EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HEWLETT-PACKARD COMPANY,
BETA ACQUISITION CORPORATION
AND
BLUESTONE SOFTWARE, INC.
DATED AS OF
OCTOBER 24, 2000
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TABLE OF CONTENTS
ARTICLE I
MERGER.................................................... 1
Section 1.1 THE MERGER.................................... 1
Section 1.2 EFFECTIVE TIME................................ 2
Section 1.3 CLOSING....................................... 2
Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION............................................. 2
ARTICLE II
STOCKHOLDER APPROVAL...................................... 2
Section 2.1 STOCKHOLDERS' MEETING......................... 2
Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT............................................... 2
Section 2.3 NO FALSE OR MISLEADING STATEMENTS............. 3
ARTICLE III
CONVERSION OF SHARES...................................... 3
Section 3.1 CONVERSION OF SHARES.......................... 3
Section 3.2 SURRENDER OF CERTIFICATES..................... 4
Section 3.3 NO FRACTIONAL SHARES.......................... 4
Section 3.4 NO DIVIDENDS.................................. 5
Section 3.5 RETURN TO PARENT.............................. 5
Section 3.6 STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN... 5
Section 3.7 EMPLOYEE STOCK PURCHASE PLAN.................. 6
Section 3.8 STOCK TRANSFER BOOKS.......................... 6
Section 3.9 CERTAIN ADJUSTMENTS........................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 7
Section 4.1 ORGANIZATION.................................. 7
Section 4.2 CAPITALIZATION................................ 7
Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF
AGREEMENT; COMPANY ACTION............................... 8
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS......... 8
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS.......... 9
Section 4.6 ABSENCE OF CERTAIN CHANGES.................... 9
Section 4.7 NO UNDISCLOSED LIABILITIES.................... 9
Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS..... 10
Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA................. 10
Section 4.10 LITIGATION; COMPLIANCE WITH LAW.............. 12
Section 4.11 NO DEFAULT................................... 12
Section 4.12 TAXES........................................ 12
Section 4.13 CONTRACTS.................................... 14
Section 4.14 ASSETS; REAL PROPERTY........................ 14
Section 4.15 ENVIRONMENTAL MATTERS........................ 14
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Section 4.16 TRANSACTIONS WITH AFFILIATES................. 15
Section 4.17 OPINION OF FINANCIAL ADVISOR; BROKERS........ 15
Section 4.18 INTELLECTUAL PROPERTY........................ 15
Section 4.19 REORGANIZATION............................... 17
Section 4.20 INSURANCE.................................... 17
Section 4.21 ACCOUNTS RECEIVABLE.......................... 18
Section 4.22 SUPPLIERS AND CUSTOMERS...................... 18
Section 4.23 LABOR MATTERS................................ 18
Section 4.24 FULL DISCLOSURE.............................. 19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......... 20
Section 5.1 ORGANIZATION.................................. 20
Section 5.2 CAPITALIZATION................................ 20
Section 5.3 AUTHORIZATION; VALIDITY OF AGREEMENT;
NECESSARY ACTION........................................ 20
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS......... 20
Section 5.5 INFORMATION IN PROXY STATEMENT/PROSPECTUS..... 21
Section 5.6 SEC REPORTS AND FINANCIAL STATEMENTS.......... 21
Section 5.7 ABSENCE OF CERTAIN CHANGES.................... 21
ARTICLE VI
COVENANTS................................................. 22
Section 6.1 INTERIM OPERATIONS OF THE COMPANY............. 22
Section 6.2 INTERIM OPERATIONS OF PARENT.................. 23
Section 6.3 ACCESS TO INFORMATION......................... 24
Section 6.4 HSR ACT FILINGS............................... 24
Section 6.5 OTHER CONSENTS AND APPROVALS.................. 25
Section 6.6 NO SOLICITATION............................... 25
Section 6.7 ADDITIONAL AGREEMENTS......................... 27
Section 6.8 PUBLICITY..................................... 27
Section 6.9 NOTIFICATION OF CERTAIN MATTERS............... 27
Section 6.10 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION......................................... 27
Section 6.11 COOPERATION.................................. 28
Section 6.12 CONSENTS OF ACCOUNTANTS...................... 28
Section 6.13 SUBSEQUENT FINANCIAL STATEMENTS.............. 28
Section 6.14 TAX TREATMENT................................ 28
ARTICLE VII
CONDITIONS................................................ 29
Section 7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY... 29
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND
SUB..................................................... 29
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY................................................. 30
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ARTICLE VIII
TERMINATION............................................... 31
Section 8.1 TERMINATION................................... 31
Section 8.2 EFFECT OF TERMINATION......................... 32
ARTICLE IX
MISCELLANEOUS............................................. 32
Section 9.1 FEES AND EXPENSES............................. 32
Section 9.2 AMENDMENT AND MODIFICATION.................... 32
Section 9.3 NONSURVIVAL OF REPRESENTATIONS AND
WARRANTIES.............................................. 32
Section 9.4 NOTICES....................................... 32
Section 9.5 INTERPRETATION................................ 33
Section 9.6 COUNTERPARTS.................................. 34
Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY
BENEFICIARIES; RIGHTS OF OWNERSHIP...................... 34
Section 9.8 SEVERABILITY.................................. 34
Section 9.9 GOVERNING LAW................................. 34
Section 9.10 ASSIGNMENT................................... 34
EXHIBITS
Exhibit A Form of Option Agreement
Exhibit B Form of Voting Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of October 24,
2000, by and among Hewlett-Packard Company, a Delaware corporation ("PARENT"),
Beta Acquisition Corporation, a Delaware corporation and a direct wholly owned
subsidiary of Parent ("SUB"), and Bluestone Software, Inc., a Delaware
corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent and Sub have approved, and deem
it advisable and in the best interests of their respective stockholders to
consummate, a strategic business combination between the Company and Parent upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company, having carefully considered
the long-term prospects and interests of the Company and its stockholders and
having determined that such strategic business combination is advisable, has
approved the transactions contemplated by this Agreement and the Option
Agreement (as defined below) in accordance with the provisions of the Delaware
General Corporation Law (the "DGCL") and has resolved to recommend to the
stockholders of the Company the approval and adoption of this Agreement and the
Merger (as defined below) and the consummation of the transactions contemplated
hereby and thereby upon the terms and subject to the conditions set forth
herein;
WHEREAS, as a condition and inducement to Parent and Sub entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, (i) Parent and the Company are
entering into an Option Agreement, in the form of EXHIBIT A hereto (the "OPTION
AGREEMENT"), pursuant to which, among other things, the Company has granted Sub
an option to purchase certain newly-issued Shares (as defined in Section 3.1
hereof), subject to certain conditions; (ii) Parent and certain employees of the
Company identified in Section 7.2(d) of the Disclosure Schedule (as defined in
Section 3.6(a) hereof) are entering into offer letters, the effectiveness of
which offer letters is conditioned upon the consummation of the transactions
contemplated hereby (the "OFFER LETTERS"); and (iii) Parent and certain
stockholders of the Company are entering into Voting Agreements, each in the
form of EXHIBIT B hereto (the "VOTING AGREEMENTS"), pursuant to which, among
other things, such stockholders are agreeing to vote in favor of approval and
adoption of this Agreement and the transactions contemplated hereby and against
approval of any competing transaction;
WHEREAS, the Board of Directors of the Company has approved the transactions
contemplated by this Agreement and the Option Agreement in accordance with the
provisions of Section 251 of the DGCL; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "CODE"), and this Agreement is
intended to be and is adopted as a plan of reorganization within the meaning of
Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Option Agreement, the parties hereto agree as follows:
ARTICLE I
MERGER
Section 1.1 THE MERGER. Subject to the terms and conditions of this
Agreement and the provisions of the DGCL, at the Effective Time (as defined in
Section 1.2 hereof), the Company and Sub shall consummate a merger (the
"MERGER") pursuant to which: (a) Sub shall be merged with and into the Company
and the separate corporate existence of Sub shall thereupon cease; (b) the
Company
shall be the successor or surviving corporation in the Merger and shall continue
to be governed by the laws of the State of Delaware; and (c) the separate
corporate existence of the Company, with all its rights, privileges, immunities,
powers and franchises, shall continue unaffected by the Merger. Pursuant to the
Merger, (x) the certificate of incorporation of Sub, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation (the
"CERTIFICATE OF INCORPORATION") of the Surviving Corporation (as defined below)
until thereafter amended as provided by law and the Certificate of Incorporation
and (y) the bylaws of Sub, as in effect immediately prior to the Effective Time,
shall be the bylaws (the "BYLAWS") of the Surviving Corporation until thereafter
amended as provided by law, the Certificate of Incorporation and the Bylaws. The
corporation surviving the Merger is sometimes hereinafter referred to as the
"SURVIVING CORPORATION". The Merger shall have the effects set forth in
Section 259 and in the other relevant provisions of the DGCL.
Section 1.2 EFFECTIVE TIME. Parent, Sub and the Company will cause a
certificate of merger (the "CERTIFICATE OF MERGER") to be executed and filed on
the date of the Closing (as defined in Section 1.3 hereof) (or on such other
date as Parent and the Company may agree) with the Secretary of State of the
State of Delaware (the "SECRETARY OF STATE") as provided by the DGCL. The Merger
shall become effective on the date on which the Certificate of Merger has been
duly filed with the Secretary of State at such time specified therein or such
other later date as the Company and Sub shall agree and specify in the
Certificate of Merger, and such time is hereinafter referred to as the
"EFFECTIVE TIME".
Section 1.3 CLOSING. The closing of the Merger (the "CLOSING") will take
place at 8:00 a.m., Palo Alto, California time, on a date to be specified by
Sub, which may be on but shall be no later than the first business day after
satisfaction or waiver of all of the conditions set forth in Article VII hereof
(the "CLOSING DATE"), at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx
LLP, 000 Xxxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another date or place
is agreed to in writing by the parties hereto.
Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of Sub at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and Bylaws.
ARTICLE II
STOCKHOLDER APPROVAL
Section 2.1 STOCKHOLDERS' MEETING. In order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance with
applicable law, duly call, give notice of, convene and hold a special meeting of
its stockholders (the "SPECIAL MEETING"), as soon as practicable after the
Registration Statement (as defined in Section 2.2 hereof) is declared effective,
for the purpose of considering and taking action upon this Agreement and the
transactions contemplated hereby. Subject to Section 6.6 hereof, the Company
shall include in the Proxy Statement/Prospectus (as defined in Section 2.2
hereof) the recommendation of the Board of Directors of the Company that
stockholders of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement.
Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. In
connection with the solicitation of approval of this Agreement and the Merger by
the Company's stockholders, the Company shall prepare and file with the
Securities and Exchange Commission (the "SEC") a preliminary proxy statement
relating to the Merger and this Agreement and use its best efforts to obtain and
furnish the information required to be included by the SEC in the Proxy
Statement/Prospectus (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause a definitive proxy statement to be mailed
to its stockholders. Such definitive proxy statement shall also constitute a
prospectus of Parent with
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respect to the common stock, par value $.01 per share, of Parent ("PARENT COMMON
STOCK") to be issued in the Merger (such proxy statement and prospectus are
hereinafter referred to as the "PROXY STATEMENT/PROSPECTUS") and shall be filed
by Parent with the SEC as part of a registration statement on Form S-4 (the
"REGISTRATION STATEMENT") filed by Parent with the SEC for the purpose of
registering such shares of Parent Common Stock under the Securities Act of 1933,
as amended (the "SECURITIES ACT"). The Company and Parent shall cooperate to
file promptly the Registration Statement and shall use their commercially
reasonable efforts to have the Registration Statement declared effective by the
SEC. The Company shall use its commercially reasonable efforts to obtain the
necessary approvals of the Merger and this Agreement by its stockholders.
