______________
AGREEMENT AND PLAN OF MERGER
DATED AS OF
June 14, 1999
BY AND AMONG
XXXXXX XXXXXXXXXXX,
SHELLCO INC.,
AND
PULSEPOINT COMMUNICATIONS
______________
TABLE OF CONTENTS
ARTICLE I THE MERGER........................................................2
Section 1.1 The Merger.................................................2
Section 1.2 The Closing; Effective Time................................2
Section 1.3 Subsequent Actions.........................................3
Section 1.4 Articles of Incorporation; Bylaws; Directors and Officers
of the Surviving Corporation.............................3
ARTICLE II EFFECT OF THE MERGER.............................................4
Section 2.1 Treatment of Capital Stock.................................4
Section 2.2 Conversion of Company Common Stock.........................4
Section 2.3 Conversion of Company Preferred Stock......................5
Section 2.4 Cancellation of Excluded Shares............................5
Section 2.5 Conversion of Common Stock of Merger Sub...................5
Section 2.6 Exchange Agent; Exchange Procedures........................5
Section 2.7 Transfer Books.............................................6
Section 2.8 No Fractional Share Certificates; Termination of
Exchange Fund ...........................................7
Section 2.9 Dissenting Shares..........................................7
Section 2.10 Dividends.................................................8
Section 2.11 Certain Adjustments.......................................8
Section 2.12 Withholding Rights........................................8
Section 2.13 Lost, Stolen or Destroyed Certificates....................9
Section 2.14 Options to Purchase Company Shares........................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................11
Section 3.1 Organization and Qualification; Subsidiaries..............11
Section 3.2 Articles of Incorporation and Bylaws......................12
Section 3.3 Capitalization............................................12
Section 3.4 Power and Authority; Authorization; Valid & Binding.......14
Section 3.5 No Conflict; Required Filings and Consents................14
Section 3.6 SEC Reports; Financial Statements.........................15
Section 3.7 Absence of Certain Changes................................16
- i -
Section 3.8 Litigation and Liabilities................................17
Section 3.9 No Violation of Law; Permits..............................18
Section 3.10 Benefit Plans............................................18
Section 3.11 Labor Matters............................................20
Section 3.12 Environmental Matters....................................20
Section 3.13 Vote Required; Options...................................22
Section 3.14 Opinion of Financial Advisor.............................23
Section 3.15 Brokers..................................................23
Section 3.16 Tax Matters..............................................23
Section 3.17 Intellectual Property....................................25
Section 3.18 Title to Property........................................25
Section 3.19 Contracts and Commitments................................26
Section 3.20 Proxy Statement/Prospectus; Registration Statement.......26
Section 3.21 Pooling of Interests; Reorganization.....................27
Section 3.22 Restrictions on Business Activities......................27
Section 3.23 Related Party Transactions...............................27
Section 3.24 Insurance................................................28
Section 3.25 Year 2000................................................28
Section 3.26 Foreign Corrupt Practices, etc...........................29
ARTICLE IV REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB...........29
Section 4.1 Organization and Qualification; Subsidiaries..............29
Section 4.2 Certificate of Incorporation and Bylaws...................29
Section 4.3 Capitalization............................................30
Section 4.4 Power and Authority; Authorization; Valid & Binding.......30
Section 4.5 No Conflict; Required Filings and Consents................31
Section 4.6 SEC Reports; Financial Statements.........................32
Section 4.7 Absence of Certain Changes................................33
Section 4.8 Litigation and Liabilities................................33
Section 4.9 No Violation of Law; Permits..............................33
- ii -
Section 4.10 Proxy Statement/Prospectus; Registration Statement.......34
Section 4.11 Pooling of Interests; Reorganization.....................34
Section 4.12 Merger Sub...............................................34
Section 4.13 Valid Issuance...........................................35
Section 4.14 Brokers..................................................35
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS........................35
Section 5.1 Interim Operations of the Company.........................35
Section 5.2 Interim Operations of Parent..............................38
Section 5.3 No Solicitation...........................................39
ARTICLE VI ADDITIONAL COVENANTS............................................42
Section 6.1 Meeting of Shareholders; Record Date......................42
Section 6.2 Filings; Other Actions....................................42
Section 6.3 Publicity.................................................43
Section 6.4 Registration Statement....................................43
Section 6.5 Listing Application.......................................43
Section 6.6 Further Action............................................44
Section 6.7 Expenses..................................................44
Section 6.8 Notification of Certain Matters...........................44
Section 6.9 Access to Information.....................................45
Section 6.10 Review of Information....................................46
Section 6.11 Insurance; Indemnity.....................................46
Section 6.12 Employee Benefits........................................47
Section 6.13 Options..................................................48
Section 6.14 Affiliates...............................................48
Section 6.15 Takeover Statutes........................................48
Section 6.16 Pooling of Interests.....................................49
Section 6.17 Tax-Free Reorganization..................................49
Section 6.18 Accountant's Comfort Letters.............................49
Section 6.19 Accountant's Pooling Letters.............................49
Section 6.20 Warrants.................................................49
- iii -
ARTICLE VII CONDITIONS TO MERGER...........................................50
Section 7.1 Conditions to Obligations of the Parties to Consummate
the Merger .............................................50
