or other
business association which is not a Subsidiary.
2.4 Authorization of Transaction. Subject to the conditions precedent set
----------------------------
forth herein, the Company has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement and, subject to the adoption of
this Agreement and the approval of the Merger by a majority of the votes
represented by the outstanding Company Shares entitled to vote on this Agreement
and the Merger (the "Requisite Stockholder Approval"), the performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. Each of this Agreement
and the Option Agreement (as defined in Section 2.32) has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification provisions may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 9
Execution Copy
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.5 Present Compliance with Obligations and Laws. The Company is not: (a) in
--------------------------------------------
violation of its Charter or Bylaws; (b) in default in the performance of any
obligation, agreement or condition of any debt instrument which (with or without
the passage of time or the giving of notice) affords to any person the right to
accelerate any indebtedness or terminate any right; (c) in default of or breach
of (with or without the passage of time or the giving of notice) any other
contract to which it is a party or by which it or its assets are bound; or (d)
in violation of any law, regulation, administrative order or judicial order,
decree or judgment applicable to it or its business or assets, except where any
violation or default under items (b), (c), or (d) would not, individually or in
the aggregate, have a Company Material Adverse Effect.
2.6 No Conflict of Transaction With Obligations and Laws Subject to
----------------------------------------------------
compliance with the applicable requirements of the Securities Act, any
applicable state securities laws, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the filing of the Certificate of Merger as
required by the DGCL, and obtaining the consents listed on Schedule 2.6(a) of
---------------
the Company Disclosure Schedule, neither the execution, delivery and performance
of this Agreement, nor the performance of the transactions contemplated hereby,
will: (i) constitute a breach or violation of the Charter or Bylaws of the
Company; (ii) require any consent, waiver, exemption, approval or authorization
of, declaration, filing or registration with, or giving of notice to any person,
court, arbitration tribunal, administrative agency or commission or other or
governmental or regulatory agency or authority; (iii) constitute (with or
without the passage of time or the giving of notice) a breach of, or default
under, any debt instrument to which the Company or any Subsidiary is a party, or
give any person the right to accelerate any indebtedness or terminate, modify or
cancel any right with respect to any indebtedness; (iv) constitute (with or
without the passage of time or giving of notice) a default under or breach of
any other agreement, instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
assets are bound; (v) result in the creation of any lien or encumbrance upon any
of the assets of the Company or any Subsidiary; (vi) result in a violation of
any law, regulation, administrative order or judicial order, decree or judgment
applicable to the Company or any Subsidiary, or their businesses or assets; or
(vii) invalidate or adversely affect any permit, license or authorization used
in the Company's or any Subsidiary's business, excluding from clauses (ii),
(iii), (iv), (vi) and (vii) consents, waivers, exemptions, approvals or
authorizations, declarations, filings or registrations, notices, conflicts,
breaches or defaults which would not, either individually or in the aggregate,
either have a Company Material Adverse Effect or materially impair or preclude
the Company's ability to consummate the Merger or the transactions contemplated
hereby. Except as set forth in Schedule 2.6(b) of the Company Disclosure
---------------
Schedule, neither the execution, delivery and performance of this Agreement nor
the performance of the transactions contemplated hereby will give rise to a
right of any party (other than the Company or any Subsidiary) to terminate,
modify or cancel any contract, agreement or other instrument required to be
disclosed in the Company Disclosure Schedule.
2.7 Reports and Financial Statements
--------------------------------
(a) The Company has previously made available to the Parent complete and
accurate copies, as amended or supplemented, of its (a) Annual Report on Form
10-K or Form 10-KSB for the fiscal years ended January 31, 1996 and 1997, as
filed with the Securities and Exchange Commission (the "SEC"), and amendments
thereto, (b) Quarterly Report on Form 10-QSB for the fiscal quarter ended March
31, 1998, (c) Current Reports on Form 8-K filed with the SEC since January 1,
1996, (d) proxy statements relating to all
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 10
Execution Copy
meetings of its stockholders (whether annual or special) since January 1, 1996,
and (e) the final prospectus filed with the SEC on May 6, 1997 pursuant to Rule
424(b) under the Securities Act (such annual reports, proxy statements,
prospectuses and other filings, together with any amendments or supplements
thereto, are collectively referred herein as the "Company Reports"). The Company
Reports constitute all of the periodic reports, current reports, proxy
statements, information statements and final prospectuses contained in
registration statements filed or required to be filed by the Company with the
SEC since January 1, 1996 pursuant to the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act"). As of their respective dates, the
Company Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited financial statements and unaudited interim financial
statements of the Company included in the Company Reports (together, the
"Financial Statements") (i) comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods covered thereby (except as may be indicated therein
or in the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q or Form 10-QSB under the Exchange Act and subject to
normal recurring year-end adjustments), (iii) fairly present the consolidated
financial condition, results of operations and cash flows of the Company and the
Subsidiaries as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent in all material respects with the books and
records of the Company and the Subsidiaries. The Company has also made available
to the Parent all offering documents used in connection with any offer or sale
of securities by the Company since January 1, 1996, which documents are
identified in Schedule 2.7(a) of the Company Disclosure Schedule.
---------------
(b) The balance sheet contained in the Company's Annual Report on Form 10-
QSB for the fiscal quarter ended March 31, 1998, including the footnotes
thereto, is sometimes referred to hereinafter as the "Base Balance Sheet."
(c) The books of account of the Company are complete and correct in all
material respects and have been maintained on a consistent basis, except as
noted in the Company Reports. The current books of account and auditor's letters
to management of the Company for the past five (5) years and other significant
correspondence from or to such auditors during such period, if any, have been
made available to the Parent.
2.8 Absence of Undisclosed Liabilities. Except as disclosed in Schedule 2.8
---------------------------------- ------------
of the Company Disclosure Schedule and except for liabilities and obligations
arising in connection with the transactions contemplated by this Agreement,
neither the Company nor any Subsidiary has any liabilities or obligations of any
nature, except (i) the liabilities reflected on the Base Balance Sheet or in the
notes thereto, and (ii) the liabilities and obligations incurred since the date
of the Base Balance Sheet in the ordinary course of business and consistent with
past practice that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
2.9 Absence of Certain Changes. Except as disclosed in Schedule 2.9 of the
-------------------------- ------------
Company Disclosure Schedule, since the date of the Base Balance Sheet there has
not been:
(a) any change in the financial condition, working capital, earnings,
reserves, properties, assets, liabilities, business or operations of the Company
or any Subsidiary, which change by itself or in conjunction with all other such
changes, whether or not arising in the ordinary course of business, has had a
Company Material Adverse Effect;
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 11
Execution Copy
(b) any material contingent liability incurred by the Company or any
Subsidiary as guarantor or otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of the properties of
the Company or any Subsidiary which remains in existence on the date hereof;
(d) any material obligation or material liability incurred by the Company
or any Subsidiary other than obligations and liabilities incurred in the
ordinary course of business and consistent with past practice;
(e) any material purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any material
properties or assets of the Company or any Subsidiary, or any equity interests
in or securities of any Subsidiary or any corporation, partnership, association
or other business organization or division thereof, other than in the ordinary
course of business and consistent with past practice;
(f) any damage, destruction or loss, whether or not covered by insurance,
that has had or is reasonably likely to have a Company Material Adverse Affect;
(g) any union organization attempts or claim of unfair labor practices
(other than routine internal employee grievances) involving the Company or any
Subsidiary, any change in the compensation payable or to become payable by the
Company or any Subsidiary to any of their respective officers, employees or
agents, or any change in any bonus, pension, or profit sharing payment,
entitlement or arrangement made to or with any of such officers, employees or
agents;
(h) any change with respect to the management personnel of the Company or
any Subsidiary that has had or is reasonably likely to have a Company Material
Adverse Effect;
(i) any payment or discharge of a material lien, claim, obligation or
liability of the Company or any Subsidiary which was not shown on the Base
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice thereafter;
(j) any obligation or liability incurred by the Company or any Subsidiary
to any of its employees, officers, directors or shareholders or any loans or
advances made by the Company or any Subsidiary to any of their respective
officers, directors or shareholders except normal compensation (other than
bonuses (except bonuses payable to Messrs. Xxxxxxx, Xxxxxxxx and XxXxxxxx in the
aggregate amount of $270,000 which shall be paid prior to the Effective Time)),
benefits and expense allowances payable in the ordinary course of business
consistent with past practice;
(k) any net change in the Company's reserve for inventory of $25,000 or
more;
(l) any disposal or lapse of any rights to the use of any trademark,
tradename, patent or copyright, or disposal of or disclosure by the Company or
any of its Subsidiaries to any person other than the Parent or employees of the
Company of any trade secret, formula, process or know-how not theretofor a
matter of public knowledge other than pursuant to confidentiality agreements;
(m) any change in any method of accounting or accounting practice;
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 12
Execution Copy
(n) any action taken to issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorize the
issuance, sale or delivery of, or redeem or repurchase, any stock of any class
or any other securities or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the redemption, conversion or
exercise of the securities outstanding on the date hereof), or amend any of the
terms of any such securities (except as contemplated in this Agreement);
(o) any action taken to split, combine or reclassify any shares of its
capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; or
(p) any agreement, whether in writing or otherwise, to take any action
described in this Section 2.09.
2.10 Payment of Taxes. Each of the Company and the Subsidiaries has duly and
----------------
timely filed all Federal, state, local, and foreign government income, excise,
gross receipts or franchise tax returns, real estate and personal property tax
returns, sales and use tax returns, employee tax and contribution returns, and
all other tax returns, reports and declarations, including valid extensions
therefore, or estimated taxes required to be filed by them, with respect to all
applicable taxes ("Tax Returns"), including without limitation, with respect to
all income, profit, franchise, sales, use, real property, personal property, ad
valorem, excise, employment, social security and wage withholding, severance,
stamp, occupation, and windfall profits taxes, of every kind, character or
description, and imposed by any government or quasi-governmental authority
(domestic or foreign), and any interest or fines, and any and all penalties or
additions relating to such taxes, charges, fees, levies or other assessments
("Taxes") except to the extent that any failures to file, taken together, do not
individually or in the aggregate, have a Company Material Adverse Effect. All
of the Tax Returns are complete and correct in all material respects. All Taxes
shown to be due on each Tax Return have been paid, reserved against or are being
contested in good faith by the Company (which contest is being diligently
pursued and is described on Schedule 2.10 of the Company Disclosure Schedule).
-------------
All Taxes and other assessments and levies which the Company or any Subsidiary
is required to withhold or collect have been withheld or collected and paid over
or will be paid over to proper governmental authorities as required. Except as
set forth on Schedule 2.10 of the Company Disclosure Schedule, the Tax Returns
-------------
have never been examined by any government entity, including the Internal
Revenue Service and the Virginia Department of Revenue. The Company has not
received notice of any intention on the part of any government entity to examine
any of the Tax Returns. No deficiencies have been asserted or assessments made
against the Company or any Subsidiary, nor is the Internal Revenue Service nor
any other taxing authority now asserting or, to the knowledge of the Company or
any Subsidiary, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional taxes or interest thereon or penalties in
connection therewith. Neither the Company nor any Subsidiary has extended the
time for the filing of any Tax Return or the assessment of deficiencies or
waived any statute of limitations for any year, which extension or waiver is
still in effect. To the Company's knowledge, the provisions for taxes reflected
in the above-mentioned Financial Statements are adequate, in all material
respects, to cover any tax liabilities of the Company and the Subsidiaries in
respect of their businesses, properties and operations during the periods
covered by said Financial Statements and all prior periods. Neither the Company
nor any Subsidiary has filed a consent under Section 341(f) of the Code. Neither
the Company nor any Subsidiary has ever been part of an affiliated group filing
consolidated returns, or entered into any tax allocation or tax sharing
agreement, other than by and among each other.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 13
Execution Copy
2.11 Title to Properties; Liens; Condition of Properties.
---------------------------------------------------
(a) Neither the Company nor any Subsidiary owns, directly or indirectly,
any real property. The Company has made available to Parent true, correct and
complete copies of all material leases, subleases, rental agreements, contracts
of sale, tenancies or licenses related to any of the real or personal property
currently used by the Company or any Subsidiary in their respective businesses.
(b) Except as specifically disclosed in Schedule 2.11(b) of the Company
----------------
Disclosure Schedule or in the Base Balance Sheet, all of the Company's material
leases are valid, binding and enforceable in accordance with their terms against
the parties thereto, and each such lease is subsisting and no material default
exists under any thereof. Neither the Company nor any Subsidiary has received
notice that any party to any such lease intends to cancel, terminate or refuse
to renew the same or to exercise or decline to exercise any option or any right
thereunder.
(c) Except as specifically disclosed in Schedule 2.11(c) of the Company
----------------
Disclosure Schedule or in the Base Balance Sheet, none of the material personal
property owned by the Company or any Subsidiary is subject to any material
mortgage, pledge, deed of trust, lien (other than for taxes not yet due and
payable and statutory liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen, and liens imposed by law created in the ordinary
course of business for amounts not yet due (the "Permitted Liens")), conditional
sale agreement, security title, encumbrance, or other adverse claim or interest
of any kind.
(d) Except as otherwise specified in Schedule 2.11(d) of the Company
----------------
Disclosure Schedule, all buildings, machinery and equipment of the Company or
any Subsidiary are in reasonable, working order and repair, normal wear and tear
and excepted, are adequate for the uses to which they are being put, have been
reasonably maintained and conform in all material respects with all applicable
ordinances, regulations and zoning, safety or other laws.
2.12 Inventories; Collectibility of Accounts Receivable.
--------------------------------------------------
(a) All inventories of finished goods and raw materials of the Company and
the Subsidiaries reflected on the Base Balance Sheet were as of the date
thereof, and those existing at the Closing, to the Company's knowledge, will be,
except as reserved against in accordance with GAAP, of a quality and quantity
salable in the ordinary course of the business of the Company and the
Subsidiaries and are recorded on the Company's books and records at the lower of
cost or market price. Except as set forth in Schedule 2.12 of the Company
-------------
Disclosure Schedule, since the date of the Base Balance Sheet, no inventory
items have been sold or disposed of except through sales in the ordinary course
of business and consistent with past practice.
(b) Except as set forth in Schedule 2.12, all of the accounts receivable
of the Company and the Subsidiaries shown or reflected on the Base Balance
Sheet, less a reserve for bad debts, returns and allowances in the amount shown
on the Base Balance Sheet, are, and those existing at the time of Closing, less
any reserves for bad debts, returns and allowances taken in accordance with GAAP
and consistent with past practices, will be, (a) valid and to the Company's
knowledge enforceable claims, (b) which arose out of transactions with
unaffiliated parties. Except as set forth in Schedule 2.12 of the Company
-------------
Disclosure Schedule, neither the Company nor any Subsidiary is aware of the
intention of any customer to resist or delay paying any receivable.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 14
Execution Copy
2.13 Intellectual Property Rights.
----------------------------
(a) The Company or the Subsidiaries own or possess the adequate right to
use all Intellectual Property Rights (as defined below) necessary to the conduct
of their respective businesses as presently conducted or presently contemplated
to be conducted as of the date of this Agreement. Schedule 2.13(a) of the
----------------
Company Disclosure Schedule contains a list of all patents, trade names,
trademarks, service marks, and registered copyrights and applications for the
same owned by the Company or any Subsidiary. The Company and/or a Subsidiary
have unencumbered title to the Intellectual Property Rights set forth in
Schedule 2.13(a) which are listed as owned by the Company or any Subsidiary and
----------------
such title has not been challenged (pending, or to the knowledge of the Company,
threatened) by others except for the encumbrances listed in such Schedule
--------
2.13(a). No rights or licenses to use Intellectual Property Rights have been
-------
granted or acquired by the Company or any Subsidiary except licenses associated
with sales of products to end user customers in the ordinary course of business
and consistent with past practice under the terms of the "shrink wrap" license
in the form attached as Schedule 2.13(b) hereto (the "Shrink Wrap Licenses") and
----------------
except those listed in Schedule 2.13(c) of the Company Disclosure Schedule.
----------------
Schedule 2.13(c) of the Company Disclosure Schedule lists all material licenses,
----------------
agreements, obligations, provisions or contracts relating to the Intellectual
Property Rights to which the Company or any Subsidiary is a party or by which
the Company or any subsidiary is bound (other than the Shrink Wrap License).
Each of the licenses, agreements, obligations, provisions or contracts listed in
Schedule 2.13(c) (i) is in full force and effect, (ii) neither the Company nor
----------------
any Subsidiary is in material default under any such instrument, and (iii) there
are no outstanding, or, to the knowledge of the Company, threatened, disputes or
disagreements with respect to any such instrument. Except as listed in Schedule
--------
2.13(d) of the Company Disclosure Schedule, to the knowledge of the Company,
-------
there have been (i) no claims or assertions made by others that the Company or
any Subsidiary has infringed any Intellectual Property Rights of others by the
sale of products or any other activity in the preceding five year period and
(ii) no infringements by the Company or any Subsidiary during such period.
Except as set forth in Schedule 2.13(e) of the Company Disclosure Schedule, the
----------------
Company has no knowledge of any infringement of Intellectual Property Rights of
the Company or any Subsidiary by others. All such patents, registered
trademarks, service marks, and copyrights owned by the Company or any Subsidiary
are in good standing and are recorded on the public record in the name of the
Company or a Subsidiary, except for those failures to be in good standing and so
recorded that would not, individually or in the aggregate, have a Company
Material Adverse Effect. True, complete and correct copies of all material
listed in Schedules 2.13(a), 2.13(b), 2.13(c), 2.13(d) and 2.13(e) of the
--------------------------------------------------------
Company Disclosure Schedule have been delivered or made available to the Parent.
For purposes of this Agreement, "Intellectual Property Rights" shall mean and
include all of the Company's rights relating to patents, trademarks, service
marks, tradenames, copyrights, inventions, processes, trade secrets, know-how,
software and any documentation relating to the manufacture, marketing and
maintenance of products by the Company or any Subsidiary.
(b) Except as listed on Schedule 2.13(f) of the Company Disclosure
----------------
Schedule, all current employees of and technical consultants to the Company or
any of its Subsidiaries have entered into proprietary information and invention
agreements with the Company or such Subsidiary and copies of such agreements
have been made available to Parent. To the Company's knowledge, no employee of
the Company or any Subsidiary has entered into any agreement that prohibits him
from performing work in which the employee may be engaged or requires the
employee to transfer, assign, or disclose information concerning his work to
anyone other than the Company or any Subsidiary.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 15
Execution Copy
(c) The manner in which the Company or any Subsidiary has manufactured,
packaged, shipped, advertised, labeled and sold its products complies in all
material respects with all the material applicable laws and regulations
pertaining thereto. Neither the Company nor any Subsidiary has deposited, or is
obligated to deposit, any source code regarding its products into any source
code escrows or similar arrangements and neither the Company nor any Subsidiary
is under any contractual or other obligation to disclose the source code or any
other material proprietary information included in or relating to its products.
2.14 Contracts and Commitments.
-------------------------
(a) Except for contracts, commitments, plans, agreements and licenses
described (without the names of any customers of the Company who are parties
thereto) in Schedule 2.14(a), Schedule 2.13(b), Schedule 2.13(c) or Schedule
---------------- ---------------------------------- -----------
2.15 of the Company Disclosure Schedule (correct and complete copies of which,
----
if written, have been made available to the Parent) and except for contracts,
commitments, plans, agreements and licenses not presently in effect, neither the
Company nor any Subsidiary is a party to or subject to:
(i) any contract or agreement for the purchase of any commodity,
material, equipment or asset, except for the Company's proposed investment in
serverfarm equipment for its Comprende products and purchase orders in the
ordinary course for less than $10,000 each, such orders not exceeding in the
aggregate $50,000;
(ii) any other contracts or agreements creating any obligations of
the Company or any Subsidiary after the date of the Base Balance Sheet of
$20,000 or more with respect to any such contract or agreement, other than sales
and purchase commitments in the ordinary course of business and consistent with
past practice;
(iii) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier;
(iv) any material contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Company or any Subsidiary
(or its successor or assign) within 90 days after the date hereof;
(v) any contract or agreement for the sale, license or lease of its
products not made in the ordinary course of business and consistent with past
practice;
(vi) any contract with any sales agent or distributor of products of
the Company or any Subsidiary;
(vii) any contract containing covenants limiting the freedom of the
Company or any Subsidiary to compete in any line of business or with any person
or entity;
(viii) any material license or franchise agreement (as licensor or
licensee or franchisor or franchisee);
(ix) any arrangement or obligation with respect to the return of
inventory or merchandise other than on account of a defective condition,
incorrect quantities or missed delivery dates; or
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 16
Execution Copy
(x) any contract, subcontract or other agreement with any agency of
the United States government or other governmental entity .
(b) Neither the Company nor any Subsidiary is in material default under
any contracts, commitments, plans, agreements or licenses described in Schedule
--------
2.14(a) of the Company Disclosure Schedule nor does the Company have knowledge
-------
of any termination, cancellation, limitation or modification or change other
than in the ordinary course of business in any business relationship with any
material supplier or customer. For the purposes hereof, a supplier is material
if it accounted for more than $25,000 of the orders of the Company and its
Subsidiaries for purchases of raw materials and other products essential to its
manufacturing processes during either of fiscal year 1996 or 1997 or during the
three months ended March 31, 1998. A customer is material if it accounted for
more than $25,000 of the orders of the Company and its Subsidiaries in either
fiscal year 1996 or 1997 or during the three months ended March 31, 1998.
2.15 Labor and Employee Relations.
----------------------------
(a) Except as shown on Schedule 2.15(a) of the Company Disclosure
----------------
Schedule, as of the date hereof, there are no currently effective material
consulting or employment agreements or other material agreements with individual
consultants or employees to which the Company or any Subsidiary is a party.
Complete and accurate copies of all such written agreements have been made
available to Parent. Also shown on Schedule 2.15(a) of the Company Disclosure
----------------
Schedule, as of the date hereof, are the name and rate of compensation
(including all current salary, bonus, benefit and compensation) of each officer
and employee of the Company and the Subsidiaries, including all bonus
compensation for fiscal 1997 and from January 1, 1998, through the date hereof.
(b) Except as shown on Schedule 2.15(b) of the Company Disclosure
----------------
Schedule, none of the employees of the Company or any Subsidiary is covered by
any collective bargaining agreement with any trade or labor union, employees'
association or similar association. The Company and each Subsidiary has complied
in all material respects with applicable laws, rules and regulations relating to
the employment of labor, including without limitation those relating to wages,
hours, unfair labor practices, discrimination, and payment of social security
and similar taxes. Except as set forth on Schedule 2.15(b) there are no
----------------
representation elections, arbitration proceedings, labor strikes, slowdowns or
stoppages, material grievances or other general labor troubles pending, or, to
the knowledge of the Company, overtly threatened, with respect to the employees
of the Company or any Subsidiary.
(c) There are no complaints against the Company or any Subsidiary pending
or, to the knowledge of the Company, overtly threatened before the National
Labor Relations Board or any similar foreign, state or local labor agencies, or
before the Equal Employment Opportunity Commission or any similar foreign, state
or local agency, by or on behalf of any employee or former employee of the
Company or any Subsidiary.
(d) There is no material contingent liability for severance pay, accrued
vacation pay for prior years or similar items as of the date of the Base Balance
Sheet not set forth on the Base Balance Sheet or on Schedule 2.15(d) of the
-----------------
Company Disclosure Schedule. Except as set forth on Schedule 2.15(d), the
-----------------
execution, delivery and performance of this Agreement and the consummation of
the Merger will not trigger any severance pay obligation under any contract or
at law.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 17
Execution Copy
(e) The Company has made available to Parent a description of all written
material employment policies under which the Company and each Subsidiary
operates.
(f) Except as disclosed on Schedule 2.15(f) of the Company Disclosure
----------------
Schedule and except where the failure to so be in compliance, individually or in
the aggregate, would not have a Company Material Adverse Effect, the Company and
each Subsidiary is in compliance with all Federal, foreign (as applicable), and
state worker's safety laws and requirements.
(g) Except as disclosed on Schedule 2.15(g) of the Company Disclosure
----------------
Schedule, no executive, key employee or group of employees has notified the
Company of any plans to terminate his or her employment with the Company or any
Subsidiary.
(h) Except as disclosed on Schedule 2.15(h) of the Company Disclosure
----------------
Schedule, no salaried or commissioned employee has left the employment of the
Company or any Subsidiary since the date of the Base Balance Sheet, except where
such departure would not be reasonably likely to have a Company Material Adverse
Effect.