Section 2.3 NO FALSE OR MISLEADING STATEMENTS. The information provided
and to be provided by each of Parent, Sub and the Company specifically for use
in the Registration Statement shall not, with respect to the information
supplied by such party, in the case of the Registration Statement, on the date
the Registration Statement becomes effective and, in the case of the Proxy
Statement/Prospectus, on the date upon which the Proxy Statement/Prospectus is
mailed to the stockholders of the Company or on the date upon which approval of
the Merger by the stockholders of the Company is obtained, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of Parent,
Sub and the Company agrees to correct promptly any such information provided by
it that shall have become false or misleading in any material respect and to
take all steps necessary to file with the SEC and have declared effective or
cleared by the SEC any amendment or supplement to the Registration Statement or
the Proxy Statement/Prospectus so as to correct the same and to cause the Proxy
Statement/Prospectus as so corrected to be disseminated to the Company's
stockholders to the extent required by applicable law. The Registration
Statement and the Proxy Statement/Prospectus shall comply as to form in all
material respects with the provisions of the Securities Act, the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and other applicable law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 CONVERSION OF SHARES. (a) Each share of common stock, $.001
par value per share, of the Company (the "COMPANY COMMON STOCK" or the "SHARES")
issued and outstanding immediately prior to the Effective Time (other than
Shares to be cancelled pursuant to Section 3.1(c) hereof) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive .2433 (the "EXCHANGE RATIO"), of a fully
paid and nonassessable share of Parent Common Stock (the "MERGER
CONSIDERATION").
(b) Each share of Common Stock, par value $.001 per share, of Sub (the
"SUB COMMON STOCK"), issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of Parent
or Sub, be converted into one fully paid and nonassessable share of common
stock, $.001 par value per share, of the Surviving Corporation.
(c) At the Effective Time, all shares of Company Common Stock that are
owned by the Company as treasury stock and any shares of Company Common Stock
owned by Parent, Sub or any other wholly owned Subsidiary (as defined in
Section 4.1 hereof) of Parent shall be cancelled and retired and shall cease to
exist and no Parent Common Stock or other consideration shall be delivered in
exchange therefor.
(d) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"CERTIFICATES") shall cease to have any rights as stockholders of the Company,
except the right to receive the Merger Consideration for each Share represented
by such Certificates and held by such holders.
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Section 3.2 SURRENDER OF CERTIFICATES. At or promptly after the Effective
Time, Parent shall make available to a bank or trust company reasonably
acceptable to the Company (the "EXCHANGE AGENT"), in trust for the benefit of
the holders of Shares for exchange in accordance with this Article III,
certificates representing the aggregate number of shares of Parent Common Stock
issuable pursuant to Section 3.1 hereof. Promptly after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate, a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Parent Common Stock and
cash in lieu of fractional shares pursuant to Section 3.3 hereof, if applicable.
Upon surrender of a Certificate to the Exchange Agent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be cancelled. Until surrendered as contemplated by this Article III,
from and after the Effective Time each Certificate shall be deemed to represent
only the right to receive the Merger Consideration for each Share formerly
represented by such Certificate, and shall not evidence any interest in, or any
right to exercise the rights of a stockholder of Parent. If a certificate
representing Parent Common Stock is to be issued or a cash payment in lieu of
fractional share interests pursuant to Section 3.3 hereof is to be made to a
person other than the one in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition to such issuance or payment that
such Certificate be properly endorsed (or accompanied by an appropriate
instrument of transfer) and accompanied by evidence that any applicable stock
transfer taxes have been paid or provided for as specified in such letter of
transmittal.
Section 3.3 NO FRACTIONAL SHARES.
(a) No certificate or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of Parent.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (x) the number of full shares of
Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 3.2 hereof over (y) the aggregate number of full shares of Parent Common
Stock to be distributed to holders of Shares pursuant to Section 3.1 hereof
(such excess being herein called the "EXCESS SHARES"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for the holders of
Shares, shall sell the Excess Shares at then prevailing prices on the New York
Stock Exchange, Inc. (the "NYSE"), all in the manner provided in paragraph (c)
of this Section 3.3.
(c) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. Until the net proceeds of such
sale or sales have been distributed to the holders of Shares, the Exchange Agent
will hold such proceeds in trust for the holders of Shares (the "SHARES TRUST").
All commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of the Excess Shares shall be paid out of proceeds
from the sale of such Excess Shares. The Exchange Agent shall determine the
portion of the Shares Trust to which each holder of Shares shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Shares Trust by a fraction the numerator of which is the amount of the
fractional share interest to which such holder of Shares is entitled and the
denominator of which is the aggregate amount of fractional share interests to
which all holders of Shares are entitled.
(d) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Shares in lieu of any fractional share
interests, the Exchange Agent shall make available such amount to such holders
of Shares.
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Section 3.4 NO DIVIDENDS. No dividends or other distributions declared or
made after the Effective Time with respect to shares of Parent Common Stock with
a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the Parent Common Stock represented
thereby until the holder of such Certificate shall surrender such Certificate.
Dividends or other distributions with a record date after the Effective Time
payable in respect of shares of Parent Common Stock held by the Exchange Agent
shall be held in trust for the benefit of such holders of unsurrendered
Certificates. Following surrender of any previously unsurrendered Certificate,
there shall be paid to the holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock and (ii) at the date of payment of any
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender, the amount of
such dividends or other distributions payable with respect to such whole shares
of Parent Common Stock.
Section 3.5 RETURN TO PARENT. Any shares of Parent Common Stock made
available to the Exchange Agent and any portion of the Shares Trust not
exchanged for Certificates within six months after the Effective Time and any
dividends and distributions held by the Exchange Agent for payment or delivery
to the holders of unsurrendered Certificates representing Shares and unclaimed
at the end of such six-month period shall be redelivered or repaid by the
Exchange Agent to Parent, after which time any holder of a Certificate who has
not theretofore delivered or surrendered such Certificate to the Exchange Agent,
subject to applicable law, shall look as a general creditor only to Parent for
payment of the Merger Consideration, cash in lieu of fractional share interests
to be paid pursuant to Section 3.3 hereof, and any such dividends or
distributions. Notwithstanding the foregoing, none of Parent, the Exchange
Agent, the Surviving Corporation or any other party shall be liable to a holder
of Shares for any Merger Consideration, cash in lieu of fractional share
interests to be paid pursuant to Section 3.3 hereof or dividends or
distributions delivered to a public official pursuant to applicable escheat
laws.
Section 3.6 STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN.
(a) Unless Parent, Sub and the Company agree otherwise, Parent, Sub and
the Company shall take all actions necessary to provide that effective as of the
Effective Time, each outstanding option to purchase shares of Company Common
Stock (each, a "COMPANY STOCK OPTION," and collectively, the "COMPANY STOCK
OPTIONS") granted under the Company's 1996 Incentive and Non-Qualified Stock
Option Plan, or any other stock option plan, program or agreement to which the
Company or any of its subsidiaries is a party (collectively, the "COMPANY OPTION
PLANS") that is outstanding immediately prior to the Effective Time, whether or
not then exercisable, shall be cancelled as of the Effective Time. As of the
Effective Time, each such Company Stock Option shall cease to represent a right
to acquire shares of Company Common Stock and shall be converted automatically
into an option to purchase shares of Parent Common Stock under the HP 2000 Stock
Plan (collectively, the "NEW PARENT STOCK OPTIONS") in an amount, at an exercise
price and subject to such terms and conditions determined as provided below.
Each Company Stock Option assumed by Parent shall be subject to, and exercisable
upon, the same terms and conditions as under the applicable Company Option Plan
and the applicable option agreement issued thereunder, except that (A) each
assumed Company Stock Option shall be exercisable for, and represent the right
to acquire, that number of shares of Parent Common Stock (rounded down to the
nearest whole share) equal to (i) the number of shares of Company Common Stock
subject to such Company Stock Option immediately prior to the Effective Time
multiplied by (ii) the Exchange Ratio; and (B) the exercise price per share of
Parent Common Stock subject to each assumed Company Stock Option shall be an
amount equal to (i) the exercise price per share of Company Common Stock subject
to such Company Stock Option in effect immediately prior to the Effective Time
divided by (ii) the Exchange Ratio (rounded up to the nearest
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whole cent). A listing of all outstanding Company Options as of October 24, 2000
is set forth in Section 3.6 of the disclosure schedule delivered by the Company
to Parent (the "DISCLOSURE SCHEDULE") showing the per share exercise price and
the date upon which each Company Option expires.
(b) If and to the extent necessary or required by the terms of the
Company Option Plans or pursuant to the terms of any Company Stock Option
granted thereunder, each of Parent, Sub and the Company shall use its
commercially reasonable efforts to obtain the consent of each holder of
outstanding Company Stock Options to the foregoing treatment of such Company
Stock Options.
(c) The Company, Parent and Sub agree that each of the Company Option
Plans and agreements shall be amended, to the extent necessary, to reflect the
transactions contemplated by this Agreement.
(d) Parent, Sub and the Company shall take all such steps as may be
required to cause the transactions contemplated by this Section 3.6 and any
other dispositions of equity securities of the Company (including derivative
securities) or acquisitions of Parent equity securities (including derivative
securities) in connection with this Agreement by each individual who (i) is a
director or officer of Company or (ii) at the Effective Time, will become a
director or officer of Parent, to be exempt under Rule 16b-3 promulgated under
the Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP.
(e) Parent shall file with the SEC as soon as practicable following the
Effective Time a registration statement on Form S-8 under the Securities Act
covering, to the extent applicable, the shares of Parent Common Stock to be
issued upon the exercise of Company Stock Options assumed by Parent.
Section 3.7 EMPLOYEE STOCK PURCHASE PLAN. As of the earlier of
December 31, 2000 and the Effective Time (the "TERMINATION DATE"), the Company's
2000 Employee Stock Purchase Plan shall be terminated. If the Termination Date
does not coincide with the last day of the offering period then underway, then,
pursuant to Section 15 of such plan, payroll deductions (to the extent not yet
applied to the purchase of shares under such plan) shall be distributed to the
participants. Prior to the Termination Date, the Company shall take all actions
(including, if appropriate, amending the terms of such plan) that are necessary
to give effect to the transactions contemplated by this Section 3.7. In respect
of the foregoing, the Company shall cause written notice to be given to
participants in accordance with the terms of the plan and no further offering
period shall be created thereunder.
Section 3.8 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Shares shall
thereafter be made. If, after the Effective Time, any Certificate is presented
to the Surviving Corporation, such Certificate shall be cancelled and exchanged
for the Merger Consideration.