Section 7.2 Additional Conditions to Obligations of Parent and
Merger Sub .............................................51
Section 7.3 Additional Conditions to Obligations of the Company.......52
ARTICLE VIII TERMINATION AND AMENDMENT.....................................53
Section 8.1 Termination...............................................53
Section 8.2 Effect of Termination.....................................54
Section 8.3 Amendment.................................................56
ARTICLE IX GENERAL PROVISIONS..............................................56
Section 9.1 Non-Survival of Representations, Warranties and
Agreements .............................................56
Section 9.2 Notices...................................................56
Section 9.3 Certain Definitions; Interpretation.......................57
Section 9.4 Headings..................................................61
Section 9.5 Severability..............................................61
Section 9.6 Entire Agreement; No Third-Party Beneficiaries............62
Section 9.7 Assignment................................................62
Section 9.8 Governing Law; Jurisdiction...............................62
Section 9.9 Trial by Jury.............................................62
Section 9.10 Enforcement..............................................62
Section 9.11 Obligations of Subsidiaries..............................62
Section 9.12 Counterparts.............................................63
EXHIBITS
--------
Exhibit A -- List of Persons Executing Voting Agreements
Exhibit B -- Form of Voting Agreements
Exhibit C -- Articles of Incorporation of Surviving Corporation
Exhibit D -- Form of Affiliate Letter
- iv -
INDEX OF DEFINED TERMS
DEFINED TERM Page No.
Action......................................................................46
affiliate...................................................................57
Agreement....................................................................1
Agreement of Merger..........................................................2
Average Stock Price..........................................................4
Benefit Agreement...........................................................18
Benefit Plan................................................................57
Cap Amount..................................................................46
CGCL.........................................................................2
Closing......................................................................2
Closing Date.................................................................2
Code.........................................................................1
Company......................................................................1
Company Acquisition Proposal................................................40
Company Acquisition Transaction.............................................41
Company Capital Stock Disclosure Date.......................................12
Company Common Shares........................................................1
Company Common Stock.........................................................1
Company Disclosure Letter...................................................57
Company Equity Rights.......................................................58
Company Financial Advisor...................................................23
Company Material Adverse Effect.............................................58
Company Options..............................................................9
Company Preferred Stock or Company Preferred Shares.........................58
Company SEC Reports.........................................................15
Company Shareholder Meeting.................................................42
Company Shares..............................................................58
Company Stock Option Plans...................................................9
Confidentiality Agreement...................................................58
Consents....................................................................51
Contracts...................................................................26
control.....................................................................58
Daily Per Share Price........................................................4
Debt Instrument.............................................................26
December 1998 Company Balance Sheet.........................................58
December 1998 Parent Balance Sheet..........................................58
- i -
E&Y.........................................................................49
Effective Time...............................................................3
Employee....................................................................58
Environmental Claim.........................................................21
Environmental Laws..........................................................22
Environmental Permits.......................................................20
ERISA.......................................................................59
ERISA Affiliate.............................................................59
ERISA Benefit Plan..........................................................59
ESPP........................................................................48
ESPP Option.................................................................48
Exchange Act................................................................10
Exchange Agent...............................................................5
Exchange Fund................................................................6
Exchange Ratio...............................................................4
Excluded Shares.............................................................59
Filings.....................................................................51
Form S-4....................................................................43
GAAP.........................................................................1
Governmental Entity.........................................................15
Hazardous Materials.........................................................22
HSR Act.....................................................................15
Imperial Bank Warrants......................................................59
Indebtedness................................................................26
Indemnified Party...........................................................46
Intellectual Property Rights................................................59
Joint Proxy Statement/Prospectus............................................43
Junior Preferred Stock......................................................59
Knowledge...................................................................59