2.16 Employee Benefits and ERISA.
---------------------------
(a) Schedule 2.16(a) of the Company Disclosure Schedule sets forth a list
----------------
of every plan or arrangement relating to employees of the Company or of any
member of a controlled group or affiliated service group (as defined in Code
Section 414(b), (c), (m) and (o)) which includes the Company (an "ERISA
Affiliate") which is:
(i) an employee benefit plan within the meaning of Section 3 of the
Employment Retirement Income Security Act of 1974, as amended ("ERISA"); or a
multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA;
or
(ii) a compensation, stock purchase, stock option, stock bonus,
stock appreciation, severance, health, welfare, life, disability or other
benefit plan, fund, program or arrangement which is not covered by clause (i) or
(ii) above.
(Hereinafter, "ERISA Benefit Plan" refers to plans or arrangements under clauses
(i) and (ii) above and "Benefit Plan" refers to plans or arrangements under
clauses (i) - (iii) above.)
(b) There are no agreements or commitments of the Company or any
ERISA Affiliate, whether or not legally binding, to create any additional
Benefit Plan not listed on Schedule 2.16(b) of the Company Disclosure Schedule.
----------------
There have been no multiemployer plans or defined benefit pension plans covering
employees of the Company or an ERISA Affiliate within the last ten (10) years.
(c) The Company has made available to Parent complete and accurate
copies of each Benefit Plan described in Schedule 2.16(c) of the Company
----------------
Disclosure Schedule, including all amendments thereto. With respect to each
ERISA Benefit Plan, the Company has also furnished the three most recent Form
5500s and the most recent Internal Revenue Service determination letter (if
any), plan actuarial report, summary plan description, summary annual report (if
any) and employee manual, as well as summaries of material modifications, (if
any) material employee communications, and all reports (if any) of the Benefit
Plan required by ERISA and the regulations thereunder. The Company has also
furnished Parent copies of any
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 18
Execution Copy
insurance contracts or trust agreements through which any ERISA Benefit Plan is
funded, any custodial or investment contracts relating to assets or benefits
under the ERISA Benefit Plan, any contracts relating to record keeping or
administration for the ERISA Benefit Plan. To the knowledge of the Company,
there has not been any material adverse change occurring with respect to any
ERISA Benefit Plan since the date of the most recently completed and filed
annual report.
(d) No ERISA Benefit Plan is a pension plan within the meaning of Section
3(2) of ERISA except the Company's 401(k) Plan.
(e) With respect to each Benefit Plan:
(i) each Benefit Plan materially complies currently and has in all
material respects complied in the past, as to form and operation, with the
provisions of all applicable Federal and state laws, such as ERISA and the Code,
including without limitation all requirements regarding discrimination,
disclosure, and continuation coverage (under Section 4980B of the Code); and the
Company has not, and to the knowledge of the Company no other party has, engaged
in a nonexempt "prohibited transaction" (as defined in Section 4975 of the Code
or enumerated in Section 406(a) or (b) of ERISA);
(ii) all required government filings, reports, and notices have been
properly and timely made;
(iii) no such Benefit Plan is currently under audit or to the
Company's knowledge, investigation by any governmental agency or body;
(iv) there are no actions, suits or claims (other than routine
claims for benefits) pending or, to the knowledge of the Company, threatened
against any of the Benefit Plans or against the assets of any Benefit Plan;
(v) all premiums due in connection with the Benefit Plan and
premiums for life and health insurance and annuity contracts, have been paid in
full when due or within any applicable grace period;
(vi) all reports and filings made pursuant to ERISA, including
without limitation all 5500 forms and attachments, summary annual reports, and
participant reports, and any other documents reasonably necessary to enable
Parent to perform its responsibilities with respect to any employee program
subsequent to the Closing, are and shall be available at the offices of the
Company on and immediately after the Closing; and
(vii) except as required by COBRA (Section 4980B of the Code) or the
Family Medical Leave Act, no Benefit Plan provides health or other welfare
benefits to retirees, former employees, or their dependents.
(f) Except as required by COBRA or the Family Medical Leave Act, neither
the Company nor any ERISA Affiliate has made any promises or incurred any
obligation to provide any health or other welfare benefits to any retirees,
former employees, or their dependents.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 19
Execution Copy
(g) The execution and delivery of this Agreement by the Company and the
consummation of the Merger:
(i) do not constitute a nonexempt prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code;
(ii) will not result in any obligation or liability of the Parent or
of the Company to any employee of the Company or any ERISA Affiliate or to the
PBGC in respect of any Benefit Plan.
2.17 Environmental Matters. The Company and its Subsidiaries have complied
---------------------
in all respects with all applicable environmental laws, where the failure to
comply, individually or in the aggregate, would result in a Company Materials
Adverse Effect.
2.18 Permits. As of the date hereof, the Company and each Subsidiary holds
-------
all licenses, permits, registrations, orders, authorizations, approvals and
franchises which are required to permit it to conduct its businesses as
presently conducted, except where the failure to hold such licenses, permits,
registrations, orders, authorizations, approvals or franchises would not,
individually or in the aggregate, have a Company Material Adverse Effect. All
such licenses, permits, registrations, orders, authorizations, approvals and
franchises as of the date hereof are listed on Schedule 2.18 of the Company
-------------
Disclosure Schedule and are now and to the Company's knowledge, will be after
the Closing, valid and in full force and effect, and the Surviving Corporation,
unless otherwise indicated on Schedule 2.18, shall have full benefit of the
-------------
same. Since January 1, 1996, neither the Company nor any Subsidiary has
received any notification of any asserted present failure (or past and
unremedied failure) by it to have obtained any such license, permit,
registration, order, authorization, approval or franchise.
2.19 Warranty or Other Claims. Except as disclosed on Schedule 2.19 of the
------------------------ -------------
Company Disclosure Schedule, no product manufactured, sold or leased by the
Company or any Subsidiary is subject to any guaranty, warranty or, right of
return beyond the applicable standard terms and conditions of sale or lease,
which have been provided to the Parent, or that may be imposed by law. Schedule
--------
2.19 of the Company Disclosure Schedule sets forth the aggregate expenses
----
incurred by the Company's customer support and service center in fulfilling its
and the Subsidiaries' obligations under their guaranty, warranty and right of
return provisions during each of the fiscal years and the interim period covered
by the Financial Statements; and the Company knows of no reason why such
expenses should significantly increase as a percentage of sales in the future.
Except as set forth in Schedule 2.19 of the Company Disclosure Schedule, there
-------------
are no existing or, to the knowledge of the Company threatened claims, against
the Company or any Subsidiary for services or merchandise which are defective or
fail to meet any service or product warranties other than in the ordinary course
of business consistent with past experience. Except as set forth in Schedule
--------
2.19 of the Company Disclosure Schedule, no claim has been asserted against the
----
Company or any Subsidiary since January 1, 1997 for renegotiation or price
redetermination of any completed business transaction. The Company's and the
Subsidiaries' products are free from known significant defects and, to the
knowledge of the Company, conform to the specifications, documentation and
sample demonstration furnished to the Company's and the Subsidiaries' customers
and made available to Parent.
Claims and Legal Proceedings. Except for matters described in Schedule
---------------------------- --------
2.20 of the Company Disclosure Schedule, there are no claims, actions, suits,
----
arbitrations, proceedings or investigations pending (or, to the knowledge of the
Company, threatened) against the Company or any Subsidiary, and there are no
outstanding court orders, court decrees, or court stipulations to which the
Company or any Subsidiary is a
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 20
Execution Copy
party or by which any of their assets are bound, any of which (a) affect this
Agreement or the transactions contemplated hereby, or (b) materially restrict
the present business, properties, operations, prospects, assets, revenues or
condition (financial or otherwise) of the Company or any Subsidiary, or (c)
would, individually or in the aggregate, have a Company Material Adverse Effect
or materially impair or preclude the Company's ability to consummate the Merger
or the other transactions contemplated hereby.
2.21 Borrowings and Guarantees. As of the date hereof, except as shown on
-------------------------
Schedule 2.21 of the Company Disclosure Schedule, there are no agreements and
-------------
undertakings pursuant to which the Company or any Subsidiary (a) is borrowing or
is entitled to borrow any money, (b) is lending or has committed itself to lend
any money, or (c) is a guarantor or surety with respect to the obligations of
any person. Complete and accurate copies of all such written agreements have
been made available to Parent.
2.22 Financial Service Relations and Powers of Attorney. All of the
--------------------------------------------------
arrangements which the Company or any Subsidiary has with any bank depository
institution or other financial services entity as of the date hereof, whether or
not in the Company's or any Subsidiary's name, are completely and accurately
described on Schedule 2.22 hereto, indicating with respect to each of such
-------------
arrangements the type of arrangement maintained (such as checking account,
borrowing arrangements, safe deposit box, etc.), the banking institution and the
person or persons authorized in respect thereof. Neither the Company nor any
Subsidiary has any outstanding powers of attorney.
2.23 Insurance. Schedule 2.23 of the Company Disclosure Schedule lists all
--------- -------------
insurance policies in force on the date hereof covering the businesses,
properties and assets of the Company and the Subsidiaries and all outstanding
claims against such policies. All such policies are currently in effect.
Except as set forth on Schedule 2.23 of the Company Disclosure Schedule, neither
-------------
the Company nor any Subsidiary has received notice of the cancellation of any
such insurance in effect on the date hereof.
2.24 Government Contracts. Neither the Company nor any Subsidiary has ever
--------------------
had a contract or subcontract terminated for default and has never been
determined to be "nonresponsible" by any agency of the United States government.
As of the date hereof, neither the Company nor any Subsidiary has any
outstanding agreements, contracts or commitments that required it to obtain or
maintain a government security clearance.
2.25 Corporate Books, Records and Accounts.
-------------------------------------
(a) The minute books and stock ledgers of the Company, copies of which
have been made available for inspection by Parent, accurately record all
material action taken by the Company's stockholders, board of directors and
committees thereof.
(b) The Company's books, records and accounts fairly and accurately
reflect transactions and dispositions of assets by the Company and the Company's
Subsidiaries, and the system of internal accounting controls of the Company and
the Company's Subsidiaries is sufficient to assure that: (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 21
Execution Copy
2.26 Transaction Fee. Except for X.X. Xxxxxxxx & Co., Inc. ("Xxxxxxxx") and
---------------
Xxxxxx, Xxxxx Xxxxx, Inc. ("FBW," together with Xxxxxxxx, the "Bankers"),
neither the Company nor any Subsidiary has employed any investment banker,
broker, finder or intermediary in connection with the transactions contemplated
hereby and/or who is entitled to a fee or any commission the receipt of which is
conditioned upon the consummation of the Merger. The Company has attached
hereto as Schedule 2.26 of the Company Disclosure Schedule true and complete
-------------
copies of the retainer letters dated July 1, 1998 and July 8, 1998,
respectively, for the services of the Bankers and will not amend either letter
without Parent's prior, written consent. The Company has no other agreements,
obligations or understandings in connection therewith. Any and all fees,
commissions, expenses or other sums payable to Xxxxxxxx shall be payable only
upon the consummation of the Merger. The Company shall not be obligated to pay
any such fees or expenses to Xxxxxxxx if the Merger is not consummated. Subject
to the foregoing restrictions, any fees payable to Xxxxxxxx shall be payable in
shares of Parent Common Stock valued at the closing price of the Parent's Common
Stock on the Nasdaq National Market on the date prior to the consummation of the
Merger (the "Xxxxxxxx Shares"). The Parent agrees to issue the Xxxxxxxx Shares
in accordance with the terms of the retainer letter with Xxxxxxxx.
2.27 Transactions with Interested Persons. Except as disclosed in Schedule
------------------------------------ --------
2.27 of the Company Disclosure Schedule to the Company's knowledge, no officer,
----
director or 5% stockholder of the Company or any Subsidiary, or their respective
spouses or children, (i) owns, directly or indirectly, on an individual or joint
basis, any material interest in, or serves as an officer or director of, any
customer, competitor or supplier of the Company or any Subsidiary or any
organization which has a material contract or arrangement with the Company or
any Subsidiary, or (ii) has any material contract or agreement with the Company
or any Subsidiary other than as disclosed on a schedule hereto, and all such
agreements are, except as noted on such schedule, on arms-length terms.
2.28 Absence of Sensitive Payments. Neither the Company, any Subsidiary,
-----------------------------
nor, to the knowledge of the Company, any of the Company's or any Subsidiary's
directors, officers, agents, stockholders or employees, on behalf of the Company
or any Subsidiary:
(a) has made or has agreed to make any contributions, payments or gifts of
funds or property to any governmental official, employee or agent where either
the payment or the purpose of such contribution, payment or gift was or is
illegal under the laws of the United States, any state thereof, or any other
jurisdiction (foreign or domestic);
(b) has established or maintained any unrecorded fund or asset for any
purpose, or has made any false or artificial entries on any of its books or
records for any reason; or
(c) has made or has agreed to make any contribution or expenditure, or has
reimbursed any political gift or contribution or expenditure made by any other
person to candidates for public office, whether Federal, state or local (foreign
or domestic) where such contributions were a violation of applicable law.
2.29 Year 2000. All operating codes, programs, utilities and other software,
---------
as well as all hardware and systems, utilized by the Company and its
Subsidiaries in their businesses, or in the provisions or services by the
Company and its Subsidiaries, or comprising software, hardware and/or systems
sold by the Company and its Subsidiaries to third parties, are designed to
record, store, process, and present calendar dates falling on or after January
1, 2000 in the same manner, and with the same functionality, as provided on or
before
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 22
Execution Copy
December 31, 1999. Such software and hardware is designed to not lose
functionality or degrade in performance as a consequence of such software and
hardware operating at a date later than December 31, 1999.
2.30 Disclosure of Material Information. No representation or warranty by the
----------------------------------
Company contained in this Agreement, and no statement contained in the Company
Disclosure Schedule, any exhibit to this Agreement or certificate issued by or
to be issued by the Company and furnished or to be furnished to Parent pursuant
to this Agreement contains or will contain any untrue statement of a material
fact or omits, or will omit, to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
2.31 Regulatory Correspondence. The Company has made available to the Parent
-------------------------
true and correct copies of any and all material correspondence from or to any
federal governmental or regulatory agencies or bodies since January 1, 1997,
including, without limitation, all significant correspondence with the
Securities and Exchange Commission, the National Association of Securities
Dealers and the United States Justice Department.
2.32 Company Action.
--------------
(a) The Board of Directors of the Company, at a meeting duly called and
held, has (i) determined that the Merger is fair and in the best interests of
the Company and its stockholders, (ii) approved the Merger in accordance with
the provisions of the DGCL, (iii) approved this Agreement, the Certificate of
Merger and the Option Agreement, (iv) authorized the execution and delivery of
this Agreement, the Certificate of Merger and the Option Agreement and (v)
directed that this Agreement and the Merger be submitted to the Company
Stockholders for their approval and resolved to recommend that Company
Stockholders vote in favor of the approval of this Agreement and the Merger.
(b) The Company has received the opinion of FBW dated of recent date,
satisfactory to the Company and its Board of Directors to the effect that the
terms of the Merger are fair to the Company Stockholders from a financial point
of view (the "FBW Opinion").
(c) On the date hereof, the Company has entered into an option agreement
(the "Option Agreement") with the Parent in substantially the form attached
hereto as Exhibit B pursuant to which the Company grants the Parent an option,
---------
under certain circumstances whereby this Agreement is terminated and the Merger
does not take place as contemplated herein, to purchase up to that number of
Company Shares as may equal 16% of the issued and outstanding Company Shares, at
a price equal to the Per Share Consideration payable in cash.
(d) The Company shall use it reasonable efforts to obtain and deliver to
the Parent simultaneously with the execution of this Agreement or as soon as
practicable thereafter, the written agreement of the executive officers and
directors listed on Schedule 2.32 hereto, and all other persons or entities who
-------------
are at such time "affiliates" of the Company for purposes of Rule 145 under the
Securities Act, to the extent such persons or entities own Company Shares (the
"Company Affiliates") substantially in the form attached hereto as Exhibit C (an
---------
"Affiliate Agreement") pursuant to which each of the Company Affiliates shall
have (i) acknowledged that the Merger Shares to be received by them will be
subject to certain resale restrictions under Rule 145 of the Securities Act, and
(ii) with respect to the Company Affiliates who are directors or executive
officers of the Company (other than Mr. Xxxxxxx Xxxxxxxx) agreed
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 23
Execution Copy
to vote all Company Shares owned by them or over which they have voting control,
in favor of the Merger and this Agreement and irrevocably grant a proxy, coupled
with an interest, to the Parent or its designee to vote such Company Shares in
favor of this Agreement and the Merger. Schedule 2.32 of the Company Disclosure
-------------
Schedule identifies all persons or entities who or which are as of the date
hereof Company Affiliates.
(e) The Company has delivered to the Parent the Employment Agreements and
Noncompetition and Confidentiality Agreements (attached hereto as Exhibits E and
E-1, respectively and referred collectively as the "Employment Agreements")
executed by Xxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxx X. XxXxxxxx III, which
agreements will become effective only upon consummation of the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
AND THE ACQUISITION SUBSIDIARY
Each of the Parent and the Acquisition Subsidiary hereby jointly and
severally represents and warrants to the Company that the statements contained
in this Article III are true and correct, except as set forth in the disclosure
schedule attached hereto (the "Parent Disclosure Schedule"). The Parent
Disclosure Schedule shall be initialed by the Parties and shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article III; provided, however, that any matter disclosed in any Section
hereof or on any part of the Parent Disclosure Schedule shall be deemed
disclosed for purposes of every Section hereof and every part of the Parent
Disclosure Schedule; provided further, that the Parent shall make a good faith
effort to include any disclosure (by cross-reference or repeating the
disclosure) that is required by more than one representation and warranty in
each applicable portion of the Parent Disclosure Schedule.
3.1 Organization of Parent and Acquisition Subsidiary. The Parent is a
-------------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Belgium with full corporate power and authority to own, lease and operate its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it. The
Acquisition Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own, lease and operate its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it. The Parent owns all of the issued
and outstanding capital stock of the Acquisition Subsidiary. The Acquisition
Subsidiary was formed solely for the purpose of the Merger and engaging in the
transactions contemplated hereby. Except for obligations or liabilities
incurred in connection with its incorporation, continuing existence or the
transactions contemplated hereby, The Acquisition Subsidiary has not incurred,
directly or indirectly through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business or activities of any kind whatsoever or
entered into any agreements or arrangements with any person or entity. The
copies of the Parent's Restated Articles of Incorporation and the Acquisition
Subsidiary's Certificate of Incorporation, each as amended to date, certified by
the appropriate Belgian authorities and the Delaware Secretary of State,
respectively, and of the Acquisition Subsidiary's Bylaws as amended to date,
certified by its Secretary, copies of which have been delivered to the Company.
3.2 Capitalization. All of the Merger Shares will be, when issued in
--------------
accordance with this Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. There are no
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 24
Execution Copy
authorized or outstanding options, warrants, calls, rights, commitments or other
agreements of any character to which the Acquisition Subsidiary is a party or by
which it is bound requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Acquisition Subsidiary.
3.3 Authorization of Transaction. Each of the Parent and the Acquisition
----------------------------
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the Merger
and the transactions contemplated hereby. The execution and delivery of this
Agreement and the performance of this Agreement and the consummation by each of
the Parent and the Acquisition Subsidiary of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of each of the Parent and the Acquisition Subsidiary. This
Agreement has been duly and validly executed and delivered by each of the Parent
and the Acquisition Subsidiary and constitute valid and binding obligations of
the Parent and the Acquisition Subsidiary, enforceable against them in
accordance with its terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
3.4 No Conflict of Transaction With Obligations and Laws. Subject to
----------------------------------------------------
compliance with the applicable requirements of the Coordinated Laws on
Commercial Companies of Belgium (which have been described in a memorandum which
has been made available to the Company), the Securities Act, any applicable
state takeover or securities laws, the Exchange Act, the Nasdaq National Market,
the Easdaq market and the filing of the Certificate of Merger and any other
documents as required by the DGCL, neither the execution, delivery and
performance of this Agreement, nor the performance of the transactions
contemplated hereby, will: (i) constitute a breach or violation of the Charter
or Bylaws of the Parent or the Acquisition Subsidiary; (ii) require any consent,
waiver, exemption, approval or authorization of, declaration, filing or
registration with, or giving of notice to, any person, court, arbitration
tribunal, administrative agency or commission or other governmental or
regulatory agency or authority (iii) conflict with or constitute (with or
without the passage of time or the giving of notice) a breach of, or default
under, any debt instrument to which the Parent (including any subsidiary of the
Parent) or the Acquisition Subsidiary is a party, or give any person the right
to accelerate any indebtedness or terminate, modify or cancel any right with
respect to any indebtedness; (iv) constitute (with or without the passage of
time or giving of notice) a default under or breach of any other agreement,
instrument or obligation to which the Parent (including any subsidiary of the
Parent) or the Acquisition Subsidiary is a party or by which the Parent
(including any subsidiary of the Parent) or the Acquisition Subsidiary or any of
their assets are bound; (v) result in the creation of any lien or encumbrance
upon any of the assets of the Parent (including any subsidiary of the Parent) or
the Acquisition Subsidiary; (vi) result in a violation of any law, regulation,
administrative order or judicial order, decree or judgment applicable to the
Parent (including any subsidiary of the Parent) or the Acquisition Subsidiary,
or their businesses or assets; or (vii) invalidate or adversely affect any
permit, license or authorization used in the Parent's (including any subsidiary
of the Parent) or the Acquisition Subsidiary's business, excluding from clauses
(ii) through (vii) consents, waivers, exemptions, approvals or authorizations,
declarations, filings or registrations, notices, conflicts, breaches, defaults,
liens or encumbrances, or violations which would not, either individually or in
the aggregate, have a material adverse effect on the business, properties,
operations, assets, revenues or condition (financial or otherwise) of the Parent
and its subsidiaries on a consolidated basis (a "Parent Material Adverse
Effect") or materially impair or preclude the Parent's or the
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 25
Execution Copy
Acquisition Subsidiary's ability to consummate the Merger or the transactions
contemplated hereby. Neither the execution, delivery and performance of the
Agreement nor the performance of the transactions contemplated hereby will give
rise to a right of any party (other than the Parent) to terminate, modify or
cancel any contract, agreement or other instrument except where any
terminations, modifications or cancellations, either individually or in the
aggregate, would not have a Parent Material Adverse Effect.
3.5 Reports and Financial Statements
--------------------------------
(a) The Parent has previously furnished to the Company complete and
accurate copies, as amended or supplemented, of its (a) Annual Report on Form
20-F for the fiscal years 1996 and 1997, as filed with the SEC, and any
amendments thereto, (b) proxy statements relating to all meetings of its
stockholders (whether annual or special) since January 1, 1996 and (c) all other
reports filed pursuant to the Exchange Act since January 1, 1996 (such annual
reports, proxy statements and other filings, together with any amendments or
supplements thereto, are collectively referred to herein as the "Parent
Reports"). As of their respective dates, the Parent Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
audited financial statements, and schedules (if any) of the Parent included in
the Parent Reports (together, the "Parent Financial Statements") (i) comply as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the notes
thereto), (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Parent and each of its subsidiaries as of the
respective dates thereof and for the periods referred to therein, and (iv) are
consistent in all material respects with the books and records of the Parent.
(b) The consolidated balance sheet contained in the Parent's Annual Report
on Form 20-F for the fiscal year ended December 31, 1997, including the
footnotes thereto, is sometimes referred to hereinafter as the "Parent Base
Balance Sheet."
(c) The books of account of the Parent are complete and accurate in all
material respects.
3.6 Claims and Legal Proceedings. As of the date hereof, there are no
----------------------------
claims, actions, suits, arbitrations, proceedings or investigations pending (or,
to the best knowledge of Parent, threatened) against Parent or any of its
subsidiaries, and there are no outstanding court orders, court decrees, or court
stipulations to which Parent or any of its subsidiaries is a party or by which
any of their respective assets are bound, any of which (a) affect this Agreement
or the transactions contemplated hereby, (b) would, individually or in the
aggregate materially restrict the present business, properties, operations,
prospects, assets, revenues or condition (financial or otherwise) of the Parent
or any of its subsidiaries, or (c) would, individually or in the aggregate, have
a Parent Material Adverse Effect or materially impair or preclude the Parent's
or the Acquisition Subsidiary's ability to consummate the Merger or the other
transactions contemplated hereby.