Section 3.9 CERTAIN ADJUSTMENTS. If between the date hereof and the
Effective Time, the outstanding shares of Parent Common Stock shall be changed
into a different number of shares by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange of shares, or
any dividend payable in stock or other securities shall be declared thereon with
a record date within such period, the Exchange Ratio shall be adjusted
accordingly to provide to the holders of Company Common Stock the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, stock split, split-up, combination, exchange or dividend. By
way of example, upon the two-for-one stock split of Parent Common Stock
effective October 27, 2000, the Exchange Ratio will automatically be adjusted
from .2433 to .4866.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 ORGANIZATION. Each of the Company and its Subsidiaries (as
defined below) is a corporation, partnership or other entity duly organized,
validly existing, duly qualified or licensed to do business and in good standing
under the laws of the jurisdiction of its incorporation or organization and in
each jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on the Company and its Subsidiaries, taken as a whole. As used in
this Agreement, the word "SUBSIDIARY" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding such partnerships where such party or any Subsidiary of such party
does not have a majority of the voting interest in such partnership) or (ii) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, any reference to any event, change or
effect having a "MATERIAL ADVERSE EFFECT" on or with respect to any entity (or
group of entities taken as a whole) means such event, change, occurrence or
circumstance, individually or in the aggregate with such other events, changes,
occurrences or circumstances, which is materially adverse to the business,
operations, prospects, properties, financial condition or results of operations
of such entity (or, if used with respect thereto, of such group of entities
taken as a whole); provided, that none of the following shall be deemed,
individually or in the aggregate, in and of itself or by themselves, to
constitute a material adverse effect on the Company: (i) any decrease in
revenues of the Company, (ii) any decrease in or cancellation of customer orders
or (iii) any suit, claim, action or proceeding, in each case directly
attributable to the public announcement of the transactions contemplated by this
Agreement. Section 4.1 of the Disclosure Schedule sets forth a complete list of
the names, jurisdiction of incorporation or other formation and capitalization
of each of the Company's Subsidiaries.
Section 4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 54,900,000
shares of Company Common Stock. As of the date hereof: (i) 20,812,792 shares of
Company Common Stock were issued and outstanding, of which no shares were held
by the Company's 2000 Employee Stock Purchase Plan; (ii) 6,906,250 shares of
Company Common Stock were reserved for issuance pursuant to the Company Option
Plan and all other employee benefit plans of the Company; and (iii) 201,132
shares of Company Common Stock were reserved for issuance upon the exercise of
warrants. All of the issued and outstanding shares of Company Common Stock are
validly issued, fully paid and nonassessable.
(b) Except as disclosed in this Section 4.2 or as set forth in Sections
3.6 or 4.2(b) of the Disclosure Schedule other than pursuant to the Option
Agreement: (i) there is no outstanding right, subscription, warrant, call,
option or other agreement or arrangement of any kind (collectively, "RIGHTS") to
purchase or otherwise to receive from the Company or any of its Subsidiaries any
of the outstanding authorized but unissued or treasury shares of the capital
stock or any other security of the Company or any of its Subsidiaries;
(ii) there is no outstanding security of any kind convertible into or
exchangeable for such capital stock; and (iii) there is no voting trust or other
agreement or understanding to which the Company or any of its Subsidiaries is a
party or is bound with respect to the voting of the capital stock of the Company
or any of its Subsidiaries.
7
(c) Since April 19, 2000, the Company has not in any manner modified
the terms and conditions applicable to any of the Company Options, whether set
forth in the Company Option Plan, in a stock option grant, award or other
agreement, or otherwise.
Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY
ACTION. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and the Option Agreement and, subject to obtaining any
necessary approval of its stockholders as contemplated by Section 2.1 hereof
with respect to the Merger, to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and the Option Agreement, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by its Board of Directors and, except for obtaining any approval of
its stockholders as contemplated by Section 2.1 hereof with respect to the
Merger, no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
Option Agreement and the consummation by it of the transactions contemplated
hereby and thereby. Each of this Agreement and the Option Agreement have been
duly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding obligation of the other parties hereto,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly approved
and taken all corporate action required to be taken by the Board of Directors
for the consummation of the transactions contemplated by this Agreement and the
Option Agreement, including, but not limited to, all actions necessary to render
the provisions of Section 203 of the DGCL inapplicable to such transactions. The
affirmative vote of the holders of a majority of the Shares is the only vote of
the holders of any class or series of Company capital stock necessary to approve
the Merger. To the best of the Company's knowledge, no other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Option Agreement or any of the transactions
contemplated by this Agreement or the Option Agreement.
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as disclosed in
Section 4.4 of the Disclosure Schedule and for filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and any comparable premerger notification laws, rules
or regulations of any applicable foreign jurisdiction, and the Exchange Act, the
approval of this Agreement and the Merger by the Company's stockholders and the
filing of the Certificate of Merger as required by the DGCL, neither the
execution, delivery or performance of this Agreement or the Option Agreement by
the Company nor the consummation by the Company of the transactions contemplated
hereby or thereby nor compliance by the Company with any of the provisions
hereof or thereof will: (i) conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws or similar
organizational documents of the Company or of any of its Subsidiaries;
(ii) require any filing with, or permit, authorization, consent or approval of,
any court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "GOVERNMENTAL ENTITY");
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
(a "COMPANY AGREEMENT"); or
8
(iv) violates any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any of its Subsidiaries or any of their properties or
assets; except in the case of clause (ii), (iii) or (iv) where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings, or where such violations, breaches or defaults would not, individually
or in the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, and will not materially impair the ability of
the Company to consummate the transactions contemplated hereby or by the Option
Agreement.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since September 23, 1999 under
the Exchange Act and the Securities Act (as such documents have been amended
since the time of their filing, collectively, the "COMPANY SEC DOCUMENTS"). As
of their respective dates or, if amended, as of the date of the last such
amendment, the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and
(b) complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Each of the consolidated financial
statements included in the Company SEC Documents has been prepared from, and is
in accordance with, the books and records of the Company and its consolidated
Subsidiaries, complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein.
Section 4.6 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in
the Company SEC Documents filed prior to the date of this Agreement or in
Section 4.6 of the Disclosure Schedule, since June 30, 2000, the Company and its
Subsidiaries have conducted their respective businesses and operations
consistent with past practice only in the ordinary and usual course. From
June 30, 2000 through the date of this Agreement, there has not occurred:
(i) any event, change, or effect (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries, taken as a whole; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries; or (iii) any change by the Company or any
of its Subsidiaries in accounting principles or methods, except insofar as may
be required by a change in GAAP. Except as set forth in Sections 3.6 or 4.6 of
the Disclosure Schedule, since June 30, 2000 neither the Company nor any of its
Subsidiaries has taken any of the actions prohibited by Section 6.1 hereof.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except (a) to the extent disclosed
in the Company SEC Documents filed prior to the date of this Agreement or in
Section 4.7 of the Disclosure Schedule and (b) for liabilities and obligations
incurred in the ordinary course of business and consistent with past practice,
since June 30, 2000, neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that have, or would be reasonably likely to have, a
material adverse effect on the Company and its Subsidiaries taken as a whole or
would be required to be reflected or reserved against on a consolidated balance
sheet of the Company and its Subsidiaries (including the notes thereto) prepared
in accordance with GAAP as
9
applied in preparing the consolidated balance sheet of the Company and its
Subsidiaries as of June 30, 2000. Section 4.7 of the Disclosure Schedule sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing indebtedness of the Company and its Subsidiaries which
will accelerate or become due or result in a right of redemption or repurchase
on the part of the holder of such indebtedness (with or without due notice or
lapse of time) as a result of this Agreement, the Option Agreement, the Merger
or the other transactions contemplated hereby or thereby.
Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) will not,
at the date mailed to Company stockholders and at the time of the Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect to
statements made therein based on information supplied by Parent or Sub in
writing for inclusion in the Proxy Statement/Prospectus. None of the information
supplied by the Company for inclusion or incorporation by reference in the
Registration Statement will, at the date it becomes effective and at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement/Prospectus will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 4.9 of the Disclosure Schedule contains a true and complete
list of each employment, bonus, deferred compensation, incentive compensation,
stock purchase, stock option, stock appreciation right or other equity-based
incentive, severance or termination pay, hospitalization or other medical, life,
disability or other insurance, supplemental unemployment benefits,
profit-sharing, savings, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by the Company or by any trade or business, whether or not
incorporated (an "ERISA AFFILIATE"), that together with the Company would be
deemed a "single employer" within the meaning of Section 4001(b)(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the
benefit of any current or former employee or director of the Company or any
ERISA Affiliate (the "PLANS").
(b) With respect to each Plan, the Company has heretofore delivered to
Parent true and complete copies of each of the following documents, as
applicable: (i) a copy of the Plan (including all amendments thereto) or a
written description of any Plan that is not otherwise in writing; (ii) if
required under ERISA, a copy of the annual report and actuarial valuation with
respect to such Plan for each of the last three plan years; (iii) a copy of the
most recent Summary Plan Description required under ERISA with respect thereto,
together with all Summaries of Material Modification issued with respect to such
Summary Plan Description, and a copy of all other material employee
communications relating to the Plan; (iv) if the Plan is funded through a trust
or any other funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
(v) all contracts relating to the Plans with respect to which the Company or any
ERISA Affiliate may have any liability, including, without limitation, insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (vi) the most recent determination
letter received from the Internal Revenue Service with respect to each Plan
intended to qualify under Section 401(a) of the Code or trust intended to
qualify under Section 501(c)(9) of the Code.
(c) Neither the Company nor any ERISA Affiliate currently or within the
six year period immediately preceding the date hereof, has maintained,
sponsored, contributed to or otherwise been
10
obligated or required to make contributions to any plan subject to Title IV of
ERISA, including without limitation any "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA or plan described in Section 4063(a) of
ERISA. Neither the Company nor any ERISA Affiliate has at any time incurred any
liability under Title IV of ERISA in respect of a plan termination or a
withdrawal from a multiemployer plan.
(d) Neither the Company nor any ERISA Affiliate, nor any Plan, nor any
trust created thereunder, nor any trustee or administrator thereof has engaged
in a transaction in connection with which the Company or any ERISA Affiliate,
any Plan, any such trust, or any trustee or administrator thereof, or any party
dealing with any Plan or any such trust could be subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material
tax imposed pursuant to Section 4975 or 4976 of the Code. Full payment has been
made, or will be made in accordance with Section 404(a)(6) of the Code, of all
amounts which the Company or any ERISA Affiliate is required to pay under the
terms of each of the Plans, and all such amounts properly accrued through the
Closing Date with respect to the current plan year thereof will be paid by the
Company on or prior to the Closing Date or have been properly accrued for in the
financial statements of the Company.
(e) Each Plan has been operated and administered in accordance with its
terms and in all material respects in accordance with applicable law, including
but not limited to ERISA and the Code. Each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code
and no circumstances exist which may reasonably affect such qualified status.
The Company has timely applied for and received a currently effective
determination letter from the Internal Revenue Service with respect to each such
Plan.
(f) No amounts payable under the Plans or any other agreement or
arrangement with respect to which the Company may have any liability could give
rise to the payment of any amount that would fail to be deductible for federal
income tax purposes by virtue of Section 162(m) or 280G of the Code.