Merger.......................................................................1
Merger Sub...................................................................1
Nasdaq......................................................................59
NEXTLINK Warrants...........................................................59
Nondisclosure Agreement.....................................................60
NYSE........................................................................60
Other Warrants..............................................................60
Parent.......................................................................1
Parent Common Stock..........................................................4
Parent Disclosure Letter....................................................60
Parent Equity Rights........................................................60
Parent Material Adverse Effect..............................................60
- ii -
Parent Rights Agreement.....................................................60
Parent SEC Reports..........................................................32
Parent Shares................................................................4
Parties......................................................................1
Party........................................................................1
PCBs........................................................................22
Person......................................................................60
Preferred Holders............................................................1
Related Party...............................................................27
Release.....................................................................22
Representative..............................................................39
Requisite Conversion........................................................54
SEC..........................................................................1
Securities Act..............................................................15
Series A Preferred Stock....................................................30
Shareholder Meeting Date....................................................60
Stock Option Agreement.......................................................1
Subsidiary..................................................................60
Substitute Option............................................................9
Superior Proposal...........................................................41
Surviving Corporation........................................................2
Tax.........................................................................61
Tax Return..................................................................61
Termination Date............................................................53
Termination Fee.............................................................55
Third Party.................................................................39
Total Merger Consideration..................................................51
Trigger Date................................................................54
Voting Agreements............................................................1
Warrants....................................................................61
Year 2000 Compliant.........................................................28
- iii -
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 14, 1999 (this
"Agreement"), by and among XXXXXX XXXXXXXXXXX ("Parent"), a Delaware
--------- ------
corporation, SHELLCO INC. ("Merger Sub"), a California corporation and a
-----------
wholly-owned subsidiary of Parent, and PULSEPOINT COMMUNICATIONS (the
"Company"), a California corporation. Parent, Merger Sub and the Company are
-------
sometimes referred to herein, individually, as a "Party," and, together, as the
-----
"Parties." Certain capitalized terms used herein are defined in Section 9.3.
-------
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have each determined that the merger of Merger Sub with and into
the Company (the "Merger") upon the terms and subject to the conditions set
------
forth in this Agreement is advisable, fair to and in the best interests of their
respective corporations and shareholders and have approved the Merger;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger will qualify as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended and the rules and regulations
promulgated thereunder (the "Code");
----
WHEREAS, it is intended that, for accounting purposes, the Merger
will be accounted for as a pooling-of-interests under United States generally
accepted accounting principles ("GAAP") and applicable rules and regulations of
----
the Securities and Exchange Commission (the "SEC");
---
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, Parent and the Company have executed and delivered a Stock
Option Agreement, dated as of the date hereof (the "Stock Option Agreement"),
-----------------------
pursuant to which the Company is granting to Parent an option to purchase, under
certain circumstances, up to a number of shares of common stock, no par value,
of the Company (the "Company Common Stock" or "Company Common Shares") equal to
--------------------- ---------------------
19.9% of the outstanding shares of Company Common Stock with an exercise price
per share equal to $6.60; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, certain persons listed on Exhibit A (the "Preferred
---------- ---------
Holders") have entered into Voting Agreements with Parent dated as of the date
-------
of this Agreement in the form attached hereto as Exhibit B (the "Voting
---------- ------
Agreements"), pursuant to which such persons
----------
- 1 -
have agreed, among other things, to vote all voting securities of the Company
beneficially owned by such persons in favor of approval and adoption of this
Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time and subject to and upon the
----------
terms and conditions of this Agreement and in accordance with the California
General Corporation Law (the "CGCL"), Merger Sub shall be merged with and into
----
the Company and the separate corporate existence of Merger Sub shall cease. The
Company shall continue as the surviving corporation (sometimes referred to
herein as the "Surviving Corporation") in the Merger and as of the Effective
----------------------
Time shall be a wholly-owned subsidiary of Parent. The Merger shall have the
effects specified in the CGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all properties, rights, privileges,
powers and franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and obligations of Merger Sub and the
Company shall become the debts, liabilities and obligations of the Surviving
Corporation.