3.7 Present Compliance with Obligations and Laws. As of the date hereof, the
--------------------------------------------
Parent is not: (a) in violation of its Charter or Bylaws; (b) in default in the
performance of any obligation, agreement or condition of any debt instrument
which (with or without the passage of time or the giving of notice) affords to
any person the right to accelerate any indebtedness or terminate any right; (c)
in default of or breach of (with or without the passage of time or the giving of
notice) any other contract to which it is party or by which it or its assets are
bound; or (d) in violation of any law, regulation, administrative order or
juridical
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 26
Execution Copy
order, decree, or judgment applicable to it or its business or assets,
except where any violation or default under items (b), (c) or (d) would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
3.8 Permits. As of the date hereof, each of the Parent and the Acquisition
-------
Subsidiary holds all licenses, permits, registrations, orders, authorizations,
approvals and franchises which are required to permit it to conduct its business
as presently conducted, except where the failure to hold such licenses, permits,
registrations, orders, authorizations, approvals or franchises would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
3.9 Disclosure of Material Information. As of the date hereof, no
----------------------------------
representation or warranty by the Parent or the Acquisition Subsidiary contained
in this Agreement, and no statement contained in the Parent's Disclosure
Schedule, any exhibit to this Agreement or certificate issued by or to be issued
by the Parent and furnished or to be furnished to the Company pursuant to the
Agreement contains or will contain any untrue statement of a material fact or
omits, or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
3.10 Parent Action. The Parent has received the opinion of Xxxxx & Company
-------------
satisfactory to the Parent to the effect that the terms of the Merger are fair
to the Parent from a financial point of view. A copy of such letter has been
previously furnished to the Company.
3.11 Liquidation. The Parent has no present intention to dissolve, sell all
-----------
or substantially all of its assets or discontinue its core business.
ARTICLE IV
COVENANTS
4.1 Reasonable Best Efforts. Each of the Parties shall use, and the Parent
-----------------------
shall cause the Acquisition Subsidiary to use, reasonable best efforts to take
all actions and to do all things necessary, proper or advisable to consummate
the Merger and the transactions contemplated by this Agreement, including, but
not limited to the delivery of certificates reasonably requested in connection
with any opinions to be delivered hereunder.
4.2 Notices and Consents. Each of the Parties shall use, and the Parent
--------------------
shall cause the Acquisition Subsidiary to use, reasonable best efforts to
obtain, at its reasonable expense, all such waivers, permits, consents,
approvals or other authorizations from third parties and governmental entities
or authorities, and to effect all such registrations, filings and notices with
or to third parties and governmental entities or authorities, as may be
necessary or desirable in connection with the transactions contemplated by this
Agreement.
4.3 Special Meeting, Prospectus/Proxy Statement and Registration Statement;
-----------------------------------------------------------------------
Fairness Opinion.
----------------
(a) The Parent and the Company shall jointly prepare, and the Company
shall file with the SEC under the Exchange Act, subject to the other provisions
of this Agreement, proxy materials for the purpose of soliciting proxies from
holders of Company Shares to vote in favor of the adoption of this Agreement and
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 27
Execution Copy
the approval of the Merger at a meeting of holders of Company Shares to be
called and held for such purpose (the "Special Meeting"). Such proxy materials
shall be in the form of a prospectus/proxy statement to be used for the purpose
of offering the Merger Shares to holders of Company Shares and soliciting such
proxies from holders of Company Shares (such prospectus/proxy statement,
together with any accompanying letter to stockholders, notice of meeting and
form of proxy, shall be referred to herein as the "Prospectus/Proxy Statement").
The Parent and Acquisition Subsidiary shall furnish to the Company all
information concerning the Parent and Acquisition Subsidiary as the Company may
reasonably request in connection with the preparation of the Prospectus/Proxy
Statement. The Parent and its counsel shall be given an opportunity to review
and comment on the Prospectus/Proxy Statement prior to its filing with the SEC.
The Company, with the assistance of the Parent, shall promptly respond to any
SEC comments on the Prospectus/Proxy Statement and shall otherwise use
reasonable best efforts to resolve as promptly as practicable all SEC comments
thereon.
(b) A copy of the FBW Opinion shall be delivered by the Company to the
Parent no later than the day that the preliminary proxy materials described in
subparagraph (a) above are first filed with the SEC.
(c) The Parent shall prepare and file with the SEC under the Securities
Act and all other applicable regulatory bodies as soon as reasonably
practicable, a Registration Statement on Form F-4 with respect to shares of
Parent Common Stock to be issued in the Merger and the Xxxxxxxx Shares (the
"Registration Statement"), which shall include the Prospectus/Proxy Statement as
a part thereof. The Company and its counsel shall be given an opportunity to
review and comment on the Registration Statement prior to its filing with the
SEC. The Parent, with the assistance of the Company, shall promptly respond to
any SEC comments on the Registration Statement and shall otherwise use
reasonable best efforts to cause the Registration Statement to be declared
effective as promptly as practicable. The Parent shall also take any and all
such actions to satisfy the requirements of the Securities Act, including Rule
145 thereunder, and the Exchange Act. Prior to the Closing Date, the Parent
shall use its reasonable, good faith efforts to cause the shares of Parent
Common Stock to be issued pursuant to the Merger to be registered or qualified
under all applicable securities or Blue Sky laws of each of the states and
territories of the United States, and to take any other such actions which may
be necessary to enable the Parent Common Stock to be issued pursuant to the
Merger in each such jurisdiction.
(d) Promptly following the resolution of all SEC comments on the
Prospectus/Proxy Statement and the declaration of effectiveness of the
Registration Statement, the Company shall distribute the Prospectus/Proxy
Statement to its stockholders and, pursuant thereto, shall call the Special
Meeting in accordance with the DGCL and subject to the other provisions of this
Agreement, solicit proxies from Company Stockholders to vote in favor of the
adoption of this Agreement and the approval of the Merger at the Special
Meeting.
(e) The Company shall comply with all applicable provisions of and rules
under the Exchange Act and all applicable provisions of the DGCL in the
preparation, filing and distribution of the Prospectus/Proxy Statement, the
solicitation of proxies thereunder, and the calling and holding of the Special
Meeting. Without limiting the foregoing, the Company shall make sure that the
Prospectus/Proxy Statement does not, as of the date on which it is distributed
to Company Stockholders, and as of the date of the Special Meeting, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading (provided that the Company shall not be
responsible for the accuracy or completeness of any information relating to the
Parent and the Acquisition Subsidiary or any other information furnished by the
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 28
Execution Copy
Parent in writing for inclusion in the Prospectus/Proxy Statement). The
information relating to the Company supplied by the Company for inclusion in the
Registration Statement will not as of the effective date of the Registration
Statement (or any amendment or supplement thereto) or at the time of the Special
Meeting, contain any statement which, at such time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein not false or misleading.
(f) The Parent shall comply with all applicable provisions of and rules
under the Securities Act and state securities laws in the preparation, filing
and distribution of the Registration Statement and the offering and issuance of
the Merger Shares. Without limiting the foregoing, the Parent shall make sure
that the Registration Statement does not, as of its effective date, and as of
the date of the Special Meeting, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (provided that the Parent shall not
be responsible for the accuracy or completeness of any information relating to
the Company or any other information furnished by the Company in writing for
inclusion in the Registration Statement). The information supplied by the Parent
for inclusion in the Prospectus/Proxy Statement to be sent to the stockholders
of the Company in connection with the Special Meeting will not, on the date the
Prospectus/Proxy Statement (or any amendment or supplement thereto) is first
mailed to stockholders of the Company or at the time of the Special Meeting,
contain any statement which, at such time and in light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading.
(g) The Company, acting through its Board of Directors, shall include in
the Prospectus/Proxy Statement the recommendation of its Board of Directors that
the Company Stockholders vote in favor of the adoption of this Agreement and the
approval of the Merger, and shall otherwise use reasonable best efforts to
obtain the Requisite Stockholder Approval. Notwithstanding the foregoing, the
obligations set forth in this paragraph (g) shall not apply (and the Board of
Directors shall be permitted to modify or withdraw any such recommendation
previously made) if the Board of Directors of the Company, after consultation
with and based upon the written reasoned opinion of independent legal counsel
(who may be the Company's regular legal counsel) that to not withdraw such
recommendation would be reasonably likely to constitute a breach of the
fiduciary duties of the Board of Directors under application law, determines in
good faith that to not withdraw such recommendation would constitute a breach of
the fiduciary duties of the Board of Directors under applicable law.
4.4 Operation of Business. Except as contemplated by this Agreement, during
---------------------
the period from the date of this Agreement to the Effective Time, the Company
shall (and shall cause each Subsidiary to) conduct its operations in the
ordinary course of business and consistent with past practice and in compliance
in all material respects with applicable laws and regulations and, to the extent
consistent therewith, use reasonable efforts to preserve intact its current
business organization, keep its physical assets in good working condition, keep
available the services of its current officers and employees, preserve its
relationships with customers, suppliers and others having business dealings with
it and maintain its goodwill and ongoing business in all material respects.
Without limiting the generality of the foregoing, prior to the Effective Time,
the Company shall not, without the written consent of the Parent:
(a) other than as contemplated in this Agreement or the Exhibits hereto,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorize the issuance, sale
or delivery of,
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 29
Execution Copy
or redeem or repurchase, any stock of any class or any other securities or any
rights, warrants or options to acquire any such stock or other securities, or
amend any of the terms of any Convertible Securities or derivative securities
other than the issuance of Company Shares upon the exercise of outstanding
Convertible Securities or derivative securities;
(b) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) except in the ordinary course of business and consistent with past
practice: create, incur or assume any debt not currently outstanding (including
obligations in respect of capital leases) other than loans incurred to satisfy
the working capital needs of the Company; assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; or make any loans, advances
or capital contributions to, or investments in, any other person;
(d) enter into, adopt or amend any ERISA Benefit Plan or Benefit Plan or
any employment or severance agreement or arrangement (except renewals (without
any increase in the benefits) of existing employment agreements of the employees
named in Section 2.32(e)) or (except for normal increases in the ordinary course
of business and consistent with past practice) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, pay any
bonuses not accrued for in any of the Financial Statements other than (i) as
referred to in Section 2.9(j) and (ii) bonuses in the ordinary course of
business, consistent with past practices (in an aggregate amount not to exceed
$25,000), or pay any benefit not required by the terms in effect on the date
hereof of any existing ERISA Benefit Plan or Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any shares or other
equity interests in or securities of any corporation, partnership, association
or other business organization or division thereof or any assets, other than
purchases and sales of assets in the ordinary course of business and consistent
with past practice;
(f) amend its Charter or Bylaws;
(g) change in any material respect its accounting methods, principles or
practices, except insofar as may be required by a change in GAAP;
(h) discharge or satisfy any security interest, lien or other encumbrance
or pay any obligation or liability other than as may be required by contract or
law or in the ordinary course of business and consistent with past practice;
(i) mortgage or pledge any of its property or assets or subject any such
assets to any security interest, lien or other encumbrance, except for Permitted
Liens and to fund the Company's working capital needs;
(j) sell, assign, transfer or license any Intellectual Property Assets,
other than in the ordinary course of business and consistent with past practice;
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 30
Execution Copy
(k) enter into, amend, terminate, take or omit to take any action that
would constitute a material violation of or material default under, or waive any
material rights under, any material contract or agreement;
(l) make or commit to make any capital expenditure in excess of $10,000
per item or $50,000 in the aggregate;
(m) obtain directors' and officers' liability insurance (except renewals
(without any increase in the benefits) of the existing directors' and officers'
liability insurance listed on Schedule 2.23 of the Company Disclosure Schedule);
-------------
(n) agree in writing or otherwise to take any of the foregoing actions.
In addition, the Company shall not without prior oral consultation with the
Parent hire any employees or retain any consultants other than nonmanagement or
nonsupervisory personnel in the ordinary course of business.
4.5 Conduct of Parent Business. The Parent covenants and agrees that, from the
--------------------------
date hereof through the Closing Date, except as otherwise set forth in this
Agreement, it shall not, and shall cause the Acquisition Subsidiary not to
recommend to the stockholders that any dividend on, or distribution in respect
of, any of Parent's capital stock be declared, set aside, paid or made except
dividends payable solely in common stock or in connection with the Parent's
outstanding 4.75% Preferred Income Equity Securities.
4.6 Access. Each party shall permit representatives of the other to have
------
access (at all reasonable times and in a manner so as not to interfere with the
normal business operations of the other party) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel of or pertaining to such party, all in accordance with the terms of
the respective letter agreements dated July 1, 1998, executed by each of the
Parent and the Company, copies of which are attached hereto as Exhibit F (the
"Confidentiality Agreements"); provided that (i) the representatives of the
Company may have the access to the Parent permitted hereunder only in order to
conduct customary due diligence regarding the completeness of the Parent Reports
and other information set forth herein as the Company may reasonably request and
(ii) the parties and their representatives shall not make any copy or other
record of the names of any of the customers of the other parties or the names of
other persons or entities that are parties to contracts with such other party
(except for names that appear in contracts, copies of which already have been
provided to the other party).
4.7 Notice of Breaches and Updates.
------------------------------
(a) The Company shall promptly deliver to the Parent written notice of any
event or development that would (a) render any statement, representation or
warranty of the Company in this Agreement (including the Company Disclosure
Schedule) inaccurate or incomplete in any material respect, or (b) constitute or
result in a breach by the Company of, or a failure by the Company to comply
with, any agreement or covenant in this Agreement applicable to such Party. The
Parent or the Acquisition Subsidiary shall promptly deliver to the Company
written notice of any event or development that would (i) render any statement,
representation or warranty of the Parent or the Acquisition Subsidiary in this
Agreement inaccurate or incomplete in any material respect, or (ii) constitute
or result in a breach by the Parent or the
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 31
Execution Copy
Acquisition Subsidiary of, or a failure by the Parent or the Acquisition
Subsidiary to comply with, any agreement or covenant in this Agreement
applicable to such Party. No such disclosure shall be deemed to avoid or cure
any such misrepresentation or breach.
(b) The parties shall, if necessary, amend any schedule required in
connection with a representation made as of a specific date as if the
representation were made as of the Effective Time; provided however that such
amendments, to the extent that they reflect changes which occurred after the
date hereof, shall be for informational purposes only and shall not result in
any liability to the party making such amendment.
4.8 Exclusivity.
-----------
(a) Except as specifically permitted in this Section 4.8, the Company
shall not, and the Company shall use reasonable best efforts to cause each of
its officers, directors, employees, representatives and agents not to, directly
or indirectly, (i) encourage, solicit, initiate, engage or participate in
negotiations with any person or entity (other than the Parent) concerning any
Acquisition Transaction or (ii) take any other action intended or designed to
facilitate the efforts of any person or entity (other than Parent) relating to a
possible Acquisition Transaction. For purposes of this Agreement, the term
"Acquisition Transaction" shall mean any of the following involving the Company
or any subsidiary of the Company, that is material to the business, results of
operation, prospects or financial condition of the Company: (i) any merger,
consolidation, share exchange, business combination or other similar transaction
(other than the Merger and those transactions which would result in the current
stockholders owning, directly or indirectly, 85% or more of the equity of the
surviving corporation); (ii) any sale, lease, exchange, transfer or other
disposition of 15% or more of the assets of the Company and its Subsidiaries,
taken as a whole, in a single transaction or series of transactions; (iii) any
tender offer or exchange offer for 15% or more of the Company Shares or the
filing of a registration statement under the Securities Act in connection
therewith; (iv) the acquisition by a person or entity, or any "group" (as such
term is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 15% or more of the Company
Shares, whether by tender offer, exchange offer or otherwise; or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(b) Notwithstanding anything herein to the contrary, in the event that
there is an unsolicited proposal for or an unsolicited indication of a serious
interest in entering into, an Acquisition Transaction, the Company, at its
discretion, shall be permitted to furnish to and communicate with any such party
all publicly available information requested by such party. In the event that
such party requests information in addition to that which is publicly available,
the Company may furnish to and communicate with such third party non-public
information and otherwise negotiate with such party, only if (i) two (2)
business days prior written notice shall have been given to the Parent and
(ii)(A) the Company's Board of Directors shall have been advised in writing by
its investment banker that it believes such third party is financially capable,
without any financing contingency, of consummating an Acquisition Transaction,
(B) the Company's Board of Directors shall have been advised, by the written
reasoned opinion of outside counsel to the Company, that any failure to provide
such non-public information to such party would be reasonably likely to
constitute a breach of the fiduciary responsibilities of the Board of Directors
to the Company Stockholders and (C) the Company's Board of Directors, after
weighing such advice, determines that failing to furnish such information would
constitute a breach of the Board's fiduciary duties. Notwithstanding anything
herein to the contrary, nothing shall prohibit the Board of Directors of the
Company from responding to a tender offer or complying with its obligations
under Rules 14d-9 or 14e-2 of the Exchange Act.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 32
Execution Copy
4.9 Listing of Merger Shares. On or before the Effective Time, the Parent
------------------------
shall list the Merger Shares on the Nasdaq National Market.
4.10 Xxxx-Xxxxx-Xxxxxx. Each party shall use all commercially reasonable
-----------------
efforts to file as promptly as practicable all Notification and Report Forms
under the HSR Act, with the Federal Trade Commission and the Antitrust Division
of the Department of Justice, and use all commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from such
governmental agencies for additional information or documentation in order to
obtain as soon as practicable all necessary governmental approvals under the HSR
Act, if any, for the transactions contemplated hereby.
4.11 Options; Warrants; Convertible Debentures; Preferred Stock.
----------------------------------------------------------
(a) The Company shall not permit any options or warrants to purchase its
capital stock (issued by the Company pursuant to its stock option plan or
otherwise) to become vested or exercisable (or to otherwise accelerate) as a
result of this Agreement or the consummation of the Merger, except pursuant to
the express terms hereof or the Employment Agreements and all options held by
Xxxx Xxxxxxxxxx, which latter options shall entirely vest upon consummation of
the Merger and be treated, for purposes hereof, as if they were Subject Warrants
or Employee Options under Section 4.13(i).
(b) The Company shall use its commercially reasonable best efforts to
obtain the written agreement of all holders of (i) Convertible Securities
consenting to receipt of the Merger Consideration pursuant to Section 1.8
hereof, and (ii) Employee Options consenting to either the substitution of their
Employee Options or the acceptance of the cash payment therefor, pursuant to
Section 4.13 hereof.
4.12 Indemnification.
---------------
(a) The Parent and the Acquisition Subsidiary agree that all rights to
indemnification for acts or omissions occurring through the Effective Time of
the Merger now existing in favor of the current directors and officers of the
Company as provided in the Charter or Bylaws of the Company or in any
indemnification agreements shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
(b) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company (or
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts or events which occurred before or at the Effective Time; provided,
--------
however, that the Surviving Corporation shall not be obligated to make annual
-------
premium payments for such insurance to the extent that such premiums exceed an
amount equal to 200% of the annual premiums paid as of the date hereof by the
Company for such insurance and if such premiums exceed such amount the Surviving
Corporation shall purchase insurance policies in amounts and with coverage as
reasonably can be purchased for such amount.
(c) Xxxxxx agrees to be jointly and severally liable with the Company and
the Surviving Corporation for their indemnification obligations to the Company's
current directors and officers, in all capacities in which such directors or
officers served the Company through the Effective Time, as set forth in the
Company's Charter and Bylaws or in any indemnification agreements by and between
the Company and
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 33
Execution Copy
such current directors and officers and to the extent such indemnification by
the Company is permitted under DGCL.
(d) Xxxxxx further agrees to be jointly and severally liable with the
Surviving Corporation for any indemnification obligation it may have to
directors (in any capacity) of the Company who continue to serve as directors or
employees of the Surviving Corporation after the Effective Time pursuant to any
indemnification agreements entered into by the Company with such directors or
employees, with respect to acts or events (in any capacity) while serving as a
director or employee of the Surviving Corporation on or after the Effective Time
to the extent such indemnification by the Surviving Corporation is permitted
under DGCL.
(e) In the event the Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the Parent
assume the obligations set forth in this Section 4.12.
(f) The provisions of this Section 4.12 are intended to be for the benefit
of, and shall be enforceable by, each indemnified party and his or her heirs and
representatives.
4.13 Employees. As soon after the execution of this Agreement as is
---------
reasonably practicable, the Parent, after consultation with the Company, shall
offer (subject to the condition that the Merger be consummated) to each employee
of the Company, in consideration of such employee remaining in the employ of the
Company until consummation of the Merger (and, in the discretion of the Parent,
thereafter), either (i) (a) the substitute warrants referred to in Section 1.8
in exchange for his Employee Option and (b) such number of new warrants or
options to purchase Parent Common Stock as shall be determined by Parent; or
(ii) an amount, payable in cash promptly after consummation of the Merger, in
exchange for the cancellation of any Option to purchase Company Shares held by
him, equal to the product obtained by multiplying (a) the number of Company
Shares underlying all vested and unvested options held by such employee
immediately prior to the Effective Time by (b) the positive difference, if any,
obtained by subtracting the exercise price of such options from $5.60.
4.14 Convertible Debentures. Following the consummation of the Merger,
----------------------
Parent shall cause the Company to promptly pay in cash all accrued but unpaid
interest due on the Convertible Debentures.
4.15 Tax-Free Merger. The Parent, the Acquisition Subsidiary and the Company
---------------
shall each use all reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code, shall cooperate in
filing tax returns required by the Code and shall not knowingly take or fail to
take any action which action or failure to act would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368 of the Code.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations of
--------------------------------------
each Party to consummate the Merger are subject to the satisfaction of or waiver
by each of the Parties of the following conditions:
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 34
Execution Copy
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(b) the Registration Statement shall have become effective in accordance
with the provisions of the Securities Act and applicable state securities laws,
and no stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC or any state and remain in effect;
(c) the Merger Shares shall have been authorized for listing on the Nasdaq
National Market; and
(d) the applicable waiting period under the HSR Act shall have been
terminated or shall have expired without a request for further information under
such Act, or in the event of such a request for further information, the waiting
period following delivery of such information shall have expired without the
objection of either the Federal Trade Commission or the U.S. Justice Department.
5.2 Conditions to Obligations of the Parent and the Acquisition Subsidiary.
----------------------------------------------------------------------
The obligation of each of the Parent and Acquisition Subsidiary to consummate
the Merger is subject to the satisfaction of or waiver by the Parent and the
Acquisition Subsidiary of the following additional conditions:
(a) the representations and warranties of the Company set forth in Article
II shall be true and correct in all material respects when made on the date
hereof and shall be true and correct in all material respects as of the
Effective Time as if made as of the Effective Time, except for representations
and warranties made as of a specific date, which shall be true and correct in
all material respects as of such date and except if such inaccuracies
individually or in the aggregate do not cause a Company Material Adverse Effect;
(b) the Company shall have performed or complied in all material respects
with its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Effective Time;
(c) the Company shall have delivered to the Parent and the Acquisition
Subsidiary a certificate of its Chairman, President or Chief Financial Officer
to the effect that each of the conditions specified in clause (a) of Section 5.1
and clauses (a), (b) and (d) of this Section 5.2 is satisfied;
(d) the Company shall have obtained all of the material waivers, permits,
consents, approvals or other authorizations necessary to be obtained by it to
consummate the Merger, and effected all material registrations, filings and
notices necessary to be effected by it to consummate the Merger;
(e) the Company shall have obtained and delivered to the Parent and the
Acquisition Subsidiary copies of all consents, exercise notices or agreements
from each holder of a Convertible Security necessary to convert the Convertible
Securities into shares of Parent Common Stock pursuant to Section 1.8;
(f) no action, suit or proceeding shall be pending or threatened before
any governmental entity or authority which is reasonably likely to (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) affect materially and adversely the right of the
Parent to own, operate or control any of the assets and operations of the
Surviving Corporation following the Merger, and no such judgment, order, decree,
stipulation or injunction shall be in effect; provided, however, that the Parent
-------- -------
shall
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 35
Execution Copy
contest or cooperate with the Company in contesting, as applicable, the action,
suit or proceeding and if any injunction or order has been so issued will use
reasonable efforts to have it dismissed;
(g) from the date of this Agreement to the Effective Time, there shall not
have been any event or development which results in a Company Material Adverse
Effect, nor shall there have occurred any event or development which is
reasonably likely to result in a Company Material Adverse Effect;
(h) the Parent and the Acquisition Subsidiary shall have received from
Graubard Xxxxxx & Xxxxxx, Xxxxxxxxxx Law Firm, P.C., or other counsel to the
Company reasonably acceptable to the Parent, an opinion with respect to the
matters set forth in Exhibit E attached hereto, addressed to the Parent and the
---------
Acquisition Subsidiary and dated as of the Closing Date;
(i) Parent shall have received "comfort" letters from Xxxxx Xxxxxxxx, LLP,
independent certified public accountants for the Company, dated the effective
date of the Registration Statement and the Closing Date (or such other date
reasonably acceptable to Parent) with respect to certain financial statements
and other financial information included in the Registration Statement in
customary form;
(j) Parent shall have received an opinion of Graubard Xxxxxx & Xxxxxx
dated the Effective Time, to the effect that (i) the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code; (ii) each of Parent, Acquisition Subsidiary and the Company
will be a party to the reorganization within the meaning of Section 368(b) of
the Code; (iii) no gain or loss will be recognized by the Company, Parent or
Acquisition Subsidiary as a result of the conversion of Company Shares into
Parent Common Stock, and (iv) no gain or loss will be recognized by a
stockholder of the Company as a result of the Merger with respect to Company
Common Stock converted solely into Parent Common Stock. In rendering such
opinion, Graubard Xxxxxx & Xxxxxx may receive and rely upon representations
contained in certificates of Parent, Acquisition Subsidiary and the Company; and
(k) The total gross revenues of the Company for the quarter ended June 30,
1998 shall not have been less than, and the net loss of the Company for the
quarter ended June 30, 1998 shall not have been greater than as described in the
letter from the Company to the Parent dated the date hereof, and the average
days sales outstanding of the Company's accounts receivable ("DSO's") as of the
Effective Time shall not be more than 110% of the DSO's as of March 31, 1998.