(g) No Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees, directors or consultants of the Company or any ERISA Affiliate beyond
their retirement or other termination of service (other than coverage mandated
by applicable law).
(h) With respect to each Plan that is funded wholly or partially
through an insurance policy, there will be no liability of the Company or any
ERISA Affiliate, as of the Closing Date, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
(i) Except as set forth in Sections 3.6 or 4.9 of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee, officer, director, agent or
consultant of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement or (ii) accelerate the time of payment or vesting, or increase the
amount of or otherwise enhance any compensation or other benefit (whether under
any Plan or otherwise) to any such employee, officer, director, agent or
consultant.
(j) There are no pending, threatened or, to the knowledge of the
Company, anticipated claims by or on behalf of any Plan, by any employee or
beneficiary under any Plan, or otherwise involving the operation or
administration of any such Plan (other than routine claims for benefits).
11
Section 4.10 LITIGATION; COMPLIANCE WITH LAW.
(a) Except to the extent disclosed in the Company SEC Documents filed
prior to the date of this Agreement or in Section 4.10 of the Disclosure
Schedule, there is no suit, claim, action, proceeding or investigation pending
or, to the best knowledge of the Company, threatened against or affecting, the
Company or any of its Subsidiaries which, individually or in the aggregate, is
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or materially
impair the ability of the Company to consummate the Merger or the other
transactions contemplated hereby or by the Option Agreement.
(b) The Company and its Subsidiaries have complied in a timely manner
and in all material respects, with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any court
or governmental entity relating to any of the property owned, leased or used by
them, or applicable to their business, including, but not limited to, (A) the
Foreign Corrupt Practices Act of 1977 and any other laws regarding use of funds
for political activity or commercial bribery and (B) except as set forth in
Section 4.23 of the Disclosure Schedule, laws relating to equal employment
opportunity, discrimination, occupational safety and health, environmental,
interstate commerce and antitrust.
Section 4.11 NO DEFAULT. The business of the Company and each of its
Subsidiaries has not been and is not being conducted in default or violation of
any term, condition or provision of: (i) their respective bylaws or similar
organizational documents; (ii) any Company Agreement; or (iii) any federal,
state, local or foreign law, statute, regulation, rule, ordinance, judgment,
decree, order, writ, injunction, concession, grant, franchise, permit or license
or other governmental authorization or approval applicable to the Company or any
of its Subsidiaries; excluding from the foregoing clauses (ii) and (iii),
defaults or violations that would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
or materially impair the ability of the Company to consummate the Merger or the
other transactions contemplated hereby or by the Option Agreement. As of the
date of this Agreement, no investigation or review by any Governmental Entity or
other entity with respect to the Company or any of its Subsidiaries is pending
or, to the best knowledge of the Company, threatened, nor has any Governmental
Entity or other entity indicated in writing an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, in the future will not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
Section 4.12 TAXES.
(a) Except as set forth in Section 4.12 of the Disclosure Schedule:
(i) each of the Company and its Subsidiaries, including any
predecessors thereof, has (A) duly and timely filed (or there have been filed on
its behalf) with the appropriate governmental authorities all material Tax
Returns required to be filed by it on or prior to the date hereof, and such Tax
Returns are true, correct and complete in all material respects, and (B) duly
paid in full or made provision in accordance with GAAP (or there has been paid
or provision has been made on its behalf) for the payment of all material Taxes
for all periods ending through the date hereof;
(ii) the Company and its Subsidiaries, including any predecessors
thereof, have complied in all material respects with all applicable laws, rules
and regulations relating to the payment and withholding of Taxes;
(iii) there are no material liens for Taxes upon any property or
assets of the Company or any Subsidiary thereof, except for liens for Taxes not
yet due and payable;
(iv) the unpaid Taxes of the Company and its Subsidiaries (A) did
not, as of the most recent financial statements of the Company and its
Subsidiaries, exceed to any material extent the
12
reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of such financial statements (rather than in any notes thereto), and
(B) do not exceed that reserve as adjusted for the passage of time since the
date of such financial statements in accordance with the past custom and
practice of the Company and its Subsidiaries in filing their Tax Returns;
(v) there are no pending examinations, audits, actions,
proceedings, investigations, legal proceedings, disputes or claims with respect
to Taxes of the Company or any of its Subsidiaries, including any predecessors
thereof ("AUDITS"), and neither the Company nor any of its Subsidiaries has
received any written notice of any such Audits;
(vi) no issue has been raised in any Audit which, by application of
similar principles, could be expected to result in the proposal or assertion of
a material Tax deficiency for any other year not so examined;
(vii) the federal income Tax Returns of the Company and each of its
Subsidiaries, including any predecessors thereof, have been examined by the
applicable taxing authorities (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have expired) for all
periods through and including December 31, 1996, and no material deficiencies
were asserted as a result of such examinations which have not been resolved and
fully paid;
(viii) neither the Company nor any of its Subsidiaries has received
notice of any claim made by a governmental authority in a jurisdiction where the
Company or any of its Subsidiaries, as applicable, does not file a Tax Return,
that the Company or such Subsidiary is or may be subject to taxation by that
jurisdiction;
(ix) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by either the Company or any of
its Subsidiaries with respect to any Taxes is currently in force;
(x) neither the Company nor any of its Subsidiaries is a party to
any agreement providing for the allocation or sharing of Taxes imposed on or
with respect to any individual or other Person, and neither the Company nor any
of its Subsidiaries (A) has been a member of an affiliated group (or similar
state, local or foreign filing group) filing a consolidated federal income Tax
Return (other than the group the common parent of which is the Company) or
(B) has any liability for the Taxes of any person (other than the Company or any
of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise;
(xi) the Company and each of its Subsidiaries has delivered or made
available to Parent complete and accurate copies of: all federal income Tax
Returns of the Company or any of its Subsidiaries for taxable years ending
December 31, 1997 through December 31, 1999;
(xii) neither the Company nor any of its Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible corporations;
and
(xiii) neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two years prior to the date hereof or (B) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in connection with the
Merger.
13
(b) As used herein:
(i) "TAXES" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any governmental authority, including, without limitation, taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
unemployment, social security, workers' compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added;
and
(ii) "TAX RETURN" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to Taxes,
including, without limitation, any information return, claim for refund, amended
return, or declaration of estimated Taxes.
Section 4.13 CONTRACTS. Each Company Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries, and there are no defaults
thereunder, except those defaults that would not have a material adverse effect
on the Company and its Subsidiaries, taken as a whole. Section 4.13 of the
Disclosure Schedule sets forth a complete list of (i) all material Company
Agreements entered into by the Company or any of its Subsidiaries since
December 31, 1999 and all amendments to any Company Agreements included as an
exhibit to the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2000 and June 30, 2000 and (ii) all non-competition agreements
imposing restrictions on the ability of the Company or any of its Subsidiaries
to conduct business in any jurisdiction or territory.
Section 4.14 ASSETS; REAL PROPERTY. Neither the Company nor any Subsidiary
of the Company owns any real property.
(a) Section 4.14(b) of the Disclosure Schedule sets forth all leases,
subleases and other agreements (the "REAL PROPERTY LEASES") under which the
Company or any of its Subsidiaries uses or occupies or has the right to use or
occupy, now or in the future, any real property. The Company has heretofore
delivered to Parent true, correct and complete copies of all material Real
Property Leases (including all modifications, amendments and supplements
hereto). Each Real Property Lease is valid, binding and in full force and
effect, all rent and other sums and charges payable by the Company and its
Subsidiaries as tenants thereunder are current, no termination event or
condition or uncured default of a material nature on the part of the Company or
any such Subsidiary or, to the Company's knowledge, the landlord, exists under
any Real Property Lease. Each of the Company and its Subsidiaries has a good and
valid leasehold interest in each parcel of real property leased by it free and
clear of all mortgages, pledges, liens, encumbrances and security interests,
except: (i) those reflected or reserved against in the balance sheets of the
Company in the Company SEC Documents filed prior to the date of this Agreement;
(ii) taxes and general and special assessments not in default and payable
without penalty and interest; and (iii) other liens, mortgages, pledges,
encumbrances and security interests which do not materially interfere with the
Company's use and enjoyment of such real property or materially detract from or
diminish the value thereof.
Section 4.15 ENVIRONMENTAL MATTERS.
(a) The Company and each of its Subsidiaries (i) is and has been in
compliance in all material respects with all applicable laws, rules,
regulations, common law, ordinances, decrees, orders or other legal or
regulatory requirements relating to pollution or the protection of human health
or the environment (including without limitation the treatment, storage and
disposal of wastes and the remediation of releases and threatened releases of
materials of environmental concern) ("ENVIRONMENTAL LAWS"), and there are no
outstanding allegations by any person or entity that the Company or any of its
Subsidiaries is not or has not been in compliance with any Environmental Laws
14
and (ii) the Company and each of its Subsidiaries currently hold all permits,
licenses, registrations and other governmental authorizations (including without
limitation exemptions, waivers, and the like) and financial assurance required
under any Environmental Laws for the Company and each of its Subsidiaries to
operate their business.
(b) To the Company's knowledge, except as set forth in Section 4.15(b)
of the Disclosure Schedule, (i) there are no asbestos or asbestos-containing
materials in or on any real property, buildings, structures or components
thereof currently, leased or operated by the Company or any of its Subsidiaries,
and (ii) there are and have been no underground or aboveground storage tanks
(whether or not required to be registered under any applicable law), dumps,
landfills, lagoons, surface impoundments, sumps, injection xxxxx or other
disposal or storage sites or locations in or on any property currently leased or
operated by the Company or any of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries have received
(x) any written communication from any person stating or alleging that any of
them may be a potentially responsible party under any Environmental Law
(including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, and any state analog
thereto) with respect to any actual or alleged environmental contamination, or
(y) any written request for information under any Environmental Law from any
governmental agency or authority or any other person or entity with respect to
any actual or alleged environmental contamination or violation. None of the
Company, its Subsidiaries, any governmental agency or authority, or any other
person or entity is conducting or has conducted (or is proposing or threatening
to conduct) any environmental remediation or investigation which could result in
a material liability of the Company or any of its Subsidiaries under any
Environmental Law or otherwise require disclosure under the Securities Act or
Exchange Act.
Section 4.16 TRANSACTIONS WITH AFFILIATES. Except to the extent disclosed
in the Company SEC Documents filed prior to the date of this Agreement or as
disclosed in Section 4.16 of the Disclosure Schedule, since January 1, 1997,
there have been no transactions, agreements, arrangements or understandings
between the Company and its affiliates that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
Section 4.17 OPINION OF FINANCIAL ADVISOR; BROKERS. The Company has
received an opinion from Deutsche Bank Securities, Inc. ("DBAB"), financial
advisor to the Company, to the effect that the consideration to be received by
the stockholders of the Company pursuant to the Merger is fair to such
stockholders from a financial point of view, a copy of which opinion has been
provided to Parent. Except for fees payable to DBAB, pursuant to an engagement
letter, dated October 13, 2000, a true and complete copy of which has been
provided to Parent, no broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 4.18 INTELLECTUAL PROPERTY.