Section 1.2 The Closing; Effective Time. (a) The closing of the Merger
------------------------------
(the "Closing") shall take place (i) at the offices of Fried, Frank, Harris,
-------
Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, at 10:00 A.M.
local time, on the second business day following the date on which the last to
be satisfied or waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or, where permitted, waiver of those conditions)
shall be satisfied or waived in accordance with this Agreement unless that
second business day would be September 1, 1999 in which case the Parties shall
use reasonable best efforts to ensure that the closing shall take place on
August 31, 1999 or (ii) at such other place, time and/or date as Parent and the
Company shall agree (the date of the Closing, the "Closing Date").
------------
(b) On the Closing Date, Parent, the Company and Merger Sub shall
cause a merger agreement in such form as is required by Sections 1101, 1102 and
1103 of the CGCL (the "Agreement of Merger") to be properly executed and
---------------------
acknowledged, and filed with the Secretary of State of the State of California
as provided in the CGCL. The Merger shall become effective at such time at which
such Agreement of Merger shall be
- 2 -
duly filed with the Secretary of State of the State of California or at the time
specified in the Agreement of Merger, if any (the time that the Merger becomes
effective, the "Effective Time").
--------------
Section 1.3 Subsequent Actions. If, at any time after the Effective Time,
------------------
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to continue, vest, perfect or confirm of record or otherwise the
Surviving Corporation's right, title or interest in, to or under any of the
rights, properties, privileges, franchises or assets of either of its
constituent corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger, or otherwise to carry out the
intent of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either of the constituent corporations of the Merger, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties, privileges,
franchises or assets in the Surviving Corporation or otherwise to carry out the
intent of this Agreement.
Section 1.4 Articles of Incorporation; Bylaws; Directors and Officers of
--------------------------------------------------------------
the Surviving Corporation. Unless otherwise agreed by Parent and the Company
--------------------------
prior to the Closing, at the Effective Time:
(a) the Articles of Incorporation of the Company shall be amended
to read in their entirety as set forth on Exhibit C hereto, and as so amended
---------
shall constitute (until amended as provided by applicable law and such Articles
of Incorporation, as applicable) the articles of incorporation of the Surviving
Corporation;
(b) the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall be at and after the Effective Time (until amended as
provided by law, its Articles of Incorporation and its Bylaws, as applicable)
the Bylaws of the Surviving Corporation;
(c) the officers of Merger Sub immediately prior to the Effective
Time shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, until their successors are
elected or appointed and qualified or until their resignation or removal; and
(d) the directors of Merger Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation from and after the
Effective Time,
- 3 -
until their successors are elected or appointed and qualified or until their
resignation or removal.
ARTICLE II
EFFECT OF THE MERGER
Section 2.1 Treatment of Capital Stock. The manner and basis of converting
--------------------------
the Company Shares and the shares of common stock of Merger Sub, by virtue of
the Merger and without any action on the part of any holder thereof, shall be as
set forth in this Article II.
Section 2.2 Conversion of Company Common Stock. (a) Subject to Section
------------------------------------
2.8, each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (other than the Excluded Shares), and all rights in
respect thereof, shall at the Effective Time, without any action on the part of
any holder thereof, forthwith cease to exist and be converted into the right to
receive an amount of validly issued, fully paid and nonassessable shares of
Parent's Common Stock, $.01 par value per share (the "Parent Common Stock" or
--------------------
"Parent Shares"), which is equal to the Exchange Ratio and including
---------------
corresponding rights to purchase shares of Junior Preferred Stock pursuant to
the Parent Rights Agreement. Prior to the Distribution Date (as defined in the
Parent Rights Agreement), all references in this Agreement to Parent Common
Stock or Parent Shares to be received in accordance with the Merger shall be
deemed to include such associated rights under the Parent Rights Agreement.
(b) The "Exchange Ratio" means a fraction (expressed as a decimal
--------------
and rounded to the nearest one-thousandth), such fraction to be in the ratio
provided below. If the Average Stock Price (as defined below) is:
(i) greater than $33.00, the Common Stock Exchange Ratio shall
be equal to $6.60 divided by the Average Stock Price;
(ii) equal to or greater than $27.00 and less than or equal to
$33.00, the Common Stock Exchange Ratio shall be fixed at 0.20; and
(iii) less than $27.00, the Common Stock Exchange Ratio shall be
equal to $5.40 divided by the Average Stock Price.
"Average Stock Price" means the average of the Daily Per Share Prices for the
---------------------
twenty consecutive trading days ending on the fourth trading day prior to the
Company Shareholder Meeting. The "Daily Per Share Price" for any trading day
----------------------
means the last reported sale price per share of Parent Common Stock as reported
on the NYSE Composite Transaction Tape for that day.