5.3 Conditions to Obligations of the Company. The obligation of the Company
----------------------------------------
to consummate the Merger is subject to the satisfaction of or waiver by the
Company of the following additional conditions:
(a) the representations and warranties of the Parent and the Acquisition
Subsidiary set forth in Article III shall be true and correct in all material
respects when made on the date hereof and shall be true and correct in all
material respects as of the Effective Time as if made as of the Effective Time,
except for representations and warranties made as of a specific date, which
shall be true and correct in all material respects as of such date and except if
such inaccuracies individually or in the aggregate do not cause a Parent
Material Adverse Effect;
(b) each of the Parent and the Acquisition Subsidiary shall have performed
or complied with in all material respects its agreements and covenants required
to be performed or complied with under this Agreement as of or prior to the
Effective Time;
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 36
Execution Copy
(c) each of the Parent and the Acquisition Subsidiary shall have delivered
to the Company a certificate of its President and Chief Financial Officer to the
effect that each of the conditions specified in clauses (b) and (c) of Section
5.1 and clauses (a), (b) and (d) of this Section 5.3 is satisfied in all
respects;
(d) the Parent and the Acquisition Subsidiary shall have obtained all
material waivers, permits, consents, approvals or other authorizations necessary
to be obtained by them to consummate the Merger and effected all material
registrations, filings and notices, necessary to be effected by them to
consummate the Merger;
(e) no writ, order, decree or injunction of a court of competent
jurisdiction or governmental entity shall have been entered against the Parent,
the Acquisition Subsidiary or the Company which prohibits the consummation of
the Merger; provided, however, that the Company shall have contested or
cooperated with Parent or the Acquisition Subsidiary, as applicable, in
contesting, the action suit or proceeding giving rise to such writ, order,
decree or injunction and shall have used reasonable efforts to have the same
dismissed;
(f) if any action, suit or proceeding shall be pending or threatened
before any governmental entity or authority which is reasonably likely to (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) materially and adversely affect or
otherwise encumber the title of the Merger Shares to be issued to the pre-Merger
stockholders of the Company upon consummation of the Merger; provided, however,
that the Company shall automatically be deemed to have waived this requirement
if the Parent agrees to provide the Company's pre-Merger officers, directors and
controlling persons with full and fair indemnification with respect to such
action, suit or proceeding in form and substance reasonably satisfactory to the
Company;
(g) the Company shall have received from Brown, Xxxxxxx Xxxxx & Gesmer,
United States counsel to the Parent and the Acquisition Subsidiary, an opinion
with respect to the matters set forth in Exhibit H attached hereto, addressed to
---------
the Company and dated as of the Closing Date;
(h) the Company shall have received from Loeff Xxxxxx Xxxxxxx, Belgian
counsel to the Parent, an opinion with respect to the matters set forth in
Exhibit I attached hereto, addressed to the Company and dated as of the Closing
---------
Date;
(i) the Company shall have received "comfort" letters from KPMG Goerdeler
Bedrijfsrevisoren, independent certified public accountants for the Parent,
dated the effective date of the Registration Statement and the Closing Date (or
such other date reasonably acceptable to the Company) with respect to certain
financial statements and other financial information included in the
Registration Statement in customary form;
(j) the Company shall have received an opinion of Xxxxx, Rudnick, Freed &
Gesmer, dated the Effective Time, to the effect that (i) the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code; (ii) each of Parent, Subsidiary and the Company
will be a party to the reorganization within the meaning of Section 368(b) of
the Code; (iii) no gain or loss will be recognized by the Company, Parent or
Subsidiary as a result of the conversion of Company Shares in Parent Common
Stock, and (iv) no gain or loss will be recognized by a stockholder of the
Company as a result of the Merger with respect to Company Common Stock converted
solely into
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 37
Execution Copy
Parent Common stock. In rendering such opinion, Xxxxx, Xxxxxxx, Xxxxx & Gesmer
may receive and rely upon representations contained in certificates of Parent,
Subsidiary and the Company; and
(k) the Average Market Value shall be greater than $20 per share.
ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 Termination. In connection with the structure of the transactions as
-----------
described in this Agreement, the parties have agreed that this Agreement shall
not be terminated, nor the Merger abandoned, except in accordance with the
provisions of this Article VI, all strictly construed against the Party seeking
such termination. This Agreement may be terminated and the Merger may be
abandoned any time prior to the Effective Time, whether before or after approval
by the Company Stockholders:
(a) by mutual written consent of the Boards of Directors of the Parent and
the Company;
(b) by either the Parent or the Company, if, without fault of such
terminating party, the Merger shall not have been consummated on or before
November 30, 1998;
(c) by either the Parent or the Company, if any court of competent
jurisdiction or other governmental body shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger, and such order,
decree ruling or other action shall have become final and nonappealable provided
that the party seeking termination shall have diligently contested such ruling;
(d) by either the Parent or the Company, if this Agreement and the Merger
fail to receive the Requisite Stockholder Approval; or
(e) by either Parent or the Company if (i) the Board of Directors of the
Company shall withdraw, modify or change its recommendation so that it is not in
favor of this Agreement or the Merger or shall have resolved to do any of the
foregoing or (ii) the Board of Directors of the Company shall have recommended
or resolved to recommend to its stockholders an Acquisition Transaction other
than the Merger.
6.2 Termination by the Parent. This Agreement may be terminated and the
-------------------------
Merger may be abandoned by action of the Board of Directors of the Parent, at
any time prior to the Effective Time, before or after the approval by the
Company Stockholders, if:
(a) the Company shall have failed to comply in any material respect with
any of the covenants or agreements contained in this Agreement such that the
Closing condition set forth in Section 5.2(b) would not be satisfied; provided,
however, that if such failure or failures are capable of being cured prior to
the Effective Time, such failure or failures shall not have been cured within 15
days of delivery to the Company of written notice of such failure;
(b) there exists a breach or breaches of any representation or warranty of
the Company contained in this Agreement in any material respect such that the
Closing condition set forth in Section 5.2(a) would not be satisfied; provided,
however, that if such failure or failures are capable of being cured prior to
the
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 38
Execution Copy
Effective Time, such failure or failures shall not have been cured within 15
days of delivery to the Company of written notice of such failure;
(c) the Company shall furnish or disclose non-public information to a
third party with respect to any Acquisition Transaction, or shall have resolved
to do the foregoing and publicly disclosed such resolution; or
(d) the Average Market Value is less than $43.00 per share.
6.3 Termination by the Company. This Agreement may be terminated and the
--------------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the Company Stockholders, by action of the Board of Directors of
the Company, if:
(a) the Parent or the Acquisition Subsidiary shall have failed to comply
in any material respect with any of the covenants or agreements contained in
this Agreement such that the closing condition set forth in Section 5.3(b) would
not be satisfied provided, however, that if such failure or failures are capable
of being cured prior to the Effective Time, such failure or failures shall not
have been cured within 15 days of delivery to the Parent of written notice of
such failure;
(b) there exists a breach or breaches of any representation or warranty of
the Parent or the Acquisition Subsidiary contained in this Agreement in any
material respect such that the Closing condition set forth in Section 5.3(a)
would not be satisfied; provided, however, that if such failure or failures are
capable of being cured prior to the Effective Time, such failure or failures
shall not have been cured within 15 days of delivery to the Parent of written
notice of such failure; or
(c) the Average Market Value is not greater than $20.
6.4 Procedure for Termination. In the event of termination and abandonment
-------------------------
of the Merger by the Parent or the Company pursuant to this Article VI, written
notice thereof shall forthwith be given to the other.
6.5 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and abandonment of the
Merger pursuant to this Article VI, no Party hereto (or any of its directors or
officers) shall have any liability or further obligation to any other Party to
this Agreement, except as provided in the Confidentiality Agreement and this
Section 6.5.
(b) In the event of termination of this Agreement pursuant to Sections
6.1(d) or (e), or by the Parent pursuant to Section 6.2(a), (b) or (c) (except
Section 6.2(b) with respect to a breach of a representation or warranty deemed
to be made at the Effective Time (as opposed to upon execution of this
Agreement) if such breach was caused by factors outside of the Company's
control), then the Company shall, within five (5) business days thereafter, pay
the Parent by wire transfer of immediately available funds to an account
specified by the Parent up to $1.5 million for all documented out of pocket
reasonable fees and expenses incurred by the Parent (including the reasonable
fees and expenses of counsel, accountants, consultants and advisors) in
connection with this Agreement and the transactions contemplated hereby
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 39
Execution Copy
(subject to such $1.5 million limit, "Parent Documented Expenses"); provided,
however, that the Company shall not be obligated to pay any Parent Documented
Expenses if the Parent or the Acquisition Subsidiary shall have failed to comply
in any material respect with any of the covenants or agreements contained in
this Agreement such that the closing condition set forth in Section 5.3(b) would
not be satisfied or there exists a breach or breaches of any representation or
warranty of the Parent or the Acquisition Subsidiary contained in this Agreement
in any material respect such that the closing condition set forth in Section
5.3(a) would not be satisfied.
(c) In the event of termination of this Agreement pursuant to Section
6.1(e) , the Company shall, within five (5) business days thereafter, pay the
Parent by wire transfer of immediately available funds to an account specified
by the Parent a fee equal to $1.5 million (the "Termination Fee").
(d) To the extent that the Termination Fee has not already become payable
and been paid and the Company has become obligated to pay the Parent Documented
Expenses under (b), above, and, if after the date hereof and prior to any
termination pursuant to Sections 6.1(c) (if and only if the action arose out of
or relates to an Acquisition Transaction, as defined in Section 4.8(a) above),
or (d) or Section 6.2(a), (b) or (c), any person shall have made or discussed
with the Company a proposal concerning an Acquisition Transaction and prior to
or within twelve (12) months after the termination of this Agreement the Company
or any of its Subsidiaries, or any Company Affiliate enters into a definitive
agreement with a third party with respect to an Acquisition Transaction or an
Acquisition Transaction is effected, then the Company, prior to entering into
any such definitive agreement or any such Acquisition Transaction being
effected, shall, within five (5) business days thereafter, pay the Parent by
wire transfer of immediately available funds to an account specified by the
Parent the Termination Fee.
(e) In the event of a termination of this Agreement by the Parent pursuant
to Section 6.2(d), the Parent shall, within five (5) business days thereafter,
(i) pay the Company by wire transfer of immediately available funds to an
account specified by the Company up to $1.5 million for all documented out of
pocket reasonable fees and expenses incurred by the Company (including the
reasonable fees and expenses of counsel, accountants, consultants and advisors)
in connection with this Agreement and the transactions contemplated hereby
(subject to such $1.5 million limit, "Company Documented Expenses"); provided,
however, that the Parent shall not be obligated to pay any Company Documented
Expenses if the Company shall have failed to comply in any material respect with
any of the covenants or agreements contained in this Agreement such that the
closing condition set forth in Section 5.2(b) would not be satisfied or there
exists a breach or breaches of any representation or warranty of the Company
contained in this Agreement in any material respect such that the closing
condition set forth in Section 5.2(a) would not be satisfied; and (ii) purchase
$750,000 of Company Shares at a price (payable by wire transfer in immediately
available funds to an account specified by the Company) equal to the arithmetic
average (rounded to the nearest five decimal places) of the closing price per
Company Share as reported on the American Stock Exchange for the ten (10)
consecutive trading days beginning five (5) days prior to the date of
termination of this Agreement. Parent shall not be required to satisfy this
Section 6.5(e)(ii) if the Company fails to obtain a ruling of the Commercial
Court of Nantere prior to the date which is three business days before the
Special Meeting requiring SARL Mansoft or any affiliate thereof to pay to the
Company at least $1,160,250 pursuant to Mansoft's outstanding accounts
receivable to the Company in the amount of $1,547,000.
(f) In the event of a termination of this Agreement by the Company
pursuant to Section 6.3(a) or (b) (except Section 6.3(b) with respect to a
breach of a representation or warranty deemed to be made at the Effective Time
(as opposed to upon execution of this Agreement) if such breach was caused by
factors
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 40
Execution Copy
outside the Parent's control) then the Parent shall, within five (5) business
days thereafter, pay the Company by wire transfer of immediately available funds
to an account specified by the Company up to $1.5 million for all documented
fees and expenses incurred by the Company (including the reasonable fees and
expenses of counsel, accountants, consultants and advisors) in connection with
this Agreement and the transactions contemplated hereby (subject to such $1.5
million limit, "Company Documented Expenses"); provided, however, that the
Parent shall not be obligated to pay any Company Documented Expenses if the
Company shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement such that the closing
condition set forth in Section 5.2(b) would not be satisfied or there exists a
breach or breaches of any representation or warranty of the Parent or the
Acquisition Subsidiary contained in this Agreement in any material respect such
that the closing condition set forth in Section 5.2(a) would not be satisfied.
ARTICLE VII
MISCELLANEOUS
7.1 Reset Election.
--------------
(a) Notwithstanding anything in this Agreement to the contrary, but
subject to the provisions of this Section 7.1, if the Average Market Value of
the Parent Common Stock is less than $43.00, and this Agreement is not otherwise
terminated pursuant to the terms hereof, the Parent may elect (a "Reset
Election") to pay as Merger Consideration a combination of cash and Parent
Common Stock with an aggregate value of $5.04 per share (with each share of
Parent Common Stock deemed to have a value equal to the Average Market Value);
provided, however, in no event may the number of shares of Parent Common Stock
included in the Merger Consideration be less than the number of shares of Parent
Common Stock that would have been included in the Merger Consideration had the
Average Market Value been equal to $43.00; and provided further, that the Parent
may not pay cash in a total amount that would render Graubard Xxxxxx & Xxxxxx
and Brown, Rudnick, Xxxxx & Xxxxxx unable to deliver their opinions to the
effect that the Merger will qualify as a reorganization under Section 368(a) of
the Code. In addition, in connection with such Reset Election, the Parent may
elect to require the Company to be merged with and into the Acquisition
Subsidiary (the "Forward Merger") such that, upon consummation of the Forward
Merger, the Acquisition Subsidiary would be the Surviving Corporation. If the
Parent elects to require the Forward Merger, the Company shall be permitted to
revise the Company Disclosure Schedule as necessary to satisfy Section 5.2(a),
with such revised Company Disclosure Schedule being substituted for the original
for all purposes hereof.
(b) If at any time after the date hereof the closing price of the Parent's
Common Stock on the Nasdaq National market is less than $43.00, the Parent may
notify Company that it desires to amend the Prospectus/Proxy Statement to obtain
Company Stockholder approval of its right to make a Reset Election. Following
such notification, the Company and the Parent, unless the Parent withdraws such
notification, shall amend the Prospectus/Proxy Statement and take such other
actions as the Company or the Parent shall reasonably deem necessary or
desirable to permit the Parent to exercise the Reset Option, including without
limitation postponing the Effective Time and extending the automatic termination
date of this Agreement from November 30, 1998 to December 31, 1998; provided,
however, that from and after December 1, 1998, Parent shall no longer have the
right to terminate the Agreement under Section 6.2(d) hereof. In addition, to
the extent that any terms of this Agreement are inconsistent with a Reset
Election, such terms shall be deemed to be modified to the limited extent
necessary to accommodate the Reset Election. All incremental
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 41
Execution Copy
costs arising in connection with such amendment to the Prospectus/Proxy
Statement and the resolicitation of the Company's stockholders shall be borne by
the Parent; provided, however, that such costs and expenses shall be included in
Parent Documented Expenses for purposes of Article VI.
7.1 Fees and Expenses. All costs and expenses incurred in connection with this
-----------------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense provided that the Parent shall pay all fees and expenses
in connection with the HSR Act and the filing of the Registration Statement, and
the Company shall pay all fees and expenses in connection with the printing and
mailing of the Prospectus/Proxy Statement. The Parent acknowledges and agrees
that the Company has disclosed that it is obligated and will become further
obligated for fees and expenses (including fees and expenses of Graubard, Xxxxxx
& Xxxxxx, the Stoppleman Law Firm and Xxxxx & Xxxxxxx, its counsel and Xxxxx
Xxxxxxxx, LLP, its independent accountants, incurred by it in connection with
the Merger and the transactions contemplated hereby. It is understood and agreed
that certain of such fees and expenses may be paid by the Company prior to the
execution of this Agreement, and the Parent agrees to refrain from taking any
action which the Parent or the Acquisition Subsidiary would prevent or delay the
payment of reasonable fees and expenses by the Company. Further, the Parent
agrees to take, and cause the Acquisition Subsidiary to take, all action
necessary to cause the Surviving Corporation to pay promptly any of the
foregoing reasonable fees and expenses incurred, but not paid, by the Company
prior to the Effective Time.
7.2 Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
facsimile transmission, receipt telephonically confirmed) addressed as provided
below and if either (a) actually delivered electronically or physically at said
address, or (b) in the case of a letter, three (3) business days shall have
elapsed after the same shall have been sent by nationally recognized overnight
courier:
If to the Company to:
Globalink, Inc.
0000 Xxx Xxxxxxx
Xxxxxxx, XX 00000-1208
Attention: Xxxxx X. Xxxxxxx, Xx., Chairman
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Graubard Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Parent or the Acquisition Subsidiary, to:
Lernout & Hauspie Speech Products N.V.
Xxxx-Xxxxxxxxxxxxxx 0
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 42
Execution Copy
8900 Ieper, BELGIUM
Tel: 000 00 00 00 0000
Fax: 000 00 00 00 0000
with a copy to:
Xxxxx, Xxxxxxx, Xxxxx & Xxxxxx, P.C.
One Financial Center
Boston, MA 02111
Attention: Xxxxxxxx X. Xxxx, Esquire
Tel: (000) 000-0000
Fax: (000) 000-0000
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of deemed
delivery thereof as set forth in this Section 7.2.
7.3 Publicity and Disclosure. Neither Parent nor Company shall issue any
------------------------
press releases or make any other written public disclosure of the transactions
contemplated by this Agreement without the prior knowledge and written consent
of the other party (which may be evidenced by the initials of an authorized
officer of the consenting Party on the document to be disclosed) which consent
shall not be unreasonably withheld or delayed.
7.4 Entire Agreement. This Agreement (including all exhibits or schedules
----------------
appended to this Agreement) and the Confidentiality Agreement constitute the
entire agreement between the parties, and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof and inducements to the making of this Agreement relied upon by any party
hereto, have been expressed herein or therein or in the documents incorporated
herein or therein by reference.
7.5 Severability. The invalidity or unenforceability of any provision of this
------------
Agreement shall not affect the validity or enforceability of any other provision
hereof.
7.6 Assignability. This Agreement may not be assigned otherwise than by
-------------
operation of law (a) by the Parent or the Acquisition Subsidiary without the
prior written consent of the Company or (b) by the Company without the prior
written consent of the Parent. However, any or all rights of the Parent to
receive performance (but not the obligations of the Parent to Company hereunder)
of the Company hereunder, may be assigned by the Parent to any direct or
indirect subsidiary, parent or other affiliate of the Parent. This Agreement
shall inure to the benefit of and be binding upon the Parties hereto and their
respective successors and permitted assigns.
7.7 Amendments and Waivers. The Parties may mutually amend any provision of
----------------------
this Agreement at any time prior to the Effective Time with the prior
authorization of their respective Boards of Directors; provided, however, that
-------- -------
any amendment effected subsequent to the Requisite Stockholder Approval shall be
subject to the restrictions contained in the DGCL. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 43
Execution Copy
7.8 Governing Law; Venue.
--------------------
(a) Except as otherwise required under Belgian law (as described in a
memorandum that has been made available to the Company), this Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
(other than the choice of law principles thereof), except that any
representations and warranties with respect to real and tangible property shall
be governed by and construed in accordance with the laws of the jurisdiction
where such property is situated if other than in the State of Delaware.
(b) Any claim, action, suit or other proceeding initiated by any Party,
under or in connection with this Agreement may be asserted, brought, prosecuted
and maintained in any Federal or state court in the State of Delaware, as the
Party bringing such action, suit or proceeding shall elect, having jurisdiction
over the subject matter thereof, and the Parties hereby waive any and all rights
to object to the laying of venue in any such court and to any right to claim
that any such court may be an inconvenient forum. Each of the Parties hereby
submit themselves to the jurisdiction of each such court and agree that service
of process on them in any such action, suit or proceeding may be effected by the
means by which notices are to be given to it under this Agreement.
7.9 Remedies. The Parties hereto acknowledge that the remedy at law for any
--------
breach of the obligations undertaken by the Parties hereto is and will be
insufficient and inadequate and that the Parties hereto shall be entitled to
equitable relief, in addition to remedies at law. In the event of any action to
enforce the provisions of this Agreement, each of the Parties shall waive the
defense that there is an adequate remedy at law. Without limiting any remedies
the Parties may otherwise have hereunder or under applicable law, in the event
any Party refuses to perform its obligations under this Agreement, the other
Parties shall have, in addition to any other rights at law or equity, the right
to specific performance.
7.10 Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
7.11 Effect of Table of Contents and Headings. Any table of contents, title
----------------------------------------
of an article or section heading herein contained is for convenience of
reference only and shall not affect the meaning of construction of any of the
provisions hereof.
7.12 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that the provisions in
-------- -------
Article I concerning issuance of the Merger Shares are intended for the benefit
of the Company Stockholders.
7.13 Knowledge. "To the knowledge," "to the best knowledge, information and
---------
belief," or any similar phrase shall be deemed to refer to the knowledge of the
directors and executive officers of a party and to include the assurance that
such knowledge is based upon a reasonable investigation by such persons, unless
otherwise expressly provided.
7.14 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for those covenants and agreements contained herein and therein
which by their
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 44
Execution Copy
terms apply in whole or in part after the Effective Time, including without
limitations those covenants and agreements contained in the Confidentiality
Agreements.
7.15 Integration of Exhibits. All Exhibits and Schedules attached to this
-----------------------
Agreement are integral parts of this Agreement as if fully set forth herein, and
all statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 45
Execution Copy
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as an instrument under seal in multiple counterparts as of the date set
forth above by their duly authorized representatives.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
BY: _______________________________
Name:
Title:
BEACH ACQUISITION CORPORATION
BY: _______________________________
Name:
Title:
GLOBALINK, INC.
BY: _____________________________
Name:
Title:
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 46
Execution Copy
AGREEMENT AND PLAN OF MERGER
List of Exhibits
----------------
Exhibit A - Certificate of Merger
Exhibit B - Option Agreement
Exhibit C - Affiliate Agreement
Exhibit D - [Intentionally Omitted]
Exhibit E Employment Agreements
Exhibit E-1 Noncompetition and Confidentiality Agreements
Exhibit F Confidentiality Agreement
Exhibit G - Opinion of Counsel to the Company
Exhibit H - Opinion of U.S. Counsel to the Parent and the Acquisition Subsidiary
Exhibit I - Opinion of Belgian Counsel to the Parent
--------------------------------------------------------------------------------
Agreement and Plan of Merger Page 47
Execution Copy
EXHIBIT A
CERTIFICATE OF MERGER
OF
BEACH ACQUISITION CORPORATION, a Delaware Corporation
WITH AND INTO
BEACH, INC.