(a) The Company or its Subsidiaries own or have a valid right to use
all: trademarks, service marks, trade names, Internet domain names, designs,
slogans, and general intangibles of like nature, together with all goodwill
related to the foregoing (collectively, "TRADEMARKS"); patents; inventions
(whether patented or not); copyrights (including any registrations, renewals and
applications for any of the foregoing); Software (as defined below in
Section 4.18(x)); technology, trade secrets and other confidential information,
know-how, proprietary processes, formulae, algorithms, models, and methodologies
(collectively, "TRADE SECRETS," and together with the foregoing, the
"INTELLECTUAL PROPERTY") used in or necessary for the conduct of the business of
the Company and each of its Subsidiaries' as currently conducted or contemplated
to be conducted (collectively "COMPANY INTELLECTUAL PROPERTY").
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(b) Section 4.18(ii)(a) of the Disclosure Schedule sets forth, a
complete and accurate list of all Company Intellectual Property, consisting of
all U.S. and foreign (a) patents and patent applications, (b) Trademark
registrations (including Internet domain registrations) and applications and
material unregistered Trademarks, and (c) copyright registrations and
applications, and material unregistered copyrights, including those in Software,
indicating for each, the applicable jurisdiction, registration number (or
application number), and date issued (or date filed); and a list of all material
Trade Secrets. Section 4.18(ii)(b) of the Disclosure Schedule sets forth a
complete and accurate list of all Company Intellectual Property not owned by the
Company and license agreements granting any right to use or practice any rights
under any Company Intellectual Property, whether the Company or any Subsidiary
is the licensee or licensor thereunder, and any written settlements relating to
any Company Intellectual Property to which the Company or any Subsidiary is a
party or otherwise bound (collectively, the "LICENSE AGREEMENTS"), indicating
for each the title, the parties, date executed, and the Company Intellectual
Property covered thereby.
(c) The Company Intellectual Property is free and clear of all Liens,
and the Company or a Subsidiary or a third party (as the case may be), as set
forth in Section 4.18(iii) of the Disclosure Schedule is listed in the records
of the appropriate United States, state, or foreign agency as the sole owner of
record for each application and registration listed in Section 4.18(iii) of the
Disclosure Schedule.
(d) Except as set forth on Section 4.18(iv) of the Disclosure Schedule,
the Company Intellectual Property is valid and subsisting, in full force and
effect, and has not been cancelled, expired, or abandoned. There is no pending
or, to the Company's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in any
jurisdiction against the registrations listed in Section 4.18(iv) of the
Disclosure Schedule, or against any Company Intellectual Property not owned by
the Company or its Subsidiaries.
(e) To the knowledge of the Company, the conduct of the business of the
Company's and each of its Subsidiaries' as currently conducted or planned to be
conducted does not infringe upon any Intellectual Property rights owned or
controlled by any third party (either directly or indirectly such as through
contributory infringement or inducement to infringe). Except as set forth in
Section 4.18(v) of the Disclosure Schedule, there are no claims or suits pending
or, to the Company's knowledge, threatened, and neither the Company nor any
Subsidiary has received any notice of a third party claim or suit (a) alleging
that its activities or the conduct of its businesses infringes upon, violates,
or constitutes the unauthorized use of the Intellectual Property rights of any
third party or (b) challenging the ownership, use, validity or enforceability of
any Company Intellectual Property.
(f) Except as set forth in Section 4.18(vi) of the Disclosure Schedule,
there are no settlements, forebearances to xxx, consents, judgments, or orders
or similar obligations which (a) restrict the Company's or its Subsidiaries'
rights to use any Company Intellectual Property, (b) restrict the Company's or
its Subsidiaries' business in order to accommodate a third party's Intellectual
Property rights, or (c) permit third parties to use any Company Intellectual
Property owned or controlled by the Company or any Subsidiary. The Company or
its Subsidiaries have not licensed or sublicensed their rights in any material
Company Intellectual Property other than pursuant to the License Agreements, and
no royalties, honoraria or other fees are payable by the Company or its
Subsidiaries for the use of or right to use any Company Intellectual Property,
except pursuant to the License Agreements. The License Agreements are valid and
binding obligations of all parties thereto, enforceable in accordance with their
terms (except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought) and there exists no event or condition which will result in a
16
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default by any party under any such License Agreement.
(g) The Company and each of its Subsidiaries takes commercially
reasonable measures to protect the confidentiality of Trade Secrets, including
requiring its employees and independent contractors having access thereto to
execute written non-disclosure agreements. No Trade Secret has been disclosed or
authorized to be disclosed to any third party other than pursuant to a
non-disclosure agreement that adequately protects the Company and the applicable
Subsidiary's proprietary interests in and to such Trade Secrets. To the
knowledge of the Company, no party to any non-disclosure agreement relating to
its Trade Secrets is in breach or default thereof.
(h) To the knowledge of the Company, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned by the Company or any Subsidiary and, except as set forth on
Section 4.18(viii) of the Disclosure Schedule, no such claims have been brought
against any third party by the Company or any Subsidiary.
(i) Except as set forth in Section 4.18(ix) of the Disclosure Schedule,
the consummation of the transactions contemplated hereby will not result in the
loss or material impairment of the Company or any Subsidiary's right to own or
use any of the Company Intellectual Property, nor will require the consent of
any governmental authority or third party in respect of any such Intellectual
Property.
(j) Section 4.18(x) of the Disclosure Schedule lists all Software
(other than off-the-shelf software applications programs having an acquisition
price of less than $25,000), which are owned, licensed, leased, or otherwise
used by the Company or any Subsidiary, and identifies which Software is owned,
licensed, leased, or otherwise used, as the case may be. Section 4.18(x) of the
Disclosure Schedule lists all Software sold, licensed, leased or otherwise
distributed by the Company or any Subsidiary to any third party, and identifies
which Software is sold, licensed, leased, or otherwise distributed as the case
may be. With respect to the Software set forth in Section 4.18(x) of the
Disclosure Schedule which the Company or any Subsidiary purports to own, such
Software was either developed (a) by employees of the Company or any Subsidiary
within the scope of their employment or (b) by independent contractors who have
assigned their rights to the Company or any Subsidiary pursuant to written
agreements. For purposes of this Section 4.18, "SOFTWARE" means any and all
(v) computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object code,
(w) databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (x) descriptions, flow-charts and
other work product used to design, plan, organize and develop any of the
foregoing, (y) the technology supporting any Internet site(s) operated by or on
behalf of the Company or any Subsidiary, and (z) all documentation, including
user manuals and training materials, relating to any of the foregoing.
Section 4.19 REORGANIZATION. None of the Company, any of its Subsidiaries
or, to the knowledge of the Company, any of their respective directors, officers
or stockholders, has taken any action which would prevent the Merger from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
Section 4.20 INSURANCE. The Company and each of its Subsidiaries has
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting businesses or owning assets similar to those of the
Company and its Subsidiaries. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
17
Section 4.21 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in the
balance sheet of the Company included in the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000, as filed with the SEC prior to
the date of this Agreement (the "COMPANY BALANCE SHEET"), the accounts
receivable shown in the Company Balance Sheet arose in the ordinary course of
business; were not, as of the date of the Company Balance Sheet, subject to any
material discount, contingency, claim of offset or recoupment or counterclaim;
and represented, as of the date of the Company Balance Sheet, bona fide claims
against debtors for sales, leases, licenses and other charges. All accounts
receivable of the Company and its Subsidiaries arising after the date of the
Company Balance Sheet through the date of this Agreement arose in the ordinary
course of business and, as of the date of this Agreement, are not subject to any
material discount, contingency, claim of offset or recoupment or counterclaim,
except for normal reserves consistent with past practice. The amount carried for
doubtful accounts and allowances disclosed in the Company Balance Sheet is
believed by the Company as of the date of this Agreement to be sufficient to
provide for any losses which may be sustained or realization of the accounts
receivable shown in the Company Balance Sheet.
Section 4.22 SUPPLIERS AND CUSTOMERS. Since December 31, 1999, no material
licensor, vendor, supplier, licensee or customer of the Company or any of its
Subsidiaries, has cancelled or otherwise modified its relationship with the
Company or its Subsidiaries in a manner adverse to the Company and its
Subsidiaries, taken as a whole, and, to the Company's knowledge, (i) no such
person has any intention to do so, and (ii) the consummation of the transactions
contemplated hereby will not adversely affect any of such relationships.
Section 4.23 LABOR MATTERS.
(a) Except as set forth in Section 4.23 of the Disclosure Schedule:
(i) there is no labor strike, dispute, slowdown, stoppage or lockout actually
pending, or to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary thereto and during the last three (3) years there has
not been any such action; (ii) to the knowledge of the Company, no union claims
to represent the employees of the Company or any Subsidiary thereto;
(iii) neither the Company nor any Subsidiary thereto is a party to or bound by
any collective bargaining or similar agreement with any labor organization, or
work rules or practices agreed to with any labor organization or employee
association applicable to employees of the Company or any Subsidiary thereto;
(iv) none of the employees of the Company or any Subsidiary thereto are
represented by any labor organization and the Company has no knowledge of any
current union organizing activities among the employees of the Company or any
Subsidiary thereto, nor does any question concerning representation exist
concerning such employees; (v) there are no written personnel policies, rules or
procedures applicable to employees of the Company other than those set forth in
Section 4.23 of the Disclosure Schedule, true, correct and complete copies of
which have heretofore been delivered to Parent; (vi) the Company and any
Subsidiary thereto are, and have at all times been, in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, immigration, equal employment
opportunity, and occupational safety and health, and are not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vii) the Company has not received
written notice of any pending or threatened unfair labor practice charge or
complaint against the Company or any Subsidiary thereto before the National
Labor Relations Board or any similar state agency; (viii) there is no grievance
or arbitration proceeding arising out of any collective bargaining agreement or
other grievance procedure relating to the Company or any Subsidiary thereto;
(ix) the Company has not received written notice of any charges with respect to
or relating to the Company or any Subsidiary thereto are pending before the
Equal Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (x) the Company has not received
written or other notice of the intent of any federal, state, or local agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the
18
Company or any Subsidiary thereto and no such investigation is in progress; and
(xi) there are no complaints, controversies, lawsuits or other proceedings
pending or, to the knowledge of the Company, threatened to be brought by any
applicant for employment of current or former employees, or classes of the
foregoing, alleging breach of any express or implied contract for employment,
any law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship. Except as set forth in Section 4.23 of the Disclosure Schedule,
there are no employment contracts, severance agreements, confidentiality
agreements (other than standard employee non-disclosure agreements as
contemplated by Section 4.23(vii) hereof) or other agreements (other than any
agreements set forth in Section 4.9 of the Disclosure Schedule) with any
employees of the Company or any Subsidiary thereto. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement and the Option Agreement will not result in a breach or other
violation of any collective bargaining agreement or any other employment
contract or agreement to which the Company or any Subsidiary thereto is a party.
(b) Since the enactment of Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN ACT"), neither the Company nor any
Subsidiary thereto has effectuated (i) a "PLANT CLOSING" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or any Subsidiary
thereto, or (ii) a "MASS LAYOFF" (as defined in the WARN Act) affecting any site
of employment or facility of the Company or any Subsidiary thereto; nor has the
Company or any Subsidiary thereto been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger application
of any similar state or local law. Except as set forth in Section 4.23 of the
Disclosure Schedule, none of the employees of the Company or any Subsidiary
thereto has suffered an "EMPLOYMENT LOSS" (as defined in the WARN Act) during
the ninety day period prior to the execution of this Agreement.