- 4 -
(c) Except as otherwise provided herein, commencing immediately
after the Effective Time, each certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of Company Common
Stock shall evidence the right to receive shares of Parent Common Stock on the
basis set forth in Section 2.2(a) above (and cash in lieu of any fractional
shares pursuant to Section 2.8.)
Section 2.3 Conversion of Company Preferred Stock.
-------------------------------------
(a) Subject to Section 2.8, each share of Company Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than the
Excluded Shares), and all rights in respect thereof, shall at the Effective
Time, without any action on the part of any holder thereof, forthwith cease to
exist and be converted into the right to receive an amount of validly issued,
fully paid and nonassessable shares of Parent Common Stock, which is equal to
the product of (i) the Exchange Ratio and (ii) the number of shares of Company
Common Stock issuable upon conversion of a share of Company Preferred Stock
immediately prior to the Effective Time.
(b) Except as otherwise provided herein, commencing immediately
after the Effective Time, each certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of Company Preferred
Stock shall evidence the right to receive shares of Parent Common Stock on the
basis set forth in Section 2.3(a) above (and cash in lieu of any fractional
shares pursuant to Section 2.8).
Section 2.4 Cancellation of Excluded Shares. At the Effective Time, each
--------------------------------
Excluded Share, by virtue of the Merger and without any action on the part of
the holder thereof, shall forthwith cease to be outstanding, shall be canceled
and retired, and no shares of stock or other securities of Parent or the
Surviving Corporation shall be issuable, and no payment or other consideration
shall be made or paid, in respect thereof.
Section 2.5 Conversion of Common Stock of Merger Sub. At the Effective
------------------------------------------
Time, each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time, and all rights in respect thereof,
shall, without any action on the part of Parent, forthwith cease to exist and be
converted into one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
Section 2.6 Exchange Agent; Exchange Procedures. (a) Subject to the terms
-----------------------------------
and conditions of this Agreement, at or prior to the Effective Time, Parent
shall appoint a bank or trust company selected by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), to effect the exchange of
---------------
Company Shares for shares of Parent Common Stock in accordance with the
provisions of this Article II. From time to time following the Effective Time
upon the requisition by the Exchange Agent, Parent shall deposit, or cause to be
deposited, with the Exchange Agent certificates representing the
- 5 -
shares of Parent Common Stock to be issued in the Merger, any cash payable in
respect of fractional shares in accordance with Section 2.8 and the amount of
any dividends or distributions in accordance with Section 2.6(b) (the "Exchange
--------
Fund").
----
(b) As soon as reasonably practicable after the Effective Time,
Parent shall instruct the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented Company Shares (other than the Excluded Shares) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificates shall pass, only upon delivery to the
Exchange Agent and shall be in such form and have such other provisions as
Parent shall reasonably specify) and (ii) instructions for use in effecting the
surrender of certificates which immediately prior to the Effective Time
represented Company Shares for certificates representing shares of Parent Common
Stock and cash in lieu of fractional shares, if any. Commencing immediately
after the Effective Time, upon the surrender to the Exchange Agent of such
certificate or certificates, together with a duly executed and completed letter
of transmittal and all other documents and other materials required by the
Exchange Agent to be delivered in connection therewith, the holder thereof shall
be entitled to receive a certificate or certificates representing the number of
whole shares of Parent Common Stock into which the Company Shares which
immediately prior to the Effective Time were represented by the certificate or
certificates so surrendered shall have been converted in accordance with the
provisions of Section 2.2 or Section 2.3 as appropriate, together with a cash
payment (net of any applicable tax withholdings) in lieu of fractional shares,
if any. Unless and until any certificate or certificates which immediately prior
to the Effective Time represented Company Shares are so surrendered, no dividend
or other distribution, if any, payable to the holders of record of shares of
Parent Common Stock as of any date subsequent to the Effective Time shall be
paid to the holder of such certificate or certificates in respect thereof.
Except as otherwise provided herein, upon the surrender of any certificate or
certificates which immediately prior to the Effective Time represented Company
Shares, the record holder of the certificate or certificates representing shares
of Parent Common Stock issued in exchange therefore shall be entitled to receive
(i) at the time of surrender, the amount of any dividends or other distributions
(net of any applicable tax withholdings) having a record date after the
Effective Time and a payment date prior to the surrender date, payable in
respect of such shares of Parent Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions (net of any
applicable tax withholdings) having a record date after the Effective Time and a
payment date subsequent to the date of such surrender, payable in respect of
such shares of Parent Common Stock. No interest shall be payable in respect of
the payment of dividends or distributions pursuant to the immediately preceding
sentence.