********************
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware, the undersigned corporations organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DO HEREBY
CERTIFY:
FIRST: That the name and state of incorporation of each of the
-----
constituent corporations are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
1. Beach Acquisition Corporation Delaware
2. Beach, Inc. Delaware
SECOND: That an Agreement and Plan of Merger dated July __, 1998 by
------
and among Beach Acquisition Corp. and Beach, Inc. has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with the requirements of Section 251 of the General Corporation Law
of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is Beach,
-----
Inc. (the "Surviving Corporation").
FOURTH: The Certificate of Incorporation of the Surviving Corporation
------
shall be Amended and Restated in its entirety to read as set forth in Exhibit A
---------
attached hereto.
FIFTH: That the executed copy of the Agreement and Plan of Merger is
-----
on file at the principal place of business of the Surviving Corporation. The
address of the principal place of business of the Surviving Corporation is
[_______________________].
SIXTH: That a copy of the Agreement and Plan of Merger will be
-----
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of either constituent corporation.
IN WITNESS WHEREOF, the undersigned, being the President of Beach
Acquisition Corp., does hereby execute this Certificate of Xxxxxx and so
certify, affirm and acknowledge under penalties of perjury that this is his free
act and deed and that the facts stated herein are true, this ____ day of ______,
1998.
BEACH ACQUISITION CORP.
By:____________________________
Name:
Title:
IN WITNESS WHEREOF, the undersigned, being the President of Beach,
Inc., does hereby execute this Certificate of Xxxxxx and so certify, affirm and
acknowledge under penalties of perjury that this is his free act and deed and
that the facts stated herein are true, this ______ day of ________, 1998.
BEACH, INC.
By:____________________________
Name:
Title:
AMENDED AND RESTATED
--------------------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
BEACH, INC.
------------
FIRST: The name of the corporation (hereinafter called the
-----
"Corporation") is Beach, Inc.:
SECOND: The address, including street, number, city, and county, of the
------
registered office of the Corporation in the State of Delaware is 0000 Xxxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxx, Xxx Xxxxxx Xxxxxx 19801; and the name of the
registered agent of the Corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The nature of the business and the purposes to be conducted and
-----
promoted by the Corporation, shall be any lawful business, to promote any lawful
purpose, and to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is as follows:
[__________] shares of Common Stock, $.01 par value.
FIFTH: The Corporation shall have perpetual existence.
-----
SIXTH: Whenever a compromise or arrangement is proposed between this
-----
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 29l of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of the
-------
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
1. The business of the Corporation shall be conducted by the officers
of the Corporation under the supervision of the Board of Directors.
2. The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws. No
election of Directors need be by written ballot.
3. The Board of Directors of the Corporation may adopt, amend or repeal
the By-Laws of the Corporation at any time after the original adoption of the
By-Laws according to Section 109 of the General Corporation Law of the State of
Delaware; provided, however, that any amendment to provide for the
classification of directors of the Corporation for staggered terms pursuant to
the provisions of subsection (d) of Section 141 of the General Corporation Law
of the State of Delaware shall be set forth in an amendment to this Certificate
of Incorporation, in an initial By-Law, or in a By-Law adopted by the
stockholders of the Corporation entitled to vote.
EIGHTH: (a) The Corporation may, to the fullest extent permitted by
------
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify (and advance expenses to) any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which a person indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person. No
amendment to or repeal of this paragraph (a) of this Article Eighth shall
adversely affect any right or protection of a person existing at the time of, or
increase the liability of any person with respect to any acts or omissions of
such person occurring prior to such amendment or repeal.
(b) No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this paragraph (b) of this Article Eighth
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
NINTH: From time to time any of the provisions of this Certificate of
-----
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article Ninth.
EMPLOYMENT AGREEMENT
Agreement made this 20th day of July, 1998 by and between Lernout & Hauspie
Speech Products N.V. (the "Company"), a Belgian corporation, with its principal
place of business in Ieper, Belgium, and Xxxxx X. Xxxxxxx, Xx. ("Employee"), of
4062 Chancery Ct., Washington D.C. 20007. The Company and Employee are referred
to herein together as the Parties.
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith, the Company has on this day agreed to acquire
all of the issued and outstanding capital stock of Globalink, Inc., a Delaware
corporation ("Globalink") (the "Merger"); and
WHEREAS, prior to the Merger, Employee was a stockholder, executive officer
and director of Globalink; and
WHEREAS, it is a condition of the Merger that this Employment Agreement be
entered into; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee, the Company desires to
continue to retain Employee on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the Merger Agreement and the mutual
covenants and promises therein and herein contained, the receipt and sufficiency
of which is acknowledged, and intending to be legally bound, it is hereby agreed
by and between the Parties as follows:
1. Employment Agreement. As of the date of the consummation of the Merger (the
--------------------
"Effective Time"), the Parties agree that the Employment Agreement dated June 1,
1996, between Employee and Globalink, a copy of which is attached hereto as
Exhibit A (the "Globalink Employment Agreement") shall be terminated and of no
---------
further force and effect, except as follows: (i) pursuant to Section 6(e) of
the Employment Agreement, immediately following the Effective Time, the Company
shall pay to the Employee $200,000 in immediately available funds; and (ii)
pursuant to Section 6(e) of the Globalink Employment Agreement, immediately
prior to the Effective Time, all options to purchase Common Stock of Globalink
held by Employee shall become immediately vested and exercisable, provided that
such number of options shall be 510,000.
2. Engagement/Termination.
----------------------
(a) This agreement confirms the basis upon which Employee has been engaged
as an employee of the Company and the Company's wholly-owned subsidiary, Lernout
& Hauspie Speech Products USA, Inc. following the Merger. Employee shall report
to the President of the Language Technologies Division or such other Senior
Executive Officer of the Company as the Company shall determine in its
reasonable discretion.
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 1
(b) Employee shall perform the duties assigned to him from time to time by
the Company in accordance with the terms of this Agreement for a period of one
(1) year following the Effective Time (the "Term"), subject to each party's
right to terminate the Agreement as set forth in this Section 2. Upon
termination of this Agreement, the obligations of the Company and Employee
hereunder shall terminate. Notwithstanding any other provision of this
Agreement, if the Merger is not consummated in accordance with the terms of the
Merger Agreement, this Agreement shall be null and void as if it were never
entered into.
(c) Employee may terminate his employment under this Agreement upon sixty
(60) days' written notice with the understanding that Employee will not be
entitled to any termination or severance benefits in the event of such
termination except payment of any salary, bonus or other compensation due but
not previously paid to Employee through the date of termination of Employee's
employment.
(d) The Company may terminate Employee's employment under this Agreement for
cause (as defined below) without notice with the understanding that Employee
will not be entitled to any termination or severance benefits in the event of
such termination except payment of any salary due but not previously paid to
Employee through the date of termination. "Cause" for purposes of termination
of Employee's employment by the Company shall be defined as:
(i) any willful and material breach or violation of any of Employee's
covenants, duties or obligations under this Agreement (including Employee's
resignation without cause) or any willful or material neglect of or failure or
refusal to perform any of such covenants, duties or obligations, which is not
cured within five (5) days after the receipt by Employee of notice of such
breach or violation;
(ii) any willful or material misconduct which is reasonable deemed to
be injurious to the Company, including, without limitations, misconduct
involving fraud or dishonesty in the performance of such covenants, duties or
obligations;
(iii) the development by Employee of any drug, alcohol or other
substance abuse problem, or the conviction of a crime involving moral turpitude;
or
(iv) any willful violation or willful refusal to obey the reasonable
lawful directives and instructions of the President of the Language Technologies
Division or such other Senior Executive Officer of the Company that Employee
shall report to from time to time hereunder.
For purposes of this definition, no act or omission of Employee shall
be considered "willful" unless Employee was not acting in good faith and did not
have a reasonable belief that such action or omission was in the best interest
of the Company.
(e) The Company may terminate Employee's employment under this Agreement
without cause upon sixty (60) days' written notice; provided, however, that
Employee will be
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 2
entitled to (i) the payment of his base salary for the remainder of the Term in
accordance with the rates set forth in Section 3 below (payable over the
remainder of the Term) plus an amount equal to the target bonus provided for in
Section 3 below (to the extent such bonus has not already been paid to
Employee), whether or not such bonus has become due hereunder, and (ii)
continued benefits as set forth in Section 5 below for the remainder of the
Term.
(f) Without limiting the foregoing, Employee shall have no authority to act
for or to bind the Company in any way, to alter any of the terms or conditions
of any agreement of the Company, to make representations or warranties or to
execute agreements on behalf of the Company, or to represent that the Company is
in any way responsible for the acts or omissions of Employee.
2. Time. During the period of this Agreement, Employee agrees to make himself
----
available to render the Services from time to time as requested by the Company
on the following basis: (i) full-time (approximately forty (40) hours per week)
for the period immediately following the Effective Time and ending on December
31, 1998; (ii) half-time (approximately twenty (20) hours per week) for the six
(6) month period from January 1, 1999 through June 30, 1999; and (iii) quarter-
time (approximately ten (10) hours per week) for the remaining three (3) months
of the Term (from July 1, 1999 through September 30, 1999).
3. Compensation.
------------
(a) In consideration of Employee's provision of the services hereunder, the
Company shall pay Employee at a rate of $200,000 per annum (payable biweekly),
pro rated in accordance with the provisions of Section 2 above. Employee is
entitled to a target bonus of $100,000 based upon the performance of Globalink
for the period following the Effective Time through September 30, 1999, as
compared to the business plan for the period following the Effective Time
through December 31, 1999 (the "1999 Plan") presented to and agreed upon by the
Company prior to the Effective Time and attached hereto as Exhibit B. Such
---------
bonus shall become due (if at all) in equal installments on December 31 1998,
March 31, 1999, June 30, 1999 and September 30, 1999, respectively, to the
extent that Globalink shall have met the milestones contained in the 1999 Plan
for the respective periods preceding such dates as described in Section 2 above,
and shall be payable within sixty (60) days thereafter.
(b) As of the Effective Time, with the approval of the Company's Board of
Directors, Employee is hereby granted warrants to purchase 20,000 shares of
Common Stock of the Company (the "Warrants') which shall have an exercise price
per share equal to the closing price of such Common Stock on the Nasdaq National
Market on the date of the Effective Time. The Warrants shall become vested and
exercisable in full on the date five (5) years from the date of the Effective
Time and not before; provided, however, that the Warrants shall be subject to
accelerated vesting as follows: (i) 1/3 of the Warrants shall become
immediately vested and exercisable if Globalink meets or exceeds the projections
contained in the 1999 Plan; (ii) 1/3 of the Warrants shall become immediately
vested and exercisable if Globalink meets or exceeds the projections contained
the business plan for the twelve (12) month period following the first
anniversary of the Effective Time (the "2000 Plan") presented to and agreed upon
by the
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 3
Company prior to the Effective Time and attached hereto as Exhibit C; and (iii)
---------
1/3 of the Warrants shall become immediately vested and exercisable if Globalink
meets or exceeds the projections contained the business plan for the twelve (12)
month period following the second anniversary of the Effective Time (the "2001
Plan") presented to and agreed upon by the Company prior to the Effective Time
and attached hereto as Exhibit D; provided, further, that whether Globalink has
---------
met or exceeded the projections contained in the 1999 Plan, the 2000 Plan or the
2001 Plan shall determined by the Company in its sole discretion; and provided,
further, that there shall be no accelerated vesting hereunder in the event that
Globalink ceases to exist as a separate corporate entity or the Company
otherwise ceases to operate Globalink as a separate business unit. The Warrants
shall expire 72 months after the Effective Time (the "Warrant Expiration Date").
All Warrants that are vested on the date this Agreement is terminates (or is
terminated) may be exercised at any time thereafter until the Warrant Expiration
Date. The shares issuable upon exercise of the Warrants shall be registered on
the registration statement on Form S-8 described in Section 1.8(d) of the Merger
Agreement.
4. Expenses. Employee shall be reimbursed for all reasonable, ordinary, and
--------
necessary travel expenses incurred in connection with his provision of Service.
Employee shall furnish the Company with the appropriate documentation relating
to such expenses and shall comply with any additional requirements of the
Company generally applicable to the Company's employees in connection therewith.
5. Other Benefits. Employee shall be entitled to participation in all benefit
--------------
programs as may from time to time be made available by the Company to its United
States employees.
6. Noncompetition, Protection and Assignment of Proprietary Information.
--------------------------------------------------------------------
Employee acknowledges that he is subject to that certain Proprietary Information
and Noncompetition Agreement dated the date hereof among Employee and the
Company.
7. Severability. The Parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law.
8. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or (b) in the case of a letter,
three (3) business days shall have elapsed after the same shall have been
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested or forty eight (48) hours shall have elapsed
after the same shall have been sent by nationally recognized overnight courier,
or (c) when transmission acknowledged by telephonic receipt if sent by
facsimile:
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 4
If to Employee, to:
Xxxxx X. Xxxxxxx, Xx.
4062 Chancery Ct.
Washington D.C. 20007
Tel: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company to:
Lernout & Hauspie Speech Products X.X.
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx, Xxxxxxx
Attn: Xxxxxxx XxXxxxxxxxx, Esquire
Tel: 000-00-00-000000
Fax: 000-00-00-000000
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Xxxxxxxx X. Xxxx, Esquire
Tel: 000 000-0000
Fax: 000 000-0000
and in any case at such other address as the addressee shall have
specified by written notice.
9. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the Parties with respect to the subject matter hereof, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto have been expressed herein or in that certain
Proprietary Information and Noncompetition Agreement dated the date hereof among
Employee and the Company.
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 5
10. Assignability. Employee may not assign his duties hereunder or his rights
-------------
in this Agreement to any other person or entity.
11. Governing Law. This Agreement shall be deemed a contract made under the
-------------
laws of the Commonwealth of Massachusetts and, together with the rights and
obligations of the Parties hereunder, shall be construed under and governed by
the laws of such state, other than the choice of laws principles thereof.
12. Counterparts. This Agreement may be executed in multiple counterparts, each
------------
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
13. Effect of Headings. Any title of an article or section heading herein
------------------
contained is for convenience of reference only, and shall not affect the meaning
of construction of any of the provisions hereof.
14. Successors and Assigns. All covenants, promises and agreements by or on
----------------------
behalf of the Parties contained in this Agreement shall inure to the benefit of,
and be binding upon, the successors and assigns of the Parties hereto.
[Signature Page to Follow]
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 6
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By:___________________________
Name:
Title:
______________________________
Xxxxx X. Xxxxxxx, Xx.
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 7
EMPLOYMENT AGREEMENT
Agreement made this 20th day of July, 1998 by and between Lernout & Hauspie
Speech Products N.V. (the "Company"), a Belgian corporation, with its principal
place of business in Ieper, Belgium, and Xxxx X. XxXxxxxx, III ("Employee"), of
0000 Xxxxxxx Xxxxx, Xxxxx Xxxxxx, Xxxxxxxx 00000. The Company and Employee are
referred to herein together as the Parties.
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith, the Company has on this day agreed to acquire
all of the issued and outstanding capital stock of Globalink, Inc., a Delaware
corporation ("Globalink") (the "Merger"); and
WHEREAS, prior to the Merger, Employee was a stockholder, executive officer
and director of Globalink; and
WHEREAS, it is a condition of the Merger that this Employment Agreement be
entered into; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee, the Company desires to
continue to retain Employee on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the Merger Agreement and the mutual
covenants and promises therein and herein contained, the receipt and sufficiency
of which is acknowledged, and intending to be legally bound, it is hereby agreed
by and between the Parties as follows:
1. Employment Agreement. As of the date of the consummation of the Merger (the
--------------------
"Effective Time"), the Parties agree that the Employment Agreement dated August
18, 1995, between Employee and Globalink, a copy of which is attached hereto as
Exhibit A (the "Globalink Employment Agreement") shall be terminated and of no
---------
further force and effect, except as follows: (i) pursuant to Section 6(e) of
the Employment Agreement, immediately following the Effective Time, the Company
shall pay to the Employee $160,000 in immediately available funds; and (ii)
pursuant to Section 6(e) of the Globalink Employment Agreement, immediately
prior to the Effective Time, all options to purchase Common Stock of Globalink
held by Employee shall become immediately vested and exercisable, provided that
such number of options shall be 190,000.
2. Engagement/Termination.
----------------------
(a) This agreement confirms the basis upon which Employee has been engaged
as an employee of the Company and the Company's wholly-owned subsidiary, Lernout
& Hauspie Speech Products USA, Inc. following the Merger. Employee shall report
to the President of the Language Technologies Division or such other Senior
Executive Officer of the Company as the Company shall determine in its
reasonable discretion.
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 1
(b) Employee shall perform the duties assigned to him from time to time by
the Company in accordance with the terms of this Agreement for a period of one
(1) year following the Effective Time (the "Term"), subject to each party's
right to terminate the Agreement as set forth in this Section 2. Upon
termination of this Agreement, the obligations of the Company and Employee
hereunder shall terminate. Notwithstanding any other provision of this
Agreement, if the Merger is not consummated in accordance with the terms of the
Merger Agreement, this Agreement shall be null and void as if it were never
entered into.
(c) Employee may terminate his employment under this Agreement upon sixty
(60) days' written notice with the understanding that Employee will not be
entitled to any termination or severance benefits in the event of such
termination except payment of any salary, bonus or other compensation due but
not previously paid to Employee through the date of termination of Employee's
employment.
(d) The Company may terminate Employee's employment under this Agreement for
cause (as defined below) without notice with the understanding that Employee
will not be entitled to any termination or severance benefits in the event of
such termination except payment of any salary due but not previously paid to
Employee through the date of termination. "Cause" for purposes of termination
of Employee's employment by the Company shall be defined as:
(i) any willful and material breach or violation of any of Employee's
covenants, duties or obligations under this Agreement (including Employee's
resignation without cause) or any willful or material neglect of or failure or
refusal to perform any of such covenants, duties or obligations, which is not
cured within five (5) days after the receipt by Employee of notice of such
breach or violation;
(ii) any willful or material misconduct which is reasonable deemed to
be injurious to the Company, including, without limitations, misconduct
involving fraud or dishonesty in the performance of such covenants, duties or
obligations;
(iii) the development by Employee of any drug, alcohol or other
substance abuse problem, or the conviction of a crime involving moral turpitude;
or
(iv) any willful violation or willful refusal to obey the reasonable
lawful directives and instructions of the President of the Language Technologies
Division or such other Senior Executive Officer of the Company that Employee
shall report to from time to time hereunder.
For purposes of this definition, no act or omission of Employee shall
be considered "willful" unless Employee was not acting in good faith and did not
have a reasonable belief that such action or omission was in the best interest
of the Company.
(e) The Company may terminate Employee's employment under this Agreement
without cause upon sixty (60) days' written notice; provided, however, that
Employee will be
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 2
entitled to (i) the payment of his base salary for the remainder of the Term in
accordance with the rates set forth in Section 3 below (payable over the
remainder of the Term) plus an amount equal to the target bonus provided for in
Section 3 below (to the extent such bonus has not already been paid to
Employee), whether or not such bonus has become due hereunder, and (ii)
continued benefits as set forth in Section 5 below for the remainder of the
Term.
(f) Without limiting the foregoing, Employee shall have no authority to act
for or to bind the Company in any way, to alter any of the terms or conditions
of any agreement of the Company, to make representations or warranties or to
execute agreements on behalf of the Company, or to represent that the Company is
in any way responsible for the acts or omissions of Employee.
2. Time. During the period of this Agreement, Employee agrees to make himself
----
available to render the Services from time to time as requested by the Company
on the following basis: (i) full-time (approximately forty (40) hours per week)
for the period immediately following the Effective Time and ending on December
31, 1998; (ii) half-time (approximately twenty (20) hours per week) for the six
(6) month period from January 1, 1999 through June 30, 1999; and (iii) quarter-
time (approximately ten (10) hours per week) for the remaining three (3) months
of the Term (from July 1, 1999 through September 30, 1999).
3. Compensation.
------------
(a) In consideration of Employee's provision of the services hereunder, the
Company shall pay Employee at a rate of $160,000 per annum (payable biweekly),
pro rated in accordance with the provisions of Section 2 above. Employee is
entitled to a target bonus of $80,000 based upon the performance of Globalink
for the period following the Effective Time through September 30, 1999, as
compared to the business plan for the period following the Effective Time
through December 31, 1999 (the "1999 Plan") presented to and agreed upon by the
Company prior to the Effective Time and attached hereto as Exhibit B. Such
---------
bonus shall become due (if at all) in equal installments on December 31 1998,
March 31, 1999, June 30, 1999 and September 30, 1999, respectively, to the
extent that Globalink shall have met the milestones contained in the 1999 Plan
for the respective periods preceding such dates as described in Section 2 above,
and shall be payable within sixty (60) days thereafter.
(b) As of the Effective Time, with the approval of the Company's Board of
Directors, Employee is hereby granted warrants to purchase 15,000 shares of
Common Stock of the Company (the "Warrants') which shall have an exercise price
per share equal to the closing price of such Common Stock on the Nasdaq National
Market on the date of the Effective Time. The Warrants shall become vested and
exercisable in full on the date five (5) years from the date of the Effective
Time and not before; provided, however, that the Warrants shall be subject to
accelerated vesting as follows: (i) 1/3 of the Warrants shall become
immediately vested and exercisable if Globalink meets or exceeds the projections
contained in the 1999 Plan; (ii) 1/3 of the Warrants shall become immediately
vested and exercisable if Globalink meets or exceeds the projections contained
the business plan for the twelve (12) month period following the first
anniversary of the Effective Time (the "2000 Plan") presented to and agreed upon
by the
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 3
Company prior to the Effective Time and attached hereto as Exhibit C; and
---------
(iii) 1/3 of the Warrants shall become immediately vested and exercisable if
Globalink meets or exceeds the projections contained the business plan for the
twelve (12) month period following the second anniversary of the Effective Time
(the "2001 Plan") presented to and agreed upon by the Company prior to the
Effective Time and attached hereto as Exhibit D; provided, further, that whether
---------
Globalink has met or exceeded the projections contained in the 1999 Plan, the
2000 Plan or the 2001 Plan shall determined by the Company in its sole
discretion; and provided, further, that there shall be no accelerated vesting
hereunder in the event that Globalink ceases to exist as a separate corporate
entity or the Company otherwise ceases to operate Globalink as a separate
business unit. The Warrants shall expire 72 months after the Effective Time
(the "Warrant Expiration Date"). All Warrants that are vested on the date this
Agreement is terminates (or is terminated) may be exercised at any time
thereafter until the Warrant Expiration Date. The shares issuable upon exercise
of the Warrants shall be registered on the registration statement on Form S-8
described in Section 1.8(d) of the Merger Agreement.
4. Expenses. Employee shall be reimbursed for all reasonable, ordinary, and
--------
necessary travel expenses incurred in connection with his provision of Service.
Employee shall furnish the Company with the appropriate documentation relating
to such expenses and shall comply with any additional requirements of the
Company generally applicable to the Company's employees in connection therewith.
5. Other Benefits. Employee shall be entitled to participation in all benefit
--------------
programs as may from time to time be made available by the Company to its United
States employees.
6. Noncompetition, Protection and Assignment of Proprietary Information.
--------------------------------------------------------------------
Employee acknowledges that he is subject to that certain Proprietary Information
and Noncompetition Agreement dated the date hereof among Employee and the
Company.
7. Severability. The Parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law.
8. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or (b) in the case of a letter,
three (3) business days shall have elapsed after the same shall have been
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested or forty eight (48) hours shall have elapsed
after the same shall have been sent by nationally recognized overnight courier,
or (c) when transmission acknowledged by telephonic receipt if sent by
facsimile:
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 4
If to Employee, to:
Xxxx X. XxXxxxxx, III
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000
Tel: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company to:
Lernout & Hauspie Speech Products X.X.
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx, Xxxxxxx
Attn: Xxxxxxx XxXxxxxxxxx, Esquire
Tel: 000-00-00-000000
Fax: 000-00-00-000000
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Xxxxxxxx X. Xxxx, Esquire
Tel: 000 000-0000
Fax: 000 000-0000
and in any case at such other address as the addressee shall have
specified by written notice.
9. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the Parties with respect to the subject matter hereof, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto have been expressed herein or in that
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 5
certain Proprietary Information and Noncompetition Agreement dated the date
hereof among Employee and the Company.
10. Assignability. Employee may not assign his duties hereunder or his rights
-------------
in this Agreement to any other person or entity.