(c) Each of the individuals identified in Section 7.2(e) of the
Disclosure Schedule, has executed an Employee Confidentiality Agreement, in
substantially the form attached to Section 4.23(c) of the Disclosure Schedule.
As of the date of this Agreement, the individuals identified in Section 7.2(e)
of the Disclosure Schedule constitute all of the individuals who are engaged in
the development of software for or on behalf of the Company.
Section 4.24 FULL DISCLOSURE. The Company has not knowingly failed to
disclose to Parent any facts material to the Company's business, operations,
prospects, properties, financial condition or results of operations. No
representation or warranty by the Company in this Agreement and no statement by
the Company in any document referred to herein (including the Schedules and
Exhibits hereto), contains any untrue statements of a material fact or omits to
state any material fact necessary, in order to make the statement made herein or
therein, in light of the circumstances under which they were made, not
misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 5.1 ORGANIZATION. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries. Parent and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, in the aggregate, have a material adverse effect on
Parent and its Subsidiaries, taken as a whole.
Section 5.2 CAPITALIZATION.
As of September 30, 2000, after giving effect to a two-for-one stock split
in the form of a stock dividend effective October 27, 2000 for stockholders of
record of Parent as of September 27, 2000, the authorized capital stock of
Parent consists of 9,600,000,000 shares of Parent Common Stock and 600,000,000
shares of preferred stock, $.01 par value per share (the "PARENT PREFERRED
STOCK"). Before giving effect to a two-for-one stock split in the form of a
stock dividend effective October 27, 2000 for stockholders of record of Parent
as of September 27, 2000, as of the close of business on September 30, 2000,
(i) 979,221,142 shares of Parent Common Stock were issued and outstanding and
(ii) no shares of Parent Preferred Stock were issued and outstanding. All of the
issued and outstanding shares of Parent Common Stock are duly authorized,
validly issued, fully paid and nonassessable.
Section 5.3 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. Each
of Parent and Sub has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub and
no other corporate proceedings on the part of Parent and Sub are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by Parent and Sub and, assuming
this Agreement constitutes a valid and binding obligation of the other parties
hereto, constitutes a valid and binding obligation of each of Parent and Sub, as
the case may be, enforceable against them in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
When issued in accordance with the terms of this Agreement, the shares of Parent
Common Stock to be issued pursuant to the Merger will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the HSR Act and any comparable premerger
notification laws, rules or regulations of any applicable foreign jurisdiction,
the Exchange Act, the Securities Act, the DGCL, state blue sky laws and any
applicable state takeover laws, neither the execution, delivery or performance
of this Agreement by Parent and Sub nor the consummation by Parent and Sub of
the transactions contemplated hereby nor compliance by Parent and Sub with any
of the provisions hereof will (i) conflict with or result in any breach of any
20
provision of the certificate of incorporation or bylaws of Parent or the
certificate of incorporation and bylaws of Sub, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity,
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any material note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Parent or any of
its Subsidiaries is a party or by which any of them or any of their properties
or assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent, any of its Subsidiaries or any
of their properties or assets, except in the case of clauses (ii), (iii) and
(iv) where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings, or where such violations, breaches or
defaults would not, individually or in the aggregate, materially impair the
ability of Parent or Sub to consummate the transactions contemplated hereby.
Section 5.5 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The Registration
Statement (or any amendment thereof or supplement thereto) will not, at the date
it becomes effective and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by Parent or Sub with respect to statements made therein
based on information supplied by the Company in writing for inclusion in the
Registration Statement. None of the information supplied by Parent or Sub for
inclusion or incorporation by reference in the Proxy Statement/Prospectus, at
the date mailed to Company stockholders and at the time of the Special Meeting,
will contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply in all material respects with
the provisions of the Securities Act and the rules and regulations thereunder.
Section 5.6 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has filed with
the SEC, and has heretofore made available to the Company, true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since November 1, 1999 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the "PARENT SEC DOCUMENTS"). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Parent SEC Documents, including, without limitation, any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. Each of the consolidated financial statements included in the Parent
SEC Documents has been prepared from, and is in accordance with, the books and
records of Parent and its consolidated Subsidiaries, complies in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, has been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presents the consolidated
financial position and the consolidated results of operations and cash flows of
the Parent and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein.
Section 5.7 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in
the Parent SEC Documents filed prior to the date of this Agreement, since
July 31, 2000 through the date of this Agreement, Parent and its Subsidiaries
have conducted their respective businesses and operations in all material
respects consistent with past practice only in the ordinary and usual course.
From July 31, 2000 through the date of this Agreement, there has not occurred:
(i) any events, changes, or effects
21
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) having or, which would be reasonably likely to
have, individually or in the aggregate, a material adverse effect on Parent and
its Subsidiaries; (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to the
equity interests of Parent or of any of its Subsidiaries other than (A) regular
quarterly cash dividends or dividends paid by wholly owned Subsidiaries and
(B) the two-for-one stock split, in the form of a stock dividend, of Parent
Common Stock effective October 27, 2000; or (iii) any change by Parent or any of
its Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP or applicable law.
ARTICLE VI
COVENANTS
Section 6.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and
agrees that, except (i) as expressly provided in this Agreement or disclosed in
Section 6.1 of the Disclosure Schedule, or (ii) with the prior written consent
of Parent, after the date hereof and prior to the Effective Time:
(a) the business of the Company and its Subsidiaries shall be conducted
only in the ordinary and customary course consistent with past practice, and
each of the Company and its Subsidiaries shall use commercially reasonable
efforts to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock, or any outstanding capital
stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) amend
its certificate of incorporation or bylaws or similar organizational documents;
(ii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock; (iii) issue, sell,
transfer, pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
the Company or its Subsidiaries, other than issuances pursuant to the exercise
of Options outstanding on the date hereof; (iv) transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any material assets other than in the
ordinary and usual course of business and consistent with past practice; or
(v) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(d) neither the Company nor any of its Subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by the Company or
any of its Subsidiaries to any of its officers or directors, or, except for
planned increases that have been previously disclosed to Parent or increases in
accordance with normal past practice, employees, agents or consultants;
(ii) adopt or enter into any new plan, policy, agreement or arrangement that
would constitute a Plan, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing Plan; (iii) grant any Rights, whether or not pursuant to the Company
Option Plans; (iv) enter into any, or amend any existing, employment or
severance agreement with or, except in accordance with the existing written
policies of the Company previously delivered to Parent, grant any severance or
termination pay to any officer, director or employee of the Company or any of
its Subsidiaries; or (v) make any loans to any of its officers, directors,
employees, agents or consultants or make any changes in its existing borrowing
or lending arrangements for or on behalf of any of such persons, whether
contingent on the Merger or otherwise;
(e) neither the Company nor any of its Subsidiaries shall modify, amend
or terminate any of the material Company Agreements or waive, release or assign
any material rights or claims, except in the ordinary course of business and
consistent with past practice;
22
(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(g) neither the Company nor any of its Subsidiaries shall: (i) incur or
assume any long-term debt or, except in the ordinary course of business
consistent with past practice, incur or assume any short-term indebtedness in
amounts not consistent with past practice; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly owned Subsidiaries of the Company or customary advances to
employees in accordance with past practice); or (iv) enter into any material
commitment or transaction (including, but not limited to, any borrowing, capital
expenditure or purchase, sale or lease of assets) other than capital
expenditures described in Section 6.1(g) of the Disclosure Schedule;
(h) neither the Company nor any of its Subsidiaries shall change any of
the accounting principles used by it unless required by GAAP or applicable law;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations (x) in
the ordinary course of business and consistent with past practice, or claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries, (y) incurred in the ordinary course of business
and consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally required to be paid and
are also not otherwise payable in accordance with clauses (x) or (y) above, the
Company will notify Parent in writing if such claims, liabilities or obligations
exceed, individually or in the aggregate, $250,000 in value, reasonably in
advance of their payment);
(j) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries or any agreement relating to a Takeover Proposal (as defined in
Section 6.6(b) hereof) (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or agree
to commit to take, any action that would make any representation or warranty of
the Company contained herein inaccurate in any material respect at, or as of any
time prior to, the Effective Time;
(l) neither the Company nor any of its Subsidiaries shall voluntarily
make or agree to make any changes in federal and state Tax accounting methods,
waive or consent to the extension of any statute of limitations with respect to
Taxes, or consent to any assessment of any material Taxes, or settle any
judicial or administrative proceeding affecting any material Taxes; and
(m) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 6.2 INTERIM OPERATIONS OF PARENT. Each of Parent and Sub covenants
and agrees that, except (i) as expressly provided in this Agreement, or
(ii) with the prior written consent of the Company, after the date hereof and
prior to the Effective Time:
(a) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock (except for the two-for-one stock
split, in the form of a stock dividend, of Parent
23
Common Stock effective October 27, 2000 and any other action that would result
in an adjustment to the Exchange Ratio pursuant to Section 3.9 hereof);
(b) Parent shall not declare, set aside or pay any dividend or other
distribution payable in cash (other than regular quarterly dividends), stock or
property with respect to its capital stock (except for the two-for-one stock
split, in the form of a stock dividend, of Parent Common Stock effective
October 27, 2000 and any other action that would result in an adjustment to the
Exchange Ratio pursuant to Section 3.9 hereof);
(c) neither Parent nor any of its Subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
(d) neither Parent nor any of its Subsidiaries will take, or agree to
commit to take, any action that would make any representation or warranty of
Parent and Sub contained herein inaccurate in any respect at, or as of any time
prior to, the Effective Time; and
(e) neither Parent nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 6.3 ACCESS TO INFORMATION. The Company shall (and shall cause each
of its Subsidiaries to) afford to the officers, employees, accountants, counsel
and other representatives of Parent, access, during normal business hours,
during the period prior to the Effective Time, to all of its and its
Subsidiaries' properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to Parent (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably
request. Unless otherwise required by law or by any listing agreement with a
national securities exchange, until the Effective Time, Parent will hold any
such information which is nonpublic in confidence in accordance with the
provisions of the confidentiality agreement between the Company and Parent,
dated October 16, 2000 (the "CONFIDENTIALITY AGREEMENT"). Parent and Sub shall
provide to the Company and its representatives access and information reasonably
requested by the Company.
Section 6.4 HSR ACT FILINGS.
(a) Each of Parent and the Company shall: (i) make or cause to be made
the filings required of such party or any of its Subsidiaries or affiliates
under the HSR Act with respect to the transactions contemplated by this
Agreement and the Option Agreement as promptly as practicable and in any event
within ten business days after the date of this Agreement; (ii) comply at the
earliest practicable date with any request under the HSR Act for additional
information, documents, or other materials received by such party or any of its
Subsidiaries from the Federal Trade Commission or the Department of Justice
(either, an "HSR AUTHORITY") or any other Governmental Entity in respect of such
filings or such transactions; and (iii) cooperate with the other party in
connection with any such filing, response to a request for additional
information, documents or other materials, or other submissions to such
Governmental Entity under HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act,
as amended, the Federal Trade Commission Act, as amended, and any other federal,
state or foreign statutes, rules, regulations, orders, decrees, administrative
or judicial doctrines or other laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade (collectively, "ANTITRUST LAWS") with respect to any such filing or any
such transaction. Each party shall use its commercially reasonable efforts to
furnish to each other all information required for any application or another
filing to be made pursuant to any applicable law in connection with the Merger
and the other transactions contemplated by this Agreement. Each party shall
promptly inform the other party of any communication with, and any proposed
understanding,
24
undertaking, or agreement with, any Governmental Entity regarding any such
filings or any such transaction.