Section 2.7 Transfer Books. The stock transfer books of the Company shall
--------------
be closed at the Effective Time and no transfer of any Company Shares will
thereafter be
- 6 -
recorded on any of such stock transfer books. In the event of a transfer of
ownership of any Company Shares that is not registered in the stock transfer
records of the Company at the Effective Time, a certificate or certificates
representing the number of full shares of Parent Common Stock into which such
Company Shares shall have been converted in the Merger shall be issued to the
transferee together with a cash payment (net of any applicable tax withholdings)
in lieu of fractional shares, if any, in accordance with Section 2.8, and a cash
payment in accordance with Section 2.6(b) of dividends or distributions, if any,
only if the certificate or certificates which immediately prior to the Effective
Time represented such Company Shares are surrendered as provided in Section 2.6,
accompanied by all documents required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer taxes.
Section 2.8 No Fractional Share Certificates; Termination of Exchange
--------------------------------------------------------------
Fund. (a) No scrip or fractional share certificate for Parent Common Stock will
----
be issued upon the surrender for exchange of a certificate or certificates which
immediately prior to the Effective Time represented Company Shares, and no
outstanding fractional share interest will entitle the holder thereof to vote or
receive dividends or distributions or any other rights of a shareholder of
Parent with respect to such fractional share interest. Each holder entitled to
receive a fractional share of Parent Common Stock but for this Section 2.8(a)
shall be entitled to receive an amount of cash (net of applicable tax
withholdings) equal to the product obtained by multiplying (i) the fractional
share interest to which such holder would otherwise be entitled (after taking
into account all Company Shares held immediately prior to the Effective Time by
such holder) by (ii) the closing price for a share of Parent Common Stock on the
NYSE Composite Transaction Tape on the trading day immediately prior to the
Closing Date. No interest shall be payable in respect of any cash payment for
fractional share interests.
(b) Any portion of the Exchange Fund which remains undistributed
one year after the Effective Time shall be delivered to Parent upon demand, and
each holder of Company Shares who had not theretofore surrendered certificates
or certificates which immediately prior to the Effective Time represented
Company Shares in accordance with the provisions of this Article II shall
thereafter look only to Parent for satisfaction of such holder's claims for
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions payable in accordance with
Section 2.6(b). Notwithstanding the foregoing, none of Parent, the Surviving
Corporation, the Exchange Agent or any other Person shall be liable to any
former holder of Company Shares for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Section 2.9 Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, Company Shares which are "dissenting shares" (as defined in
Section 1300(b) of the CGCL), if any, shall not be converted into or represent a
right to receive
- 7 -
any shares of Parent Common Stock, but the holders thereof shall be entitled
only to such rights as are granted by the CGCL. Each holder of dissenting shares
who becomes entitled to payment therefor pursuant to the CGCL shall receive
payment from the Surviving Corporation in accordance with the CGCL; provided,
--------
however, that (i) if any such holder of dissenting shares shall have failed to
-------
establish his entitlement to appraisal rights as provided in the CGCL, (ii) if
any such holder of dissenting shares shall have effectively withdrawn his demand
for appraisal thereof or lost his right to appraisal and payment therefor under
the CGCL or (iii) if, as to the Company Common Shares, neither any holder of
dissenting shares which are shares of Company Common Stock nor the Surviving
Corporation shall have filed a petition demanding a determination of the fair
value of all dissenting shares of Company Common Stock within the time provided
in the CGCL, such holder or holders (as the case may be) of Company Common Stock
shall forfeit the right to appraisal of such shares of Company Common Stock, and
if, as to the Company Preferred Shares, neither any holder of dissenting shares
which are shares of Company Preferred Stock nor the Surviving Corporation shall
have filed a petition demanding a determination of the fair value of all
dissenting shares of Company Preferred Stock within the time period provided by
the CGCL, such holder or holders (as the case may be) of Company Preferred Stock
shall forfeit the right to appraisal of such shares of Company Preferred Stock
and, in either case, such shares shall thereupon be deemed to have been
converted, as of the Effective Time, into and represent shares of Parent Common
Stock, without interest thereon, as provided in Section 2.1(a).