11. Governing Law. This Agreement shall be deemed a contract made under the
-------------
laws of the Commonwealth of Massachusetts and, together with the rights and
obligations of the Parties hereunder, shall be construed under and governed by
the laws of such state, other than the choice of laws principles thereof.
12. Counterparts. This Agreement may be executed in multiple counterparts, each
------------
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
13. Effect of Headings. Any title of an article or section heading herein
------------------
contained is for convenience of reference only, and shall not affect the meaning
of construction of any of the provisions hereof.
14. Successors and Assigns. All covenants, promises and agreements by or on
----------------------
behalf of the Parties contained in this Agreement shall inure to the benefit of,
and be binding upon, the successors and assigns of the Parties hereto.
[Signature Page to Follow]
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 6
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By:___________________________
Name:
Title:
______________________________
Xxxx X. XxXxxxxx, III
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 7
EMPLOYMENT AGREEMENT
Agreement made this 20th day of July, 1998 by and between Lernout & Hauspie
Speech Products N.V. (the "Company"), a Belgian corporation, with its principal
place of business in Ieper, Belgium, and Xxxxxx X. Xxxxxxxx ("Employee"), of 00
Xxxxx Xxxx, Xxxxxx, Xxxxxxxxxxxx 00000. The Company and Employee are referred
to herein together as the Parties.
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith, the Company has on this day agreed to acquire
all of the issued and outstanding capital stock of Globalink, Inc., a Delaware
corporation ("Globalink") (the "Merger"); and
WHEREAS, prior to the Merger, Employee was a stockholder, executive officer
and director of Globalink; and
WHEREAS, it is a condition of the Merger that this Employment Agreement be
entered into; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee, the Company desires to
continue to retain Employee on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the Merger Agreement and the mutual
covenants and promises therein and herein contained, the receipt and sufficiency
of which is acknowledged, and intending to be legally bound, it is hereby agreed
by and between the Parties as follows:
1. Employment Agreement. As of the date of the consummation of the Merger (the
--------------------
"Effective Time"), the Parties agree that the Employment Agreement dated March
24, 1995, between Employee and Globalink, a copy of which is attached hereto as
Exhibit A (the "Globalink Employment Agreement") shall be terminated and of no
---------
further force and effect, except as follows: (i) pursuant to Section 6(e) of
the Employment Agreement, immediately following the Effective Time, the Company
shall pay to the Employee $180,000 in immediately available funds; and (ii)
pursuant to Section 6(e) of the Globalink Employment Agreement, immediately
prior to the Effective Time, all options to purchase Common Stock of Globalink
held by Employee shall become immediately vested and exercisable, provided that
such number of options shall be 210,000.
2. Engagement/Termination.
----------------------
(a) This agreement confirms the basis upon which Employee has been engaged
as an employee of the Company and the Company's wholly-owned subsidiary, Lernout
& Hauspie Speech Products USA, Inc. following the Merger. Employee shall report
to the President of the
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 1
Language Technologies Division or such other Senior Executive Officer of the
Company as the Company shall determine in its reasonable discretion.
(b) Employee shall perform the duties assigned to him from time to time by
the Company in accordance with the terms of this Agreement for a period of one
(1) year following the Effective Time (the "Term"), subject to each party's
right to terminate the Agreement as set forth in this Section 2. Upon
termination of this Agreement, the obligations of the Company and Employee
hereunder shall terminate. Notwithstanding any other provision of this
Agreement, if the Merger is not consummated in accordance with the terms of the
Merger Agreement, this Agreement shall be null and void as if it were never
entered into.
(c) Employee may terminate his employment under this Agreement upon sixty
(60) days' written notice with the understanding that Employee will not be
entitled to any termination or severance benefits in the event of such
termination except payment of any salary, bonus or other compensation due but
not previously paid to Employee through the date of termination of Employee's
employment.
(d) The Company may terminate Employee's employment under this Agreement for
cause (as defined below) without notice with the understanding that Employee
will not be entitled to any termination or severance benefits in the event of
such termination except payment of any salary due but not previously paid to
Employee through the date of termination. "Cause" for purposes of termination
of Employee's employment by the Company shall be defined as:
(i) any willful and material breach or violation of any of Employee's
covenants, duties or obligations under this Agreement (including Employee's
resignation without cause) or any willful or material neglect of or failure or
refusal to perform any of such covenants, duties or obligations, which is not
cured within five (5) days after the receipt by Employee of notice of such
breach or violation;
(ii) any willful or material misconduct which is reasonable deemed to
be injurious to the Company, including, without limitations, misconduct
involving fraud or dishonesty in the performance of such covenants, duties or
obligations;
(iii) the development by Employee of any drug, alcohol or other
substance abuse problem, or the conviction of a crime involving moral turpitude;
or
(iv) any willful violation or willful refusal to obey the reasonable
lawful directives and instructions of the President of the Language Technologies
Division or such other Senior Executive Officer of the Company that Employee
shall report to from time to time hereunder.
For purposes of this definition, no act or omission of Employee shall
be considered "willful" unless Employee was not acting in good faith and did not
have a reasonable belief that such action or omission was in the best interest
of the Company.
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 2
(e) The Company may terminate Employee's employment under this Agreement
without cause upon sixty (60) days' written notice; provided, however, that
Employee will be entitled to (i) the payment of his base salary for the
remainder of the Term in accordance with the rates set forth in Section 3 below
(payable over the remainder of the Term) plus an amount equal to the target
bonus provided for in Section 3 below (to the extent such bonus has not already
been paid to Employee), whether or not such bonus has become due hereunder, and
(ii) continued benefits as set forth in Section 5 below for the remainder of the
Term.
(f) Without limiting the foregoing, Employee shall have no authority to act
for or to bind the Company in any way, to alter any of the terms or conditions
of any agreement of the Company, to make representations or warranties or to
execute agreements on behalf of the Company, or to represent that the Company is
in any way responsible for the acts or omissions of Employee.
2. Time. During the period of this Agreement, Employee agrees to make himself
----
available to render the Services from time to time as requested by the Company
on the following basis: (i) full-time (approximately forty (40) hours per week)
for the period immediately following the Effective Time and ending on December
31, 1998; (ii) half-time (approximately twenty (20) hours per week) for the six
(6) month period from January 1, 1999 through June 30, 1999; and (iii) quarter-
time (approximately ten (10) hours per week) for the remaining three (3) months
of the Term (from July 1, 1999 through September 30, 1999).
3. Compensation.
------------
(a) In consideration of Employee's provision of the services hereunder, the
Company shall pay Employee at a rate of $180,000 per annum (payable biweekly),
pro rated in accordance with the provisions of Section 2 above. Employee is
entitled to a target bonus of $90,000 based upon the performance of Globalink
for the period following the Effective Time through September 30, 1999, as
compared to the business plan for the period following the Effective Time
through December 31, 1999 (the "1999 Plan") presented to and agreed upon by the
Company prior to the Effective Time and attached hereto as Exhibit B. Such
---------
bonus shall become due (if at all) in equal installments on December 31 1998,
March 31, 1999, June 30, 1999 and September 30, 1999, respectively, to the
extent that Globalink shall have met the milestones contained in the 1999 Plan
for the respective periods preceding such dates as described in Section 2 above,
and shall be payable within sixty (60) days thereafter.
(b) As of the Effective Time, with the approval of the Company's Board of
Directors, Employee is hereby granted warrants to purchase 15,000 shares of
Common Stock of the Company (the "Warrants') which shall have an exercise price
per share equal to the closing price of such Common Stock on the Nasdaq National
Market on the date of the Effective Time. The Warrants shall become vested and
exercisable in full on the date five (5) years from the date of the Effective
Time and not before; provided, however, that the Warrants shall be subject to
accelerated vesting as follows: (i) 1/3 of the Warrants shall become
immediately vested and exercisable if Globalink meets or exceeds the projections
contained in the 1999 Plan; (ii) 1/3 of the Warrants shall become immediately
vested and exercisable if Globalink meets or exceeds
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 3
the projections contained the business plan for the twelve (12) month period
following the first anniversary of the Effective Time (the "2000 Plan")
presented to and agreed upon by the Company prior to the Effective Time and
attached hereto as Exhibit C; and (iii) 1/3 of the Warrants shall become
---------
immediately vested and exercisable if Globalink meets or exceeds the projections
contained the business plan for the twelve (12) month period following the
second anniversary of the Effective Time (the "2001 Plan") presented to and
agreed upon by the Company prior to the Effective Time and attached hereto as
Exhibit D; provided, further, that whether Globalink has met or exceeded the
---------
projections contained in the 1999 Plan, the 2000 Plan or the 2001 Plan shall
determined by the Company in its sole discretion; and provided, further, that
there shall be no accelerated vesting hereunder in the event that Globalink
ceases to exist as a separate corporate entity or the Company otherwise ceases
to operate Globalink as a separate business unit. The Warrants shall expire 72
months after the Effective Time (the "Warrant Expiration Date"). All Warrants
that are vested on the date this Agreement is terminates (or is terminated) may
be exercised at any time thereafter until the Warrant Expiration Date. The
shares issuable upon exercise of the Warrants shall be registered on the
registration statement on Form S-8 described in Section 1.8(d) of the Merger
Agreement.
4. Expenses. Employee shall be reimbursed for all reasonable, ordinary, and
--------
necessary travel expenses incurred in connection with his provision of Service.
Employee shall furnish the Company with the appropriate documentation relating
to such expenses and shall comply with any additional requirements of the
Company generally applicable to the Company's employees in connection therewith.
5. Other Benefits. Employee shall be entitled to participation in all benefit
--------------
programs as may from time to time be made available by the Company to its United
States employees.
6. Noncompetition, Protection and Assignment of Proprietary Information.
--------------------------------------------------------------------
Employee acknowledges that he is subject to that certain Proprietary Information
and Noncompetition Agreement dated the date hereof among Employee and the
Company.
7. Severability. The Parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law.
8. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or (b) in the case of a letter,
three (3) business days shall have elapsed after the same shall have been
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested or forty eight (48) hours shall have elapsed
after the same shall have been sent by
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 4
nationally recognized overnight courier, or (c) when transmission acknowledged
by telephonic receipt if sent by facsimile:
If to Employee, to:
Xxxxxx X. Xxxxxxxx
00 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Tel: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company to:
Lernout & Hauspie Speech Products X.X.
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx, Xxxxxxx
Attn: Xxxxxxx XxXxxxxxxxx, Esquire
Tel: 000-00-00-000000
Fax: 000-00-00-000000
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Xxxxxxxx X. Xxxx, Esquire
Tel: 000 000-0000
Fax: 000 000-0000
and in any case at such other address as the addressee shall have
specified by written notice.
9. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the Parties with respect to the subject matter hereof, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 5
making of this Agreement relied upon by any party hereto have been expressed
herein or in that certain Proprietary Information and Noncompetition Agreement
dated the date hereof among Employee and the Company.
10. Assignability. Employee may not assign his duties hereunder or his rights
-------------
in this Agreement to any other person or entity.
11. Governing Law. This Agreement shall be deemed a contract made under the
-------------
laws of the Commonwealth of Massachusetts and, together with the rights and
obligations of the Parties hereunder, shall be construed under and governed by
the laws of such state, other than the choice of laws principles thereof.
12. Counterparts. This Agreement may be executed in multiple counterparts, each
------------
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
13. Effect of Headings. Any title of an article or section heading herein
------------------
contained is for convenience of reference only, and shall not affect the meaning
of construction of any of the provisions hereof.
14. Successors and Assigns. All covenants, promises and agreements by or on
----------------------
behalf of the Parties contained in this Agreement shall inure to the benefit of,
and be binding upon, the successors and assigns of the Parties hereto.
[Signature Page to Follow]
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 6
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By:___________________________
Name:
Title:
______________________________
Xxxxxx X. Xxxxxxxx
--------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT Page 7
NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENT
AGREEMENT entered into as of this 20th day of July, 1998, between LERNOUT &
HAUSPIE SPEECH PRODUCTS N.V., a Belgian corporation with its principal place of
business in Ieper, Belgium (the "Company"), and Xxxxxx X. Xxxxxxxx, an
individual residing at 00 Xxxxx Xxxx, Xxxxxx, Xxxxxxxxxxxx 19087 ("Employee").
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith, the Company has on this day agreed to acquire
substantially all of the issued and outstanding capital stock of Globalink,
Inc., a Delaware corporation ("Globalink") (the "Merger"); and
WHEREAS, it was a condition to execution of the Merger Agreement and to
consummation of the transactions contemplated therein that this Agreement be
entered into; and
WHEREAS, prior to the Merger, Employee was an executive officer and director
of Globalink; and
WHEREAS, during the course of such affiliations, Employee has become
knowledgeable and experienced in one or more aspects of the business of
Globalink, and the growth and success of the business of Globalink has been due
in part to the services and unique talents of Employee; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee resulting from Employee's
involvement with and knowledge of the business of Globalink, the Company has on
this day entered into an Employment Agreement (the "Employment Agreement") with
Employee pursuant to which the Company has agreed to retain Employee on the
terms and conditions contained therein; and
WHEREAS, in his capacity as an officer and director of Globalink and as an
employee of the Company, Employee has and will continue to have, access to
business activities, business plans, personnel, financial status and other
confidential and proprietary information including, but not limited to, existing
and potential customers, customer information, target market areas, potential
and future products, methods, techniques and other information, all of which is
of significant value to Company and which is not generally known but is
confidential; and
WHEREAS, both the Company and Globalink currently, and will in the future,
develop, distribute and sell products to customers on a worldwide basis; and
WHEREAS, as a result of Employee's involvement with and knowledge of the
business of Globalink and his access to customers of Globalink and related
customer information, Employee acknowledges the need for and agrees to impose
certain restrictions on the ability of Employee to compete with the Company
and/or any of its affiliates in order to preserve the good will of all suppliers
and customers having business relations with the Company and/or any affiliates
thereof, and to preserve the good will of the Company and/or any affiliate
thereof as a going concern, upon the terms and conditions contained in this
Agreement.
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement
NOW THEREFORE, in consideration of the Merger Agreement, the Consulting
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound, it is hereby
agreed by and between the parties as follows:
1. Covenant Not To Compete.
-----------------------
(a) During the Noncompetition Period as hereinafter defined, Employee shall
not, directly or indirectly, whether as owner, partner, shareholder,
director, consultant, agent, employee, guarantor, surety or otherwise, or
through any person, consult with or in any way aid or assist any competitor
of Company or any of its respective affiliates now or hereafter existing
(each an "Affiliate" and collectively the "Affiliates") or any successor or
assign of Company (each a "Successor"), or engage or attempt to engage in
any employment, consultancy or other activity, which consultation, aid,
assistance, employment or activity competes directly or indirectly, with
the Business of the Company or any Affiliate or any Successor, anywhere in
the world. In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly, nor shall he knowingly
attempt to, or assist any other person in attempting to, do any of the
following as it relates to the Business of Company or any Affiliate or
Successor: (i) encourage any customer, client, supplier or other party
having a business relationship with the Company or any Affiliate or
Successor to terminate or alter such relationship, whether contractual or
otherwise, written or oral, with the Company or any Affiliate or Successor,
(ii) encourage any prospective customer or supplier not to enter into a
business relationship with the Company or any Affiliate or Successor; or
(iii) impair or attempt to impair any relationship, contractual or
otherwise, written or oral, between the Company or any Affiliate or
Successor, and any customer, supplier or other party having a business
relationship with the Company or any Affiliate or Successor. For purposes
of this Agreement, the term "Business" shall mean the respective businesses
of Globalink and the Company as conducted on the date hereof and as
contemplated to be conducted in the future. For purposes of this Agreement,
the term "employment" shall include the retention of Employee as an
employee, consultant, agent, independent contractor or otherwise. Employee
acknowledges that his participation in the conduct of any such Business
alone or with any person other than the Company will materially impair the
business and prospects of Company. The Noncompetition Period shall mean:
the period commencing on the date of the consummation of the Merger (the
"Effective Time") and ending (i) in the case of termination of the
Employment Agreement by the Company for cause or by Employee for any reason
or no reason, three (3) years from the date of such termination, and (ii)
in the case of termination of the Consulting Agreement by the Company
without cause, the date of such termination, or if later at such time as
the Company shall cease any payments under the Employment Agreement to
Employee.
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 2
(b) In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly, nor shall he knowingly
attempt to or assist any other person in attempting to solicit for
employment or other engagement any director, officer, employee, or agent of
the Company or any Affiliate or Successor, or encourage any such person to
terminate such relationship with the Company or any Affiliate or Successor.
(c) In addition to and without limiting the foregoing, during the term of the
Noncompetition Period, Employee will not, either directly or indirectly,
solicit, pursue, call upon or take away, either for himself or for the
benefit of any other person or entity, as it relates to the Business of the
Company or any Affiliate or Successor, any of the customers of the Company
or any Affiliate or Successor, upon whom Employee called or with whom
Employee became acquainted during the term of his employment with the
Company.
(d) Nothing in this Agreement shall preclude Employee from making passive
investments of not more than 5% of a class of securities of any business
enterprise registered under the Securities Exchange Act of 1934, as
amended.
(e) Notwithstanding the foregoing, the Employee shall not be prohibited from
acting in any capacity listed in Section 1(a) or Section 1(c) with a
competitor of the Company or any Affiliate or any Successor, if the
Employee's activities are not provided in connection with the Business of
the Company or any Affiliate or any Successor.
2. Protection of Proprietary Information. Employee recognizes that the Company
-------------------------------------
and its Affiliates are engaged in a continuous program of research and
development relating to their respective business opportunities, market
forecasting, data processing, operating procedures, products, methods, systems,
techniques, machinery, tooling, designs, specifications, processes, plans, "know
how" and trade secrets, and that the Company and its Affiliates have developed
information regarding costs, profits, markets, products, customer lists,
tooling, designs, plans for present and future development and expansion into
new markets and other proprietary information, which is secret and confidential
in nature and is not available to the public, which gives the Company and its
Affiliates a special competence in their respective and various fields of
endeavor which are otherwise deemed to be proprietary to the Company and/or its
Affiliates, all of which have been acquired or developed at considerable expense
to the Company and its Affiliates. Employee acknowledges that a relationship of
confidence and trust has been developed and will continue to develop between
Employee and the Company with respect to information of a confidential or secret
nature made known to Employee during the term of Employee's employment with the
Company. The information referred to in the preceding two sentences is
hereafter collectively referred to as the "Company Information." Employee
further recognizes that the Company and its Affiliates have obtained and have
access to certain information concerning their respective customers and
suppliers which the Company and such Affiliates treat and desire to continue to
treat on a confidential basis ("Customer Information") and that Employee during
the course of
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 3
his affiliation with Globalink and during the course of his employment with the
Company had and will continue to have access to such Customer Information.
Accordingly, Employee agrees that:
(a) Employee shall not disclose, either directly or indirectly, under any
circumstances, at any time, any of the Company Information or Customer
Information to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever except in connection with the
performance of his duties under the Employment Agreement; provided that the
Employee shall not be deemed to be in breach of such covenant if Employee
makes such disclosure pursuant to a subpoena or final order of a court of
competent jurisdiction or other governmental process. If employee is
required to make disclosure pursuant to a subpoena or a fund order of a
court of competent jurisdiction or other governmental process, Employee
shall promptly give written notice to the Company of the request or demand
for such disclosure, and (iii) the Company shall be afforded the right to
participate at its own expense in objecting to or limiting the nature and
scope of such disclosure, and to seek judicial protection available for
like material, such as protective orders and sealed records of proceedings.
Employee further agrees not to use any of the Company Information or
Customer Information for his own benefit or for the benefit of any other
person, firm, corporation, association or other entity for any reason or
purpose whatsoever.
(b) Employee further agrees that at any time upon the request of the Company,
Employee will deliver to the Company all documents and data of any nature
pertaining to any Company Information and Customer Information which is in
the direct or indirect possession, or under the direct or indirect control,
of Employee.
(c) Employee represents that Employee's performance of all the terms of this
Agreement does not and will not breach any agreement by which Employee is
bound to keep in confidence proprietary information or trade secrets of any
other person acquired by Employee in confidence or in trust and Employee
agrees not to enter into any agreement either written or oral in conflict
herewith.
(d) The obligations of confidentiality and nondisclosure and non-use shall
terminate with respect to information which (i) is in the public domain
unless there by reason of Employee's improper disclosure or (ii) was
disclosed to Employee in good faith by a third party having the right to
disclose such information.
3. Remedies. Employee expressly acknowledges that, in the event that the
--------
provisions of Section 1 or 2 hereof are breached, the Company will suffer
damages incapable of ascertainment and will be irreparably damaged if any
provision of such Sections is not enforced. Therefore, should any dispute arise
with respect to the breach or threatened breach of any provision of said
Sections 1 or 2, Employee agrees and consents that, in addition to any and all
other remedies available to the Company, an injunction or restraining order or
other equitable relief may be issued or ordered by a court of
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 4
competent jurisdiction restraining any breach of threatened breach of any of
such provisions. Employee consents that, for purposes of any action initiated
against Employee hereunder, service of process may be effected by certified mail
or overnight receipted courier as set forth in Section 7 hereof (unless the
Company has knowledge of a change in address, in which case service of process
may be effected by such means at such new address) and shall be acceptable and
adequate to satisfy the requirement that service of process be served on
Employee in connection therewith. All such proceedings may be pursued and such
remedies sought and obtained concurrently or consecutively at the election of
the Company.
4. Integral Part of Transaction; Protection of Interests. The Company is
-----------------------------------------------------
acquiring substantially all of the capital stock of the Company as contemplated
by the Merger Agreement, and the undertakings and covenants of the Employee
contained in this Agreement are an integral part of the transactions set forth
in said Merger Agreement. Employee acknowledges, warrants and agrees that the
restrictive covenants contained in Sections 1 and 2 of this Agreement are
necessary for the protection of the business investment by the Company in the
capital stock of Globalink and the legitimate business interests of the Company
and its Affiliates, respectively, and are reasonable in scope and content.
Employee further acknowledges and agrees that the territorial, time and other
limitations imposed hereunder upon the current and future business activities of
Employee are reasonable and properly required for the adequate protection of the
business investment by the Company in the capital stock and the business affairs
of the Company and its Affiliates, respectively, and in the event any such
territorial, time or other limitations are found to be unreasonable by a court
of competent jurisdiction, Employee agrees and submits to the reduction of such
territorial, time or other limitations to such an area, period or otherwise as
the court may determine to be reasonable. In the event that any limitation
contained in Sections 1 or 2 of this Agreement is found to be unreasonable or
otherwise invalid in whole or in part in any jurisdiction, the Employee agrees
that such limitations shall be and remain valid in all other jurisdictions.
5. Severability. The parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law (in accordance with
the provisions of Section 4, as applicable).
6. Assignment. The Company shall have the right to assign this Agreement to
----------
its successors and assigns, and all covenants and agreements hereunder shall
inure to the benefit of and be enforceable by said successors or assigns.
7. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 5
(b) in the case of a letter, three (3) business days shall have elapsed after
the same shall have been deposited in the United States mail, postage prepaid
and registered or certified, return receipt requested or forty eight (48) hours
shall have elapsed after the same shall have been sent by nationally recognized
overnight courier, or (c) when transmission acknowledged by telephonic receipt
if sent by facsimile:
If to Employee, to:
Xxxxxx X. Xxxxxxxx
00 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Tel: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company to:
Lernout & Hauspie Speech Products X.X.
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx, Xxxxxxx
Attn: Xxxxxxx XxXxxxxxxxx, Esquire
Tel: 000-00-00-000000
Fax: 000-00-00-000000
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Xxxxxxxx X. Xxxx, Esquire
Tel: 000 000-0000
Fax: 000 000-0000
and in any case at such other address as the addressee shall have specified
by written notice.
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 6
8. Waivers. No term or condition of this Agreement shall be deemed to have
-------
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed to be a
continuing waiver unless specifically stated therein.
9. Modifications. No modifications of any provisions of this Agreement shall
-------------
be made unless made in writing and signed by the parties hereto.
10. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of The Commonwealth of Massachusetts,
except choice of law provisions thereof.
11. Counterparts. This Agreement may be executed in multiple counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12. Headings. The headings of sections and paragraphs herein are included
--------
solely for convenience of reference and shall not affect the meaning or
construction of any of the provisions hereof.