(b) Notwithstanding this Section 6.4 or any other provision of this
Agreement, neither Parent nor Sub shall be required, whether before or after the
Effective Time, to hold separate (including by trust or otherwise) or divest any
of its business or assets or any of the businesses or assets of the Company, or
enter into any consent decree or other agreement that would restrict Parent or
the Company in the conduct of its respective businesses as heretofore conducted.
Section 6.5 OTHER CONSENTS AND APPROVALS. Each of the Company, Parent and
Sub will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby (which actions shall include, without
limitation, furnishing all information in connection with approvals of or
filings with any Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with this
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby. Each of the Company, Parent and Sub will, and will cause its respective
Subsidiaries to, take all reasonable actions necessary to obtain any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or made by
Parent, Sub, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement or
the Option Agreement.
Section 6.6 NO SOLICITATION.
(a) The Company (and its Subsidiaries and affiliates) will not, and the
Company (and its Subsidiaries and affiliates) will use their best efforts to
ensure that their respective officers, directors, employees, investment bankers,
attorneys, accountants and other agents do not, directly or indirectly:
(i) initiate, solicit or knowingly encourage, or take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to any Takeover Proposal (as defined below) of the Company or any
Subsidiary or affiliate of the Company or an inquiry with respect thereto;
(ii) enter into any agreement with respect to any Takeover Proposal; or
(iii) in the event of an unsolicited written Takeover Proposal for the Company
or any Subsidiary or affiliate of the Company, engage in negotiations or
discussions with, or provide any information or data to, any corporation,
partnership, person or other entity or group (other than Parent, any of its
affiliates or representatives) ("PERSON") relating to any Takeover Proposal, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
knowingly encourage any effort or attempt by any Person to do or seek any of the
foregoing; PROVIDED, HOWEVER, that the Company may furnish confidential
information in response to an unsolicited written Takeover Proposal and engage
in negotiations with a Person relating to such written Takeover Proposal if, but
only if, the Company's Board of Directors shall have concluded in good faith and
on the basis of advice (x) from financial advisors, that such Takeover Proposal
involves consideration to the holders of Company Common Stock that is superior
to the consideration offered pursuant to the Merger and is otherwise superior to
the Merger and (y) from independent outside counsel that the failure to take
such action would constitute a violation of the Board's fiduciary duties under
applicable law; and PROVIDED, FURTHER, that the Company shall notify Parent
immediately of any inquiries, expressions of interest, proposals or offers
received by, the Company or any of the Company's representatives relating to any
Takeover Proposal or the possibility or consideration of making a Takeover
Proposal ("TAKEOVER PROPOSAL INTEREST") indicating, in connection with such
notice, the name of the Person indicating such Takeover Proposal Interest and
the terms and conditions of any proposals or offers. The Company agrees that it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Takeover Proposal Interest. The Company agrees that it will take the
necessary steps promptly to inform the individuals or entities referred to in
the first sentence hereof of the obligations undertaken
25
in this Section 6.6. The Company agrees that it shall keep Parent informed, on a
current basis, of the status and terms of any Takeover Proposal Interest.
(b) As used in this Agreement, "TAKEOVER PROPOSAL" when used in
connection with any Person shall mean any tender or exchange offer involving
such Person, any proposal for a merger, consolidation or other business
combination involving such Person or any Subsidiary of such Person, any proposal
or offer to acquire in any manner an interest in excess of 15% of the
outstanding equity securities of, or a substantial portion of the business or
assets of, such Person or any Subsidiary of such Person, any proposal or offer
with respect to any recapitalization or restructuring with respect to such
Person or any Subsidiary of such Person or any proposal or offer with respect to
any other transaction similar to any of the foregoing with respect to such
Person or any Subsidiary of such Person, other than pursuant to the transactions
to be effected pursuant to this Agreement.
(c) Neither the Board of Directors of the Company nor any committee
thereof shall (i) except as expressly permitted by this Section 6.6(c),
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to Parent or Sub, the approval or recommendation by such
Board of Directors or such committee of the Merger or this Agreement, or the
issuance of Parent Common Stock in connection with the Merger, (ii) approve or
recommend, or propose publicly to approve or recommend, any Takeover Proposal,
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Takeover Proposal. Notwithstanding the foregoing, in the event that prior to the
adoption of this Agreement by the holders of Company Common Stock the Board of
Directors of the Company determines in good faith, after it has received a
Superior Proposal (as defined below) and after receipt of advice from
independent outside counsel that the failure to do so would constitute a
violation of the Board's fiduciary duties under applicable law, the Board of
Directors of the Company may (subject to this and the following sentences)
inform the Company's stockholders that it no longer believes that the Merger or
this Agreement is advisable and no longer recommends approval (a "SUBSEQUENT
DETERMINATION"), but only at a time that is after the third business day
following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company has received a Superior Proposal specifying the
material terms and conditions of such Superior Proposal, identifying the person
making such Superior Proposal and stating that it intends to make a Subsequent
Determination. After providing such notice, the Company shall provide a
reasonable opportunity to Parent to make such adjustments in the terms and
conditions of this Agreement and/or of the Option Agreement as would enable the
Company to proceed with its recommendation to stockholders without making a
Subsequent Determination; PROVIDED, HOWEVER, that any such adjustments shall be
at the discretion of the parties at such time. For purposes of this Agreement, a
"Superior Proposal" means any Takeover Proposal (on its most recently amended or
modified terms, if amended or modified) made by a Person which the Board of
Directors of the Company determines in its good faith judgment (based on the
advice of DBAB, or another financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Merger
taking into account all relevant factors (including whether, in the good faith
judgment of the Board of Directors of the Company, after obtaining advice from
DBAB, or another financial advisor of nationally recognized reputation, the
Person is reasonably able to finance the transaction, and any proposed changes
to this Agreement and/or the Option Agreement that may be proposed by Parent in
response to such Takeover Proposal). Notwithstanding any other provision of this
Agreement, the Company shall submit this Agreement to its stockholders whether
or not the Board of Directors of the Company makes a Subsequent Determination.
26
(d) Nothing contained in this Section 6.6 shall prohibit the Company
(i) from taking and disclosing to its stockholders a position contemplated by
Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) from
making any disclosure to its stockholders if, in the good faith judgment of the
Board of Directors of the Company, after receipt of advice from independent
outside counsel, failure so to disclose would constitute a violation of the
Board's fiduciary duties under applicable law.
Section 6.7 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, or to remove any injunctions or other impediments or
delays, legal or otherwise, to consummate and make effective the Merger and the
other transactions contemplated by this Agreement and the Option Agreement. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or the Option Agreement,
the proper officers and directors of the Company and Parent shall use all
reasonable efforts to take, or cause to be taken, all such necessary actions.
Section 6.8 PUBLICITY. So long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement, the Option Agreement, the Employee Agreements, the
Voting Agreements or the other transactions contemplated hereby or thereby
without the prior consultation of the other party, except as may be required by
law or by any listing agreement with a national securities exchange.
Section 6.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the Effective
Time and (ii) any material failure of the Company or Parent, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder or under any Ancillary Agreement; PROVIDED,
HOWEVER, that the delivery of any notice pursuant to this Section 6.9 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 6.10 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION. Parent agrees that at all times after the Effective Time, it
shall cause the Company (or the Surviving Corporation if after the Effective
Time) and its Subsidiaries to, at all times after the Effective Time, indemnify,
each person who is now, or has been at any time prior to the date hereof, a
director or officer of the Company or of any of the Company's Subsidiaries,
successors and assigns (individually an "INDEMNIFIED PARTY" and collectively the
"INDEMNIFIED PARTIES"), to the same extent and in the same manner as is now
provided in the respective charters or by-laws of the Company and such
Subsidiaries or otherwise in effect on the date hereof, with respect to any
claim, liability, loss, damage, cost or expense (whenever asserted or claimed)
("INDEMNIFIED LIABILITY") based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Effective
Time. Parent shall, and shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, maintain in effect for not less than six years
after the Effective Time the current policies of directors' and officers'
liability insurance maintained by the Company and its Subsidiaries on the date
hereof (provided that Parent may substitute therefor policies having at least
the same coverage and containing terms and conditions which are no less
advantageous to the persons currently covered by such policies as insured) with
respect to matters existing or occurring at or prior to the Effective Time;
PROVIDED, HOWEVER, that if the aggregate annual premiums for such insurance at
any time during such period shall exceed 150% of the per annum rate of premium
currently paid by the Company and its Subsidiaries for such insurance on the
date of this Agreement, which amount is set forth in Section 6.10 of the
Disclosure Schedule, then Parent shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, and the
27
Company (or the Surviving Corporation if after the Effective Time) shall,
provide the maximum coverage that shall then be available at an annual premium
equal to 150% of such rate.
Section 6.11 COOPERATION. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (i) in determining whether any action by or in respect
of, or filing with, any Governmental Entity is required, or any actions,
consents approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and the Option Agreement and (ii) in seeking any
such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith and timely seeking to
obtain any such actions, consents approvals or waivers. Subject to the terms and
conditions of this Agreement, Parent and the Company will each use its
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after the
Registration Statement is filed, and Parent and the Company shall, subject to
applicable law, confer on a regular and frequent basis with one or more
representatives of one another to report operational matters of significance to
the Merger and the general status of ongoing operations insofar as relevant to
the Merger, provided that the parties will not confer on any matter to the
extent inconsistent with law.
Section 6.12 CONSENTS OF ACCOUNTANTS. Parent and the Company will each use
commercially reasonable efforts to cause to be delivered to each other consents
from their respective independent auditors, dated the date on which the
Registration Statement shall become effective, in form reasonably satisfactory
to the recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form S-4 under the Securities Act.
Section 6.13 SUBSEQUENT FINANCIAL STATEMENTS. The Company shall consult
with Parent prior to making publicly available its financial results for any
period after the date of this Agreement and prior to filing any Company SEC
Documents after the date of this Agreement, it being understood that Parent
shall have no liability by reason of such consultation.
Section 6.14 TAX TREATMENT. Each of Parent, Sub, the Company and their
respective Subsidiaries intend that the Merger will qualify as a reorganization
with the meaning of Section 368(a) of the Code, and each shall use commercially
reasonable efforts to cause the Merger to so qualify. The parties agree and
acknowledge that if (i) Parent has, not later than three days prior to the
Effective Time, provided written notice to the Company of its intention to merge
the Surviving Corporation with and into Parent with Parent surviving the merger
(the "Upstream Merger"), and (ii) the Company consents to the Upstream Merger,
which consent shall not be unreasonably withheld, then the Upstream Merger shall
occur immediately following the Effective Time. Neither Parent nor the Company
shall knowingly take any action, or knowingly fail to take any action, that
would be reasonably likely to jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 6.15 EMPLOYEE BENEFITS. Parent and Sub agree that, effective as of
the Effective Time, Parent shall provide, or shall cause Sub to provide, to
those persons who, immediately prior to the Effective Time, were employees of
the Company and its subsidiaries and who continue in such employment
("Continuing Employees"), with benefits and compensation no less favorable, in
the aggregate, to the Continuing Employees than benefits and compensation that
are provided to substantially similarly situated employees of the Parent or Sub
as of the Effective Time.