Section 2.10 Dividends. Parent and the Company shall coordinate with each
---------
other the declaration of, and the setting of record dates and payment dates for,
dividends (if any) in respect of their respective common stock so that, in
respect of any fiscal quarter, holders thereof (i) do not receive dividends in
respect of both (x) Company Shares and (y) shares of Parent Common Stock
received pursuant to the Merger in respect thereof or (ii) fail to receive a
dividend in respect of both (x) Company Shares and (y) the shares of Parent
Common Stock received pursuant to the Merger in respect thereof.
Section 2.11 Certain Adjustments. If between the date of this Agreement
--------------------
and the Effective Time, the outstanding shares of Company Common Stock or Parent
Common Stock shall be changed into a different number of shares by reason of any
stock split or combination of shares, or any dividend payable in stock shall be
declared thereon with a record date within such period, the Exchange Ratio shall
be appropriately adjusted to provide the holders of Company Shares the same
economic effect as contemplated by this Agreement prior to such event.
Section 2.12 Withholding Rights. Each of Parent and the Company shall be
-------------------
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of certificates which prior to the
Effective Time represented Company Shares such amounts as Parent or the Company
is required to deduct and
- 8 -
withhold with respect to the making of such payment under the Code or any
provision of state, local, or foreign Tax law. To the extent that amounts are so
withheld by Parent or the Company, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Company
Shares in respect of which such deduction and withholding was made by Parent or
the Company, as the case may be.
Section 2.13 Lost, Stolen or Destroyed Certificates. In the event any
-----------------------------------------
certificates representing Company Shares shall have been lost, stolen or
destroyed, the Exchange Agent shall pay in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, shares of Parent Common Stock and cash in lieu of fractional
shares thereof as may be required pursuant to Sections 2.2, 2.3 and 2.8;
provided, however, that Parent may in its discretion, and as a condition
-------- -------
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the certificates alleged to
have been lost, stolen or destroyed.
Section 2.14 Options to Purchase Company Shares. (a) Effective at the
------------------------------------
Effective Time, each unexpired and unexercised outstanding option or stock
purchase right, whether or not then vested or exercisable in accordance with its
terms, to purchase shares of Company Common Stock (the "Company Options")
----------------
previously granted by the Company or any of its Subsidiaries under the Company's
1983 Stock Option Plan, as amended, or its Directors Stock Option Plan, as
amended (such plans, as amended, are collectively referred to herein as the
"Company Stock Option Plans"), shall be converted automatically into an option
--------------------------
or right to acquire the number of shares of Parent Common Stock (a "Substitute
----------
Option"), rounded to the nearest whole share, determined by multiplying (i) the
------
number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time by (ii) the Exchange Ratio. The exercise
price per share of Parent Common Stock subject to each Substitute Option shall
be equal to the exercise price per share of Company Common Stock subject to the
relevant Company Option divided by the Exchange Ratio and then rounded to the
nearest one one-hundredth of a cent; provided, however, that, in the case of any
-------- -------
Company Option which is qualified as an incentive stock option under Section 422
of the Code, the conversion formula (both as to number of shares to be subject
to the related Substitute Option and the exercise price of the related
Substitute Option) shall be adjusted, if necessary, to comply with Section
424(a) of the Code. After the Effective Time, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable to the related
Company Option immediately prior to the Effective Time (including those terms
which may have caused such Company Option/Substitute Option to become
exercisable in full in connection with the consummation of the transactions
contemplated by this Agreement). As soon as practicable after the Effective
Time, Parent
- 9 -
shall deliver to the holders of the Substitute Options appropriate notice
setting forth such holders' rights pursuant thereto. Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery under the Company Stock Option Plans, which
shall be assumed in accordance with this Section 2.14.
(b) As soon as is reasonably practicable after the Effective
Time, Parent shall file a registration statement on Form S-8 (if available and
required) (or any successor or other appropriate forms) with respect to the
shares of Parent Common Stock subject to such options and rights and shall use
its reasonable best efforts to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding. The Company
(or, if appropriate, any committee administering the Company Stock Option Plans)
shall use its reasonable best efforts, prior to or as of the Effective Time, to
take all necessary actions, pursuant to and in accordance with the terms of the
Company Stock Option Plans and the instruments evidencing the Company Options,
to provide for the conversion of the Company Options into options and rights to
acquire Parent Common Stock in accordance with this Section 2.14. The Board of
Directors of the Company shall, prior to or as of the Effective Time, take
appropriate action to approve the cancellation of the Company Options for
purposes of Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Parent shall, prior to or as of the Effective Time, take
------------
appropriate action to approve the acquisition of options and rights to purchase
Parent Common Stock under the Company Options (as converted pursuant to Section
2.14(a)) for purposes of Section 16(b) of the Exchange Act.