[SIGNATURE PAGE TO FOLLOW]
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 7
IN WITNESS WHEREOF, the parties hereto, or their duly authorized
representatives, have signed, sealed and delivered this Agreement effective as
of the day and year first above written.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By: _____________________________
Name:
Title:
EMPLOYEE:
_______________________________
Xxxxxx X. Xxxxxxxx
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 8
NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENT
AGREEMENT entered into as of this 20th day of July, 1998, between LERNOUT &
HAUSPIE SPEECH PRODUCTS N.V., a Belgian corporation with its principal place of
business in Ieper, Belgium (the "Company"), and Xxxxx X. Xxxxxxx, an individual
residing at 0000 Xxxxxxxx Xx., Xxxxxxxxxx X.X. 00000 ("Employee").
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith, the Company has on this day agreed to acquire
substantially all of the issued and outstanding capital stock of Globalink,
Inc., a Delaware corporation ("Globalink") (the "Merger"); and
WHEREAS, it was a condition to execution of the Merger Agreement and to
consummation of the transactions contemplated therein that this Agreement be
entered into; and
WHEREAS, prior to the Merger, Employee was a stockholder and an executive
officer and director of Globalink; and
WHEREAS, during the course of such affiliations, Employee has become
knowledgeable and experienced in one or more aspects of the business of
Globalink, and the growth and success of the business of Globalink has been due
in part to the services and unique talents of Employee; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee resulting from Employee's
involvement with and knowledge of the business of Globalink, the Company has on
this day entered into an Employment Agreement (the "Employment Agreement") with
Employee pursuant to which the Company has agreed to retain Employee on the
terms and conditions contained therein; and
WHEREAS, in his capacity as an officer and director of Globalink and as an
employee of the Company, Employee has and will continue to have, access to
business activities, business plans, personnel, financial status and other
confidential and proprietary information including, but not limited to, existing
and potential customers, customer information, target market areas, potential
and future products, methods, techniques and other information, all of which is
of significant value to Company and which is not generally known but is
confidential; and
WHEREAS, both the Company and Globalink currently, and will in the future,
develop, distribute and sell products to customers on a worldwide basis; and
WHEREAS, as a result of Employee's involvement with and knowledge of the
business of Globalink and his access to customers of Globalink and related
customer information, Employee acknowledges the need for and agrees to impose
certain restrictions on the ability of Employee to compete with the Company
and/or any of its affiliates in order to preserve the good will of all suppliers
and customers having business relations with the Company and/or any affiliates
thereof, and to preserve the good will of the Company and/or any affiliate
thereof as a going concern, upon the terms and conditions contained in this
Agreement.
-------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement
NOW THEREFORE, in consideration of the Merger Agreement, the Consulting
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound, it is hereby
agreed by and between the parties as follows:
1. Covenant Not To Compete.
-----------------------
(a) During the Noncompetition Period as hereinafter defined, Employee shall
not, directly or indirectly, whether as owner, partner, shareholder,
director, consultant, agent, employee, guarantor, surety or otherwise, or
through any person, consult with or in any way aid or assist any competitor
of Company or any of its respective affiliates now or hereafter existing
(each an "Affiliate" and collectively the "Affiliates") or any successor or
assign of Company (each a "Successor"), or engage or attempt to engage in
any employment, consultancy or other activity, which consultation, aid,
assistance, employment or activity competes directly or indirectly, with
the Business of the Company or any Affiliate or any Successor, anywhere in
the world. In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly, nor shall he knowingly
attempt to, or assist any other person in attempting to, do any of the
following as it relates to the Business of Company or any Affiliate or
Successor: (i) encourage any customer, client, supplier or other party
having a business relationship with the Company or any Affiliate or
Successor to terminate or alter such relationship, whether contractual or
otherwise, written or oral, with the Company or any Affiliate or Successor,
(ii) encourage any prospective customer or supplier not to enter into a
business relationship with the Company or any Affiliate or Successor; or
(iii) impair or attempt to impair any relationship, contractual or
otherwise, written or oral, between the Company or any Affiliate or
Successor, and any customer, supplier or other party having a business
relationship with the Company or any Affiliate or Successor. For purposes
of this Agreement, the term "Business" shall mean the respective businesses
of Globalink and the Company as conducted on the date hereof and as
contemplated to be conducted in the future. For purposes of this Agreement,
the term "employment" shall include the retention of Employee as an
employee, consultant, agent, independent contractor or otherwise. Employee
acknowledges that his participation in the conduct of any such Business
alone or with any person other than the Company will materially impair the
business and prospects of Company. The Noncompetition Period shall mean:
the period commencing on the date of the consummation of the Merger (the
"Effective Time") and ending (i) in the case of termination of the
Employment Agreement by the Company for cause or by Employee for any reason
or no reason, three (3) years from the date of such termination, and (ii)
in the case of termination of the Consulting Agreement by the Company
without cause, the date of such termination, or if later at such time as
the Company shall cease any payments under the Employment Agreement to
Employee.
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 2
(b) In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly, nor shall he knowingly
attempt to or assist any other person in attempting to solicit for
employment or other engagement any director, officer, employee, or agent of
the Company or any Affiliate or Successor, or encourage any such person to
terminate such relationship with the Company or any Affiliate or Successor.
(c) In addition to and without limiting the foregoing, during the term of the
Noncompetition Period, Employee will not, either directly or indirectly,
solicit, pursue, call upon or take away, either for himself or for the
benefit of any other person or entity, as it relates to the Business of the
Company or any Affiliate or Successor, any of the customers of the Company
or any Affiliate or Successor, upon whom Employee called or with whom
Employee became acquainted during the term of his employment with the
Company.
(d) Nothing in this Agreement shall preclude Employee from making passive
investments of not more than 5% of a class of securities of any business
enterprise registered under the Securities Exchange Act of 1934, as
amended.
(e) Notwithstanding the foregoing, the Employee shall not be prohibited from
acting in any capacity listed in Section 1(a) or Section 1(c) with a
competitor of the Company or any Affiliate or any Successor, if the
Employee's activities are not provided in connection with the Business of
the Company or any Affiliate or any Successor.
2. Protection of Proprietary Information. Employee recognizes that the Company
-------------------------------------
and its Affiliates are engaged in a continuous program of research and
development relating to their respective business opportunities, market
forecasting, data processing, operating procedures, products, methods, systems,
techniques, machinery, tooling, designs, specifications, processes, plans, "know
how" and trade secrets, and that the Company and its Affiliates have developed
information regarding costs, profits, markets, products, customer lists,
tooling, designs, plans for present and future development and expansion into
new markets and other proprietary information, which is secret and confidential
in nature and is not available to the public, which gives the Company and its
Affiliates a special competence in their respective and various fields of
endeavor which are otherwise deemed to be proprietary to the Company and/or its
Affiliates, all of which have been acquired or developed at considerable expense
to the Company and its Affiliates. Employee acknowledges that a relationship of
confidence and trust has been developed and will continue to develop between
Employee and the Company with respect to information of a confidential or secret
nature made known to Employee during the term of Employee's employment with the
Company. The information referred to in the preceding two sentences is
hereafter collectively referred to as the "Company Information." Employee
further recognizes that the Company and its Affiliates have obtained and have
access to certain information concerning their respective customers and
suppliers which the Company and such Affiliates treat and desire to continue to
treat on a confidential basis ("Customer Information") and that Employee during
the course of
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 3
his affiliation with Globalink and during the course of his employment with the
Company had and will continue to have access to such Customer Information.
Accordingly, Employee agrees that:
(a) Employee shall not disclose, either directly or indirectly, under any
circumstances, at any time, any of the Company Information or Customer
Information to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever except in connection with the
performance of his duties under the Employment Agreement; provided that the
Employee shall not be deemed to be in breach of such covenant if Employee
makes such disclosure pursuant to a subpoena or final order of a court of
competent jurisdiction or other governmental process. If employee is
required to make disclosure pursuant to a subpoena or a fund order of a
court of competent jurisdiction or other governmental process, Employee
shall promptly give written notice to the Company of the request or demand
for such disclosure, and (iii) the Company shall be afforded the right to
participate at its own expense in objecting to or limiting the nature and
scope of such disclosure, and to seek judicial protection available for
like material, such as protective orders and sealed records of proceedings.
Employee further agrees not to use any of the Company Information or
Customer Information for his own benefit or for the benefit of any other
person, firm, corporation, association or other entity for any reason or
purpose whatsoever.
(b) Employee further agrees that at any time upon the request of the Company,
Employee will deliver to the Company all documents and data of any nature
pertaining to any Company Information and Customer Information which is in
the direct or indirect possession, or under the direct or indirect control,
of Employee.
(c) Employee represents that Employee's performance of all the terms of this
Agreement does not and will not breach any agreement by which Employee is
bound to keep in confidence proprietary information or trade secrets of any
other person acquired by Employee in confidence or in trust and Employee
agrees not to enter into any agreement either written or oral in conflict
herewith.
(d) The obligations of confidentiality and nondisclosure and non-use shall
terminate with respect to information which (i) is in the public domain
unless there by reason of Employee's improper disclosure or (ii) was
disclosed to Employee in good faith by a third party having the right to
disclose such information.
3. Remedies. Employee expressly acknowledges that, in the event that the
--------
provisions of Section 1 or 2 hereof are breached, the Company will suffer
damages incapable of ascertainment and will be irreparably damaged if any
provision of such Sections is not enforced. Therefore, should any dispute arise
with respect to the breach or threatened breach of any provision of said
Sections 1 or 2, Employee agrees and consents that, in addition to any and all
other remedies available to the Company, an injunction or restraining order or
other equitable relief may be issued or ordered by a court of
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 4
competent jurisdiction restraining any breach of threatened breach of any of
such provisions. Employee consents that, for purposes of any action initiated
against Employee hereunder, service of process may be effected by certified mail
or overnight receipted courier as set forth in Section 7 hereof (unless the
Company has knowledge of a change in address, in which case service of process
may be effected by such means at such new address) and shall be acceptable and
adequate to satisfy the requirement that service of process be served on
Employee in connection therewith. All such proceedings may be pursued and such
remedies sought and obtained concurrently or consecutively at the election of
the Company.
4. Integral Part of Transaction; Protection of Interests. The Company is
-----------------------------------------------------
acquiring substantially all of the capital stock of the Company as contemplated
by the Merger Agreement, and the undertakings and covenants of the Employee
contained in this Agreement are an integral part of the transactions set forth
in said Merger Agreement. Employee acknowledges, warrants and agrees that the
restrictive covenants contained in Sections 1 and 2 of this Agreement are
necessary for the protection of the business investment by the Company in the
capital stock of Globalink and the legitimate business interests of the Company
and its Affiliates, respectively, and are reasonable in scope and content.
Employee further acknowledges and agrees that the territorial, time and other
limitations imposed hereunder upon the current and future business activities of
Employee are reasonable and properly required for the adequate protection of the
business investment by the Company in the capital stock and the business affairs
of the Company and its Affiliates, respectively, and in the event any such
territorial, time or other limitations are found to be unreasonable by a court
of competent jurisdiction, Employee agrees and submits to the reduction of such
territorial, time or other limitations to such an area, period or otherwise as
the court may determine to be reasonable. In the event that any limitation
contained in Sections 1 or 2 of this Agreement is found to be unreasonable or
otherwise invalid in whole or in part in any jurisdiction, the Employee agrees
that such limitations shall be and remain valid in all other jurisdictions.
5. Severability. The parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to scope, activity or subject, such provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, so as to be
enforceable to the extent compatible with the applicable law (in accordance with
the provisions of Section 4, as applicable).
6. Assignment. The Company shall have the right to assign this Agreement to
----------
its successors and assigns, and all covenants and agreements hereunder shall
inure to the benefit of and be enforceable by said successors or assigns.
7. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 5
(b) in the case of a letter, three (3) business days shall have elapsed after
the same shall have been deposited in the United States mail, postage prepaid
and registered or certified, return receipt requested or forty eight (48) hours
shall have elapsed after the same shall have been sent by nationally recognized
overnight courier, or (c) when transmission acknowledged by telephonic receipt
if sent by facsimile:
If to Employee, to:
Xxxxx X. Xxxxxxx, Xx.
4062 Chancery Ct.
Washington D.C. 20007
Tel: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company to:
Lernout & Hauspie Speech Products X.X.
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx, Xxxxxxx
Attn: Xxxxxxx XxXxxxxxxxx, Esquire
Tel: 000-00-00-000000
Fax: 000-00-00-000000
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Xxxxxxxx X. Xxxx, Esquire
Tel: 000 000-0000
Fax: 000 000-0000
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 6
and in any case at such other address as the addressee shall have specified
by written notice.
8. Waivers. No term or condition of this Agreement shall be deemed to have
-------
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed to be a
continuing waiver unless specifically stated therein.
9. Modifications. No modifications of any provisions of this Agreement shall
-------------
be made unless made in writing and signed by the parties hereto.
10. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of The Commonwealth of Massachusetts,
except choice of law provisions thereof.
11. Counterparts. This Agreement may be executed in multiple counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12. Headings. The headings of sections and paragraphs herein are included
--------
solely for convenience of reference and shall not affect the meaning or
construction of any of the provisions hereof.
[SIGNATURE PAGE TO FOLLOW]
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 7
IN WITNESS WHEREOF, the parties hereto, or their duly authorized
representatives, have signed, sealed and delivered this Agreement effective as
of the day and year first above written.
LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.
By: _____________________________
Name:
Title:
EMPLOYEE:
_______________________________
Xxxxx X. Xxxxxxx, Xx.
------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 8
NONCOMPETITION AND PROPRIETARY INFORMATION AGREEMENT
AGREEMENT entered into as of this 20th day of July, 1998, between LERNOUT &
HAUSPIE SPEECH PRODUCTS N.V., a Belgian corporation with its principal place of
business in Ieper, Belgium (the "Company"), and Xxxx X. XxXxxxxx, III, an
individual residing at 0000 Xxxxxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 ("Employee").
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") of even date herewith, the Company has on this day agreed to acquire
substantially all of the issued and outstanding capital stock of Globalink,
Inc., a Delaware corporation ("Globalink") (the "Merger"); and
WHEREAS, it was a condition to execution of the Merger Agreement and to
consummation of the transactions contemplated therein that this Agreement be
entered into; and
WHEREAS, prior to the Merger, Employee was an executive officer and director
of Globalink; and
WHEREAS, during the course of such affiliations, Employee has become
knowledgeable and experienced in one or more aspects of the business of
Globalink, and the growth and success of the business of Globalink has been due
in part to the services and unique talents of Employee; and
WHEREAS, in order to assure itself of the continued benefits to be obtained
from the special talents and abilities of Employee resulting from Employee's
involvement with and knowledge of the business of Globalink, the Company has on
this day entered into an Employment Agreement (the "Employment Agreement") with
Employee pursuant to which the Company has agreed to retain Employee on the
terms and conditions contained therein; and
WHEREAS, in his capacity as an officer and director of Globalink and as an
employee of the Company, Employee has and will continue to have, access to
business activities, business plans, personnel, financial status and other
confidential and proprietary information including, but not limited to, existing
and potential customers, customer information, target market areas, potential
and future products, methods, techniques and other information, all of which is
of significant value to Company and which is not generally known but is
confidential; and
WHEREAS, both the Company and Globalink currently, and will in the future,
develop, distribute and sell products to customers on a worldwide basis; and
WHEREAS, as a result of Employee's involvement with and knowledge of the
business of Globalink and his access to customers of Globalink and related
customer information, Employee acknowledges the need for and agrees to impose
certain restrictions on the ability of Employee to compete with the Company
and/or any of its affiliates in order to preserve the good will of all suppliers
and customers having business relations with the Company and/or any affiliates
thereof, and to preserve the good will of the Company and/or any affiliate
thereof as a going concern, upon the terms and conditions contained in this
Agreement.
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement
NOW THEREFORE, in consideration of the Merger Agreement, the Consulting
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound, it is hereby
agreed by and between the parties as follows:
1. Covenant Not To Compete.
-----------------------
(a) During the Noncompetition Period as hereinafter defined, Employee shall
not, directly or indirectly, whether as owner, partner, shareholder,
director, consultant, agent, employee, guarantor, surety or otherwise,
or through any person, consult with or in any way aid or assist any
competitor of Company or any of its respective affiliates now or
hereafter existing (each an "Affiliate" and collectively the
"Affiliates") or any successor or assign of Company (each a
"Successor"), or engage or attempt to engage in any employment,
consultancy or other activity, which consultation, aid, assistance,
employment or activity competes directly or indirectly, with the
Business of the Company or any Affiliate or any Successor, anywhere in
the world. In addition to and without limiting the foregoing, during
the Noncompetition Period, Employee shall not knowingly, nor shall he
knowingly attempt to, or assist any other person in attempting to, do
any of the following as it relates to the Business of Company or any
Affiliate or Successor: (i) encourage any customer, client, supplier or
other party having a business relationship with the Company or any
Affiliate or Successor to terminate or alter such relationship, whether
contractual or otherwise, written or oral, with the Company or any
Affiliate or Successor, (ii) encourage any prospective customer or
supplier not to enter into a business relationship with the Company or
any Affiliate or Successor; or (iii) impair or attempt to impair any
relationship, contractual or otherwise, written or oral, between the
Company or any Affiliate or Successor, and any customer, supplier or
other party having a business relationship with the Company or any
Affiliate or Successor. For purposes of this Agreement, the term
"Business" shall mean the respective businesses of Globalink and the
Company as conducted on the date hereof and as contemplated to be
conducted in the future. For purposes of this Agreement, the term
"employment" shall include the retention of Employee as an employee,
consultant, agent, independent contractor or otherwise. Employee
acknowledges that his participation in the conduct of any such Business
alone or with any person other than the Company will materially impair
the business and prospects of Company. The Noncompetition Period shall
mean: the period commencing on the date of the consummation of the
Merger (the "Effective Time") and ending (i) in the case of termination
of the Employment Agreement by the Company for cause or by Employee for
any reason or no reason, three (3) years from the date of such
termination, and (ii) in the case of termination of the Consulting
Agreement by the Company without cause, the date of such termination,
or if later at such time as the Company shall cease any payments under
the Employment Agreement to Employee.
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 2
(b) In addition to and without limiting the foregoing, during the
Noncompetition Period, Employee shall not knowingly, nor shall he knowingly
attempt to or assist any other person in attempting to solicit for
employment or other engagement any director, officer, employee, or agent of
the Company or any Affiliate or Successor, or encourage any such person to
terminate such relationship with the Company or any Affiliate or Successor.
(c) In addition to and without limiting the foregoing, during the term of the
Noncompetition Period, Employee will not, either directly or indirectly,
solicit, pursue, call upon or take away, either for himself or for the
benefit of any other person or entity, as it relates to the Business of the
Company or any Affiliate or Successor, any of the customers of the Company
or any Affiliate or Successor, upon whom Employee called or with whom
Employee became acquainted during the term of his employment with the
Company.
(d) Nothing in this Agreement shall preclude Employee from making passive
investments of not more than 5% of a class of securities of any business
enterprise registered under the Securities Exchange Act of 1934, as
amended.
(e) Notwithstanding the foregoing, the Employee shall not be prohibited from
acting in any capacity listed in Section 1(a) or Section 1(c) with a
competitor of the Company or any Affiliate or any Successor, if the
Employee's activities are not provided in connection with the Business of
the Company or any Affiliate or any Successor.
2. Protection of Proprietary Information. Employee recognizes that the Company
-------------------------------------
and its Affiliates are engaged in a continuous program of research and
development relating to their respective business opportunities, market
forecasting, data processing, operating procedures, products, methods,
systems, techniques, machinery, tooling, designs, specifications, processes,
plans, "know how" and trade secrets, and that the Company and its Affiliates
have developed information regarding costs, profits, markets, products,
customer lists, tooling, designs, plans for present and future development
and expansion into new markets and other proprietary information, which is
secret and confidential in nature and is not available to the public, which
gives the Company and its Affiliates a special competence in their
respective and various fields of endeavor which are otherwise deemed to be
proprietary to the Company and/or its Affiliates, all of which have been
acquired or developed at considerable expense to the Company and its
Affiliates. Employee acknowledges that a relationship of confidence and
trust has been developed and will continue to develop between Employee and
the Company with respect to information of a confidential or secret nature
made known to Employee during the term of Employee's employment with the
Company. The information referred to in the preceding two sentences is
hereafter collectively referred to as the "Company Information." Employee
further recognizes that the Company and its Affiliates have obtained and
have access to certain information concerning their respective customers and
suppliers which the Company and such Affiliates treat and desire to continue
to treat on a confidential basis ("Customer Information") and that Employee
during the course of
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 3
his affiliation with Globalink and during the course of his employment with the
Company had and will continue to have access to such Customer Information.
Accordingly, Employee agrees that:
(a) Employee shall not disclose, either directly or indirectly, under any
circumstances, at any time, any of the Company Information or Customer
Information to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever except in connection with the
performance of his duties under the Employment Agreement; provided that the
Employee shall not be deemed to be in breach of such covenant if Employee
makes such disclosure pursuant to a subpoena or final order of a court of
competent jurisdiction or other governmental process. If employee is
required to make disclosure pursuant to a subpoena or a fund order of a
court of competent jurisdiction or other governmental process, Employee
shall promptly give written notice to the Company of the request or demand
for such disclosure, and (iii) the Company shall be afforded the right to
participate at its own expense in objecting to or limiting the nature and
scope of such disclosure, and to seek judicial protection available for
like material, such as protective orders and sealed records of proceedings.
Employee further agrees not to use any of the Company Information or
Customer Information for his own benefit or for the benefit of any other
person, firm, corporation, association or other entity for any reason or
purpose whatsoever.
(b) Employee further agrees that at any time upon the request of the Company,
Employee will deliver to the Company all documents and data of any nature
pertaining to any Company Information and Customer Information which is in
the direct or indirect possession, or under the direct or indirect control,
of Employee.
(c) Employee represents that Employee's performance of all the terms of this
Agreement does not and will not breach any agreement by which Employee is
bound to keep in confidence proprietary information or trade secrets of any
other person acquired by Employee in confidence or in trust and Employee
agrees not to enter into any agreement either written or oral in conflict
herewith.
(d) The obligations of confidentiality and nondisclosure and non-use shall
terminate with respect to information which (i) is in the public domain
unless there by reason of Employee's improper disclosure or (ii) was
disclosed to Employee in good faith by a third party having the right to
disclose such information.
3. Remedies. Employee expressly acknowledges that, in the event that the
--------
provisions of Section 1 or 2 hereof are breached, the Company will suffer
damages incapable of ascertainment and will be irreparably damaged if any
provision of such Sections is not enforced. Therefore, should any dispute
arise with respect to the breach or threatened breach of any provision of
said Sections 1 or 2, Employee agrees and consents that, in addition to any
and all other remedies available to the Company, an injunction or
restraining order or other equitable relief may be issued or ordered by a
court of
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 4
competent jurisdiction restraining any breach of threatened breach of any of
such provisions. Employee consents that, for purposes of any action
initiated against Employee hereunder, service of process may be effected by
certified mail or overnight receipted courier as set forth in Section 7
hereof (unless the Company has knowledge of a change in address, in which
case service of process may be effected by such means at such new address)
and shall be acceptable and adequate to satisfy the requirement that service
of process be served on Employee in connection therewith. All such
proceedings may be pursued and such remedies sought and obtained
concurrently or consecutively at the election of the Company.
4. Integral Part of Transaction; Protection of Interests. The Company is
-----------------------------------------------------
acquiring substantially all of the capital stock of the Company as
contemplated by the Merger Agreement, and the undertakings and covenants of
the Employee contained in this Agreement are an integral part of the
transactions set forth in said Merger Agreement. Employee acknowledges,
warrants and agrees that the restrictive covenants contained in Sections 1
and 2 of this Agreement are necessary for the protection of the business
investment by the Company in the capital stock of Globalink and the
legitimate business interests of the Company and its Affiliates,
respectively, and are reasonable in scope and content. Employee further
acknowledges and agrees that the territorial, time and other limitations
imposed hereunder upon the current and future business activities of
Employee are reasonable and properly required for the adequate protection of
the business investment by the Company in the capital stock and the business
affairs of the Company and its Affiliates, respectively, and in the event
any such territorial, time or other limitations are found to be unreasonable
by a court of competent jurisdiction, Employee agrees and submits to the
reduction of such territorial, time or other limitations to such an area,
period or otherwise as the court may determine to be reasonable. In the
event that any limitation contained in Sections 1 or 2 of this Agreement is
found to be unreasonable or otherwise invalid in whole or in part in any
jurisdiction, the Employee agrees that such limitations shall be and remain
valid in all other jurisdictions.