Section 6.16 401(k) PLAN. The Company shall terminate any and all 401(k)
plans of the Company, effective not later than the day immediately preceding the
Closing Date, unless Parent, in its sole and absolute discretion, elects to
sponsor and maintain such plan or to merge such plan into Parent's 401(k) plan,
in which event Parent shall provide the Company with written notice of such
election at least three (3) days prior to the Closing Date. Unless Parent
provides such notice to the Company, Parent shall receive from the Company
evidence that the Company's 401(k) plan(s) have
28
been terminated pursuant to resolution of Company's Board of Directors (the form
and substance of such resolutions shall be subject to review and approval by
Parent), not later than the day immediately preceding the Closing Date.
ARTICLE VII
CONDITIONS
Section 7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, on the one hand, and Parent and Sub, on the other hand, to
consummate the Merger are subject to the satisfaction (or, if permissible,
waiver by the party for whose benefit such conditions exist) of the following
conditions:
(a) any waiting period applicable to the consummation of the Merger
under the HSR Act and any comparable premerger notification laws, rules or
regulations of any applicable foreign jurisdiction shall have expired or been
terminated, and no action shall have been instituted by an HSR Authority
challenging or seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated;
(b) this Agreement shall have been adopted and approved by the
stockholders of the Company in accordance with the DGCL;
(c) the shares of Parent Common Stock to be issued pursuant to the
Merger shall have been authorized for listing on the NYSE, upon official notice
of issuance;
(d) no court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or regulation,
restraining or prohibiting the consummation of the Merger or the effective
operation of the business of the Company and its respective Subsidiaries after
the Effective Time;
(e) all actions by or in respect of or filings with any governmental
body, agency official, or authority required to permit the consummation of the
Merger shall have been obtained but excluding any consent, approval, clearance
or confirmation the failure to obtain which would not have a material adverse
effect on Parent, Sub, the Company or, after the Effective Time, the Surviving
Corporation; and
(f) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the SEC.
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to consummate the Merger are subject to the
satisfaction (or waiver by Parent) of the following further conditions:
(a) the representations and warranties of the Company shall have been
true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need only be
true and accurate as of such date) as of the Effective Time as if made at and as
of such time, except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on the Company and its Subsidiaries, taken as a whole, PROVIDED, that the
representations and warranties set forth in Sections 4.2 and 4.3 shall be true
and correct in all respects;
(b) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Effective Time;
29
(c) the Company shall have obtained, and there shall be in full force
and effect, the consents described in Section 7.2(c) of the Disclosure Schedule;
(d) the Offer Letters shall be valid, in full force and effect and
complied with in all material respects by the employee signatory thereto;
(e) at least forty (40) of the individuals identified in
Section 7.2(e) of the Disclosure Schedule shall have countersigned an offer
letter, in substantially the form attached as Schedule 7.2(e) of the Disclosure
Schedule, and each of such offer letters shall be valid, in full force and
effect and complied with in all material respects by the employee signatory
thereto;
(f) since the date of this Agreement, there shall not have occurred any
event, change or effect having, or which would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on the Company and
its Subsidiaries, taken as a whole;
(g) Parent shall have received an opinion of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, counsel to Parent, dated as of the Effective Time, to the
effect that the Merger (taking into account the effect of the Upstream Merger,
if applicable) will qualify as a reorganization within the meaning of
Section 368(a) of the Code. The issuance of such opinion shall be conditioned
upon the receipt by such counsel of customary representation letters from each
of Parent, Sub and the Company, in each case, in form and substance reasonably
satisfactory to each counsel. Each such representation letter shall be dated on
or before the date of such opinion and shall not have been withdrawn or modified
in any material respect. The opinion condition referred to in this
Section 7.2(g) shall not be waivable after receipt of the stockholder approval
referred to in Section 7.1(b), unless further stockholder approval is obtained
with appropriate disclosure; and
(h) the Company shall have furnished Parent with a certificate dated
the Closing Date signed on behalf of it by the President or any Vice President
of the Company to the effect that the conditions set forth in Sections 7.2(a)
through (f) have been satisfied.
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger are subject to the satisfaction (or
waiver by the Company) of the following further conditions:
(a) the representations and warranties of Parent and Sub shall have
been true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date which need only be
true and accurate as of such date) as of the Effective Time as if made at and as
of such time, except where the failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), does not have,
and is not likely to have, individually or in the aggregate, a material adverse
effect on Parent and its Subsidiaries, taken as a whole, PROVIDED, that the
representations and warranties set forth in Sections 5.2 and 5.3 shall be true
and correct in all respects;
(b) Each of Parent and Sub shall have performed in all material
respects all of the respective obligations hereunder required to be performed by
Parent or Sub, as the case may be, at or prior to the Effective Time;
(c) The Company shall have received an opinion of Xxxxxx Xxxxxxxx LLP,
counsel to the Company, dated as of the Effective Time, to the effect that the
Merger (taking into account the effect of the Upstream Merger, if applicable)
will qualify as a reorganization within the meaning of Section 368(a) of the
Code. The issuance of such opinion shall be conditioned upon the receipt by such
counsel of customary representation letters from each of Parent, Sub and the
Company, in each case, in form and substance reasonably satisfactory to such
counsel. Each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material
respect. The opinion condition referred to in this Section 7.3(c) shall not be
waivable after
30
receipt of the stockholder approval referred to in Section 7.1(b), unless
further stockholder approval is obtained with appropriate disclosure; and
(d) Parent shall have furnished the Company with a certificate dated
the Closing Date signed on behalf of it by the President or any Vice President
to the effect that the conditions set forth in Sections 7.3(a) and (b) have been
satisfied.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after approval thereof by the Company's stockholders (and regardless of any
time that may have elapsed since the event giving rise to the right to terminate
hereunder):
(a) By the mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the Board of
Directors of Parent:
(i) if the Merger shall not have occurred on or prior to March 31,
2001; PROVIDED, HOWEVER, that the right to terminate this Agreement under this
Section 8.1(b)(i) shall not be available to any party whose willful and material
breach of this Agreement has been the cause of, or resulted in, the failure of
the Merger to occur on or prior to such date;
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action, in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and non-appealable; or
(iii) if the approval of the stockholders of the Company
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of stockholders or
any adjournment thereof.
(c) By the Board of Directors of the Company if Parent or Sub breaches
or fails in any material respect to perform or comply with any of its material
covenants and agreements contained herein or breaches its representations and
warranties in any material respect, which breach or failure is incapable of
being cured or is not cured within ten (10) business days of written notice
thereof; or
(d) By the Board of Directors of Parent:
(i) if the Company breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained
herein or breaches its representations and warranties in any material respect,
which breach or failure is incapable of being cured or is not cured within ten
(10) business days of written notice thereof; or
(ii) if (a) the Board of Directors of the Company shall have failed
to recommend adoption and approval of this Agreement and the Merger by the
Company's stockholders or the Board of Directors of the Company shall have
withdrawn or modified such recommendation; (b) the Board of Directors of the
Company shall have recommended to the stockholders of the Company a Takeover
Proposal other than Merger; (c) a Takeover Proposal other than the Merger shall
have been announced or otherwise publicly known and the Board of Directors of
the Company shall have failed to recommend against acceptance of such Takeover
Proposal by its stockholders within ten (10) business days of its receipt or, if
sooner, the date its existence first becomes publicly known; or (d) a tender
offer or exchange offer for 15% or more of the outstanding shares of the Company
Common Stock is
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commenced (other than by Parent or an affiliate of Parent) and the Board of
Directors of the Company recommends that the stockholders of the Company tender
their shares in such tender or exchange offer or, within ten (10) days after
such tender or exchange offer, fails to recommend against acceptance of such
offer or takes no position with respect to the acceptance thereof; or (e) any
Person (other than Parent or any of its Subsidiaries or affiliates) becomes a
beneficial owner of more than 15% of the outstanding Shares.
Section 8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of the Parent, Sub or the
Company except (A) for fraud or for material breach of this Agreement and
(B) as set forth in Section 9.1 hereof.
ARTICLE IX
MISCELLANEOUS
Section 9.1 FEES AND EXPENSES.
(a) Except as contemplated by this Agreement, including Sections 9.1(b)
and 9.1(c) hereof, all costs and expenses incurred in connection with this
Agreement, the Option Agreement and the consummation of the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that those costs and expenses incurred in connection with
filing, printing and mailing the Registration Statement and the Proxy
Statement/Prospectus (including filing fees related thereto) shall be shared
equally by Parent and the Company.
(b) If (x) the Board of Directors of Parent shall terminate this
Agreement pursuant to Section 8.1(d) hereof, or (y) the Board of Directors of
Parent or the Board of Directors of the Company shall terminate this Agreement
pursuant to Section 8.1(b)(iii) hereof, then in any such case as described in
clause (x) or (y) (each such case of termination being referred to as a "TRIGGER
EVENT"), the Company shall pay to Parent (not later than simultaneously with any
such Trigger Event) an amount equal to $19 million (the "TERMINATION FEE").
(c) Notwithstanding anything to the contrary in this Section 9.1, the
payments provided for in this Section 9.1 shall not be deemed to be Parent's or
Sub's exclusive remedy, and Parent and Sub shall have the right to pursue any
remedies available to them at law or in equity; provided, however, that in the
event of a termination of this Agreement pursuant to Section 8.1(d)(i) hereof as
a result of a breach (other than a willful breach) of any of the Company's
representations and warranties, the payments provided for in this Section 9.1
shall be Parent's or Sub's sole and exclusive remedy.
Section 9.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors, at any time prior to the Closing Date with
respect to any of the terms contained herein.
Section 9.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any schedule,
certificate, instrument or other document delivered pursuant to this Agreement
shall survive the Effective Time.
Section 9.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight
32
courier service, such as FedEx, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Hewlett-Packard Company
0000 Xxxxxxx Xxxxxx
Mail Stop 20-BQ
Xxxx Xxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx -- Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
(b) if to the Company, to:
Bluestone Software, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "THE DATE OF THIS
AGREEMENT", "THE DATE HEREOF", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to October 24, 2000. As used in
this Agreement, the term "AFFILIATE(S)" shall have the meaning set forth in
Rule 12b-2 of the Exchange Act.
33
Section 9.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as provided in Section 6.11 hereof, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
Section 9.8 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 9.9 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
Section 9.10 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
HEWLETT-PACKARD COMPANY
By: --------------------------------------
Name: --------------------------------------
Title: --------------------------------------
BETA ACQUISITION CORPORATION
By: --------------------------------------
Name: --------------------------------------
Title: --------------------------------------
BLUESTONE SOFTWARE, INC.
By: --------------------------------------
Name: --------------------------------------
Title: --------------------------------------
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