5. Severability. The parties agree that each provision contained in this
------------
Agreement shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability
of any of the other clauses herein. Moreover, if one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to scope, activity or subject, such provisions shall be
construed by the appropriate judicial body by limiting and reducing it or
them, so as to be enforceable to the extent compatible with the applicable
law (in accordance with the provisions of Section 4, as applicable).
6. Assignment. The Company shall have the right to assign this Agreement to
----------
its successors and assigns, and all covenants and agreements hereunder shall
inure to the benefit of and be enforceable by said successors or assigns.
7. Notices. Any notice or other communication in connection with this
-------
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 5
(b) in the case of a letter, three (3) business days shall have elapsed after
the same shall have been deposited in the United States mail, postage prepaid
and registered or certified, return receipt requested or forty eight (48) hours
shall have elapsed after the same shall have been sent by nationally recognized
overnight courier, or (c) when transmission acknowledged by telephonic receipt
if sent by facsimile:
If to Employee, to:
Xxxx X. XxXxxxxx, III
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000
Tel: 000-000-0000
with a copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
Tel: 000-000-0000
Fax: 000-000-0000
If to the Company to:
Lernout & Hauspie Speech Products X.X.
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx, Xxxxxxx
Attn: Xxxxxxx XxXxxxxxxxx, Esquire
Tel: 000-00-00-000000
Fax: 000-00-00-000000
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
Attn: Xxxxxxxx X. Xxxx, Esquire
Tel: 000 000-0000
Fax: 000 000-0000
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 6
and in any case at such other address as the addressee shall have specified
by written notice.
8. Waivers. No term or condition of this Agreement shall be deemed to have
-------
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
to be a continuing waiver unless specifically stated therein.
9. Modifications. No modifications of any provisions of this Agreement shall
-------------
be made unless made in writing and signed by the parties hereto.
10. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of The Commonwealth of Massachusetts,
except choice of law provisions thereof.
11. Counterparts. This Agreement may be executed in multiple counterparts, each
------------
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12. Headings. The headings of sections and paragraphs herein are included
--------
solely for convenience of reference and shall not affect the meaning or
construction of any of the provisions hereof.
[SIGNATURE PAGE TO FOLLOW]
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 7
IN WITNESS WHEREOF, the parties hereto, or their duly authorized
representatives, have signed, sealed and delivered this Agreement effective as
of the day and year first above written.
LERNOUT & HAUSPIE SPEECH
PRODUCTS N.V.
By: ___________________________
Name:
Title:
EMPLOYEE:
_______________________________
Xxxx X. XxXxxxxx, III
--------------------------------------------------------------------------------
Noncompetition and Proprietary Information Agreement Page 8
EXHIBIT F
July 1, 1998
Lernout & Hauspie Speech Products N.V.
Attention: Xx. Xxxxxx Xxxxxxxxx, President
Xxxx-Xxxxxxxxxxxxxx 0
0000 Xxxxx
Xxxxxxx
Dear Xx. Xxxxxxxxx:
In order to allow you to evaluate the possible acquisition (the "Proposed
Acquisition") of Globalink, Inc. ("Company") by Xxxxxxx & Hauspie Speech
Products N.V. ("L&H") we will deliver to you, upon your execution and delivery
to us of this letter agreement, certain information about the properties,
customers and operations of the Company. All information about the Company
furnished by us or our affiliates, or our respective directors, officers,
employees, agents or controlling persons (such affiliates and other persons
collectively referred to herein as "Representatives"), whether furnished before
or after the date hereof, and regardless of the manner in which it is furnished,
is referred to in this letter agreement as "Proprietary Information".
Proprietary Information does not include, however, information which (a) is or
becomes generally available to the public other than as a result of a disclosure
by you or your Representatives, (b) was available to you on a nonconfidential
basis prior to its disclosure by us, or (c) becomes available to you on a
nonconfidential basis from a person other than us who is not otherwise
prohibited from transmitting the information to you. As used in this letter,
the term "person" shall be broadly interpreted to include, without limitation,
any corporation, company, partnership or individual.
Unless otherwise agreed to in writing to us, you agree (a) except as
required by law, to keep all Proprietary Information confidential and not to
disclose or reveal any Proprietary Information to any person other than those
employed by you or on your behalf who are actively and directly participating in
the evaluation of the Proposed Acquisition or who otherwise need to know the
Proprietary Information for the purpose of evaluating the Proposed Acquisition
and to cause those persons to observe the terms of this letter agreement, and
(b) not to use Proprietary Information for any purpose other than in connection
with the consummation of the Proposed Acquisition in a manner which we have
approved. In the event that you are requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any Proprietary
Information, you agree that you will provide us with prompt notice of such
request(s) to enable us to seek an appropriate protective order.
Unless otherwise required by law, neither you nor your Representatives
will, without the prior written consent of the Company, disclose to any person
(other than
Xx. Xxxxxx Xxxxxxxxx, President
July 1, 1998
Page 2
those actively and directly participating in the Proposed Acquisition) any
information about the Proposed Acquisition, or the terms, conditions or other
facts relating thereto, including the fact that discussions are taking place
with respect thereto or the status thereof, or the fact that the Proprietary
Information has been made available to you or your Representatives. If any party
is required by law to make any such disclosure, it shall provide the Company
with a reasonable opportunity to review and comment on such information prior to
disclosure.
If you determine that you do not wish to proceed with the Proposed
Acquisition, you will promptly advise us of that decision. In that case, or in
the event that the Proposed Acquisition is not consummated by us, you will, upon
our request, promptly deliver to us all of the Proprietary Information,
including all copies, reproductions, summaries, analysis or extracts thereof or
based thereon in your possession or in the possession of any of your
Representatives.
Although the Proprietary Information contains information which we believe
to be relevant for the purpose of your evaluation of the Proposed Acquisition,
we do not make any representation or warranty as to the accuracy or completeness
of the Proprietary Information. Neither we, our affiliates, nor any of our
respective officers, directors, employees, agents or controlling persons with in
the meaning of Section 20 of the Exchange Act shall have any liability to you or
any of your Representatives relating to or arising from the use of the
Proprietary Information.
You agree for a period of one year from the date of this letter that you
will not, directly or indirectly, either on your behalf or on behalf of any
other person or entity, solicit, induce or encourage any employee of the Company
to leave his or her employment, or hire or attempt to hire any former employee
employed by the Company within the 45-day period prior to the date hereof;
provided, however, that nothing herein shall prohibit you from hiring an
employee of the Company who seeks employment with you on an unsolicited basis.
For the purposes of this paragraph, "unsolicited" shall mean that no officer,
director, employee or agent of L&H or any affiliate of L&H initiated any contact
with any such employee relating to the employment of such employee by L&H or any
affiliate of L&H while such employee was employed by the Company.
Without prejudice to the rights and remedies otherwise available to any
party hereto, each party shall be entitled to equitable relief by way of
injunction if the other or any such party's Representatives breach or threaten
to breach any of the provisions of this letter agreement.
It is further understood and agreed that no failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
Xx. Xxxxxx Xxxxxxxxx, President
July 1, 1998
Page 3
Please confirm your agreement with the foregoing by signing and returning
to the undersigned the duplicate copy of this letter enclosed herewith.
Very truly yours,
GLOBALINK, INC.
By:__________________________
Name:
Title:
Accepted and Agreed as
of the date first written above:
LERNOUT & HAUSPIE SPEECH
PRODUCTS N.V.
By:___________________________
Xxxxxxx Xx Xxxxxxxxx,
Senior Vice President and Corporate Counsel
EXHIBIT G
Opinion of Company's Counsel
----------------------------
It is our opinion that:
1. The Company is a corporation duly incorporated, existing and in good
standing under the laws of the State of Delaware, with the corporate power and
authority to own or lease its properties and to conduct its business as
presently conducted.
2. The Company has the corporate power and authority to enter into the
Agreement and Plan of Merger by and among _______________, _____________ and
________________, dated July ___, 1998 (the "Agreement"), the Option Agreement
and the Certificate of Merger (collectively, the "Transaction Documents") and to
perform its obligations thereunder. The execution and delivery by the Company
of each of the Transaction Documents have been duly authorized by all necessary
corporate action, including, with regard to the Agreement, stockholder action,
on the part of the Company, and each Transaction Document has been duly executed
and delivered by the Company, and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3. The authorized capital stock of the Company consists of (i) 250,000
shares of preferred stock, $.01 par value, of which, based solely upon our
review of the Company's records, _____ shares, designated as Series A-2
Preferred Stock, are issued and outstanding, and (ii) 20,000,000 shares of
common stock, $.01 par value, of which, based solely on a certificate of the
Company's transfer agent, _____ shares were issued and outstanding at the close
of business on __________ and no shares are held in the treasury of the Company.
All such outstanding shares have been duly authorized and validly issued, and
are fully paid and nonassessable.
4. Except as disclosed in the Agreement, the Company Disclosure Schedule
or any supplement to the Company Disclosure Schedule, the execution and delivery
by the Company of the Transaction Documents and the consummation by the Company
of the transactions contemplated thereby will not (i) constitute a breach or
violation of the Charter or Bylaws of the Company, or (ii) to our knowledge,
constitute a material breach or violation of any provision of any contract or
agreement (a) listed in the Company Disclosure Schedule or (b) attached as an
exhibit to the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997 or any subsequent Company SEC filings prior to the effective
date, to which the Company is a party or by which the Company is bound (the
"Material Contracts"), or give rise to a right of termination of any such
Material Contract under the terms thereof, which breach or violation would have
a Company Material Adverse Effect. To our knowledge, the Company is not a party
to, or expressly bound by, any judgment, injunction or decree of any court or
governmental authority which would restrict or interfere with the performance by
the Company of its obligations under the Agreement.
5. All authorizations, consents and approvals of all United States federal
and state governmental agencies required to be obtained by the Company in order
to permit the Company to consummate the Merger and the other transactions
contemplated by the Agreement on the part of the Company have been obtained,
except for (i) the filing and acceptance of the Certificate of Merger with the
Delaware Secretary of State, and (ii) authorizations, consents and approvals
which if not obtained would not have a Company Material Adverse Effect.
6. Assuming that the Acquisition Subsidiary has complied with all relevant
provisions of the Delaware General Corporation Law (the "DGCL"), upon the filing
and acceptance of the Certificate of Merger with the Secretary of State of the
State of Delaware, the Merger will be effective under the DGCL.
7. The Prospectus/Proxy Statement complies as to form in all material
respects with the requirements of the Securities Act and the Exchange Act and
with the rules and regulations of the SEC thereunder, it being understood that
we do not express any opinion with respect to the operating statistics,
financial statements, financial schedules and other financial and statistical
data included therein, or any information relating to or furnished by the Parent
or Acquisition Subsidiary.
8. To our knowledge, except as set forth in the Agreement, the Company
Disclosure Schedule or any supplement to the Company Disclosure Schedule and as
contemplated by the Agreement, there are no (i) outstanding or authorized
subscriptions, warrants, options or other rights granted by the Company to
purchase or acquire, or preemptive rights with respect to the issuance or sale
of, the capital stock of the Company or which obligate the Company to issue any
additional shares of its capital stock or any securities convertible into or
evidencing the right to subscribe for any shares of its capital stock, (ii)
other securities of the Company directly or indirectly convertible into or
exchangeable for shares of capital stock of the Company, (iii) restrictions on
the transfer of the Company's capital stock (other than those imposed by
relevant state and federal securities laws), (iv) special voting rights with
respect to the capital stock of the Company, or (v) stock appreciation, phantom
stock or similar rights granted by the Company.
9. To our knowledge, except as disclosed in the Company Disclosure
Schedule or any supplement to the Company Disclosure Schedule, there are no
claims, actions, suits, arbitrations, proceedings, or investigations pending
(or, to our knowledge, overtly threatened in writing) against the Company and
there are no outstanding court orders, court decrees, or court stipulations to
which the Company is a party or by which any of its assets are bound, any of
which if adversely determined would (a) materially restrict or interfere with
the Agreement, the Merger or the transactions contemplated by the Agreement and
the Transaction Documents, (b) materially restrict the present business
properties, operations, assets, revenues or condition (financial or otherwise)
of the Company, or (c) have a Company Material Adverse Effect. To our knowledge,
the Company is not a party to, or expressly bound by, any judgment, injunction
or decree of
any court or governmental authority which would restrict or interfere with the
performance by the Company of its obligations under the Agreement.
10. [To our knowledge, the Company has filed with the SEC all forms,
statements, reports and documents ( including all exhibits, amendments and
supplements thereto) required to be filed by it under each of the Securities Act
and the Exchange Act and the respective rules and regulations thereunder (the
"SEC Filings"), all of which complied as to form in all material respects with
all applicable requirements of said Acts and the rules and regulations
thereunder, it being understood that we do not express any opinion with respect
to the operating statistics, financial statements, financial schedules and other
financial and statistical data included therein.]
The following paragraph may be in the form of a confirmation in the Opinion
Letter and not a numbered opinion:
We have participated in conferences with officers and other representatives
of the Company and representatives of Xxxxx Xxxxxxxx, LLP, the independent
public accountants for the Company, at which conferences we made inquiries of
such representatives of the Company and the representatives of the Company's
independent public accountants, and discussed the contents of the Registration
Statement and the Prospectus/Proxy Statement and related matters and, although
we are not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus/Proxy Statement, on the basis of the foregoing, and
solely with respect to the Company, no facts have come to our attention which
have caused us to believe that the Registration Statement as of its effective
date under the Securities Act, or as of ________, the meeting date of the
stockholders of the Company (the "Meeting Date"), contained an untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein in the light of the
circumstances in which they were made, not misleading, or that the
Prospectus/Proxy Statement, as of its mailing date to the stockholders of the
Company or as of the Meeting Date, included any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements therein in light of the circumstances under which they were made, not
misleading, it being understood that we do not express any opinion or
confirmation with respect to the operating statistics, financial statements,
financial schedules and other financial and statistical data included in the
Registration Statement, or any information concerning or furnished by the Parent
or the Acquisition Subsidiary.
Capitalized terms used herein but not defined have the meanings ascribed to
such terms in the Agreement.
EXHIBIT H
Opinion of Parent's U.S. Counsel
--------------------------------
It is our opinion that:
1. The Acquisition Subsidiary is a corporation duly incorporated, existing
and in good standing under the laws of the State of Delaware, with the corporate
power and authority to own or lease its properties and to conduct its business
as presently conducted.
2. Assuming that (a) the Parent has the corporate power and authority to
enter into the Transaction Documents to which it is a party (the "Parent
Transaction Documents") and to perform its obligations thereunder, and (b) the
execution and delivery by the Parent of each of the Parent Transaction Documents
have been duly authorized by all necessary corporate action on the part of the
Parent, (c) each Transaction Document has been duly executed and delivered by
the Parent, and (d) the application of Delaware law, the Agreement constitutes
the legal, valid and binding obligation of the Parent, enforceable against the
Parent in accordance with its terms.
3. The Acquisition Subsidiary has the corporate power and authority to
enter into the Agreement and the Certificate of Merger (the "Subsidiary
Transaction Documents") and to perform its obligations thereunder. The execution
and delivery by the Acquisition Subsidiary of the Subsidiary Translation
Documents have been duly authorized by all necessary corporate action on the
part of the Acquisition Subsidiary, and each of the Subsidiary Transaction
Documents has been duly executed and delivered by the Acquisition Subsidiary and
constitutes the legal, valid and binding obligation of the Acquisition
Subsidiary, enforceable against the Acquisition Subsidiary in accordance with
its terms.
4. Except as disclosed in the Agreement, any schedule to the Agreement or
any supplement to any schedule to the Agreement, the execution and delivery by
the Parent of the Parent Transaction Documents and the consummation by the
Parent of the transactions contemplated thereby will not, to our knowledge,
result in a material breach or violation of any provision of any contract or
agreement attached (or incorporated by reference) to the Parent's Annual Report
on Form 20-F for the fiscal year ended December 31, 1997 or any subsequent
Parent SEC filings prior to the Effective Date, or give rise to a right of
termination of any such contract under the terms thereof.
5. Except as disclosed in the Agreement, any schedule to the Agreement or
any supplement to any schedule to the Agreement, the execution and delivery by
the Acquisition Subsidiary of the Subsidiary Transaction Documents and the
consummation by the Acquisition Subsidiary of the transactions contemplated
thereby will not result in (i) a breach or violation of any of the terms or
provisions of or constitute a default under the Certificate of Incorporation or
Bylaws of the Acquisition Subsidiary, or (ii) to our knowledge, a breach or
violation of any provision of any material contract or agreement
to which the Acquisition Subsidiary is a party, or give rise to a right of
termination of any such contract or agreement under the terms thereof.
6. All authorizations, consents and approvals of all United States
federal, state and local governmental agencies required in order to permit the
consummation of the Merger and the other transactions contemplated by the Parent
Transaction Documents and the Subsidiary Transaction Documents have been
obtained, except for (i) the filing and acceptance of the Certificate of Merger
with the Delaware Secretary of State, and (ii) authorizations, consents and
approvals which if not obtained would not have a Parent Material Adverse Effect.
7. Assuming that the Company has complied with all relevant provisions of
the DGCL, upon the filing and acceptance of the Certificate of Merger with the
Secretary of State of the State of Delaware, the Merger will be effective under
Delaware law.
8. The Prospectus/Proxy Statement complies as to form in all material
respects with the requirements of the Securities Act and the Exchange Act and
with the rules and regulations of the SEC thereunder, it being understood that
we do not express any opinion with respect to the operating statistics,
financial statements, financial schedules and other financial and statistical
data included therein, or any information relating to or furnished by the
Company.
9. The Registration Statement has become effective under the Securities
Act and to the best of our knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose are pending or threatened by the Commission.
10. To our knowledge, except as disclosed in the Agreement, the Parent
Disclosure Schedule or any supplement to the Parent Disclosure Schedule there
are no claims, actions, suits, arbitrations, proceedings, or investigations
pending (or, to our knowledge, overtly threatened in writing) against the Parent
or any of its United States subsidiaries and there are no outstanding United
States court orders, court decrees, or court stipulations to which the Parent or
any of its United States subsidiaries is a party or by which any of their assets
are bound, any of which if adversely determined would (a) materially restrict or
interfere with the Agreement or any transaction contemplated thereby, (b)
materially restrict the present consolidated business properties, operations,
prospects, assets, revenues or condition (financial or otherwise) of the Parent
or any of its United States subsidiaries, or (c) individually or in the
aggregate, have a Parent Material Adverse Effect, or materially impair or
preclude the Parent's or the Acquisition Subsidiary's ability to consummate the
Merger or the transactions contemplated by the Agreement. To our knowledge,
neither the Parent nor any of its subsidiaries is a party to, or expressly bound
by, any judgment, injunction or decree of any United States federal or state
court or United States governmental authority which would restrict or interfere
with the performance by the Parent of its obligations under the Parent
Transaction Documents.
The following paragraph will be in the form of a confirmation in the Opinion
Letter and not a numbered opinion:
We have participated in conferences with [_________] of the Parent, and
other representatives of the Parent, representatives of KPMG Bedrijfsrevisoren,
the independent public accountants for the Parent, and representatives of Loeff
Xxxxxx Xxxxxxx, the parent's Belgian legal counsel, at which conferences we made
inquiries of such representatives of the Parent, and the representatives of the
Parent's independent public accountants and the Parent's Belgian legal counsel,
and discussed the contents of the Registration Statement and the
Prospectus/Proxy Statement (including Parent documents incorporated therein by
reference, if any the "Registration Statement" and the "Prospectus/Proxy
Statement") and related matters and, although we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus/Proxy
Statement, on the basis of the foregoing, and solely with respect to the Parent
and the Acquisition Subsidiary, no facts have come to our attention which cause
us to believe that the Registration Statement as of its effective date under the
Securities Act, and as of [______________], the meeting date of the stockholders
of the Company (the "Meeting Date"), contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus/Proxy Statement, as of its mailing date to the stockholders of the
Company, and as of the Meeting Date, included, any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein in light of the circumstances under which they were made, not
misleading, it being understood that we do not express any opinion or
confirmation with respect to the operating statistics, financial statements,
financial schedules and other financial and statistical data included therein,
or any information concerning or furnished by the Company.
Capitalized terms used herein but not defined have the meanings ascribed to
such terms in the Agreement.
EXHIBIT I
Opinion of Parent's Belgian Counsel
-----------------------------------
It is our opinion that:
1. The Parent is a corporation duly incorporated, existing and in good
standing under the laws of Belgium, with the corporate power and authority to
own or lease its properties and to conduct its business as to our knowledge
presently conducted .
2. The Parent has the corporate power and authority to enter into the
Transaction Documents to which it is a party (the "Parent Transaction
Documents") and to perform its obligations thereunder. The execution and
delivery by the Parent of each of the Parent Transaction Documents have been
duly authorized by all necessary corporate action on the part of the Parent, and
each Parent Transaction Document has been duly executed and delivered by the
Parent. To the extent that the Agreement is governed by Belgium law, it
constitutes the legal, valid and binding obligation of the Parent, enforceable
against the Parent in accordance with its terms.
3. Except as disclosed in the Agreement, the execution and delivery by the
Parent of the Parent Transaction Documents and the consummation by the Parent of
the transactions contemplated thereby will not result in (i) a breach or
violation of any of the terms or provisions of or constitute a default under the
Restated Articles of Incorporation of the Parent, (ii) to our knowledge, a
breach or violation of any provision of any contract or agreement attached (or
incorporated by reference) as an exhibit to the Parent's Annual Report on Form
20-F for the fiscal year ended December 31, 1997 or any subsequent Parent SEC
filings prior to the Effective Date, or (iii) give rise to a right of
termination of any such contract, which breach, violation or right would have a
material adverse affect on the business properties, operations, assets, revenues
or condition (financial or otherwise) of the Parent and its Belgian
subsidiaries, taken as a whole (a "Belgian Material Adverse Effect"). To our
knowledge, neither the Parent nor any Subsidiary is a party to, or expressly
bound by, any judgment, injunction or decree of any court or governmental
authority in Belgium or the European Association of Securities Dealers Automated
Quotation System ("EASDAQ") which would restrict or interfere with the
performance by the Parent of its obligations under the Parent Transaction
Documents and which would have a Belgian Material Adverse Effect.
4. The execution and delivery by the Parent of the Parent Transaction
Documents and the consummation by the Parent of the transactions contemplated
thereby do not violate any provision of Belgian federal, state or local
statutory law or regulation, or the rules and regulation of EASDAQ, which
violation would have a Belgian Material Adverse Effect.
5. All authorizations, consents and approvals of all Belgian federal,
state and local governmental agencies and EASDAQ required in order to permit the
consummation of the transactions contemplated by the Parent Transaction
Documents have been obtained.
6. To our knowledge, except as disclosed in the Agreement, any schedule to
the Agreement or any supplemental schedule to the Agreement, there are no
claims, actions, suits, arbitrations, proceedings, or investigations pending
(or, to our knowledge, overtly threatened in writing) against the Parent or any
of its subsidiaries and there are no outstanding Belgian court orders, court
decrees, or court stipulations to which the Parent or any of its subsidiaries is
a party or by which any of its assets are bound, any of which if adversely
determined are to our knowledge reasonably likely to (a) materially restrict or
interfere with the Parent Transaction Documents or any transaction contemplated
thereby, (b) materially restrict the present consolidated business properties,
operations, prospects, assets, revenues or condition (financial or otherwise) of
the Parent and its subsidiaries on a consolidated basis, (c) individually or in
the aggregate, have a Belgian Material Adverse Effect or materially impair or
preclude the Parent's ability to consummate the transactions contemplated by the
Parent Transaction Documents. To our knowledge, neither the Parent
nor any Subsidiary is a party to, or expressly bound by, any judgment,
injunction or decree of any court or governmental authority in Belgium that
would restrict or interfere with the performance by the Parent of its
obligations under the Parent Transaction Documents or that would have a Belgian
Material Adverse Effect.
7. All of the Merger Shares will be, when issued in accordance with the
Agreement, duly authorized, validly issued, fully paid and nonassessable, and no
preemptive rights of, or rights of refusal in favor of, any stockholder of
Parent exists with respect to the Merger Shares pursuant to the Restated
Articles of Incorporation of the Parent that have not been waived, and, to our
knowledge, there are no contractual preemptive rights that have not been waived,
or rights of first refusal or rights of co-sale that exist with respect to the
issuance and sale of the Merger Shares pursuant to the terms of the Agreement.
The Merger Shares will, when issued, be freely tradable without restriction
under applicable Belgian law.
Capitalized terms used herein but to defined have the meanings ascribed to
such terms in the Agreement.