Section 2.15 Warrants to Purchase Company Shares. (a) Prior to the
------------------------------------
Effective Time, the Company and Parent together shall use reasonable best
efforts to take all action necessary with respect to the Warrants such that as
of and after the Effective Time each Warrant shall entitle the holder thereof to
purchase such number of shares of Parent Common Stock as is equal to the product
of (x) the number of shares of Company Common Stock subject to such Warrant
immediately prior to the Effective Time and (y) the Exchange Ratio; and the
exercise price per share of Parent Common Stock subject to such Warrant shall be
equal to (A) the exercise price per share of Company Common Stock immediately
prior to the Effective Time divided by (B) the Exchange Ratio. The Company shall
take no action to cause any Warrant which pursuant to its terms as in effect as
of the date hereof would not become exercisable by reason of the transactions
contemplated by this Agreement to become exercisable in connection herewith, and
nothing contained in this Agreement shall be interpreted as causing any such
Warrant to become exercisable, except as provided currently under the terms of
the Warrants (subject to the adjustments required by this Section 2.15 after
giving effect to the Merger).
- 10 -
(b) Notwithstanding the foregoing, the number of shares of
Parent Common Stock deliverable upon exercise of each Warrant at and after the
Effective Time as contemplated by paragraph (a) above shall be rounded, if
necessary, to the nearest whole share, and the exercise price with respect
thereto shall be rounded, if necessary, to the nearest one one-hundredth of a
cent. Other than as provided in Section 2.15(a) and in the prior sentence of
this Section 2.15(b), as of and after the Effective Time, each Warrant shall be
subject to substantially the same terms and conditions as in effect immediately
prior to the Effective Time, but giving effect to the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Letter or the Company
SEC Reports filed with the SEC prior to the date hereof, the Company hereby
represents and warrants to Parent and Merger Sub as follows:
Section 3.1 Organization and Qualification; Subsidiaries. (a) The Company
---------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California. The Company has the requisite corporate power
and authority to own, operate or lease its properties and to carry on its
business as it is now being conducted. Each of the Subsidiaries of the Company
is a corporation or other business entity duly organized and validly existing
under the laws of its jurisdiction of incorporation or organization. Except as
would not, individually or in the aggregate, have a Company Material Adverse
Effect, (i) each of the Subsidiaries of the Company has the requisite corporate
or other organizational power and authority to own, operate or lease its
properties and to carry on its business as it is now being conducted, is in good
standing under the laws of its jurisdiction of incorporation or organization;
and (ii) each of the Company and its Subsidiaries is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary.
(b) Section 3.1(b) of the Company Disclosure Letter contains a
list of all Subsidiaries of the Company together with the jurisdiction of
incorporation or organization of each such Subsidiary and the number of shares
and percentage of each class of each Subsidiary's capital stock or other equity
securities owned directly or indirectly by the Company. All of the outstanding
shares of capital stock and other equity securities of the Subsidiaries of the
Company have been validly issued and are fully paid and nonassessable and all of
such shares and securities owned, directly or indirectly, by the Company are
owned free and clear of all liens, pledges, security interests or other
encumbrances. Except as set forth in Section 3.1(b) of the Company Disclosure
Letter,
- 11 -
there are no subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise)
entitling any Person to purchase or otherwise acquire from the Company or any of
its Subsidiaries at any time, or upon the happening of any stated event, any
shares of capital stock or other equity securities of any of the Subsidiaries of
the Company. There are no outstanding obligations, contingent or otherwise, of
the Company or any of its Subsidiaries to repurchase, redeem of otherwise
acquire any shares of capital stock or other equity securities, or any
securities convertible, exchangeable or exercisable for or into shares of
capital stock or other equity securities, of any Subsidiary of the Company.
Except as disclosed in the Company SEC Reports filed prior to the date of this
Agreement, the Company does not directly or indirectly own any interest (debt,
equity or otherwise) in any corporation, partnership, limited partnership, joint
venture, limited liability company or other business association or entity that
is not a Subsidiary of the Company, or have any obligation, commitment or
undertaking to acquire any such interest or invest in any such corporation,
partnership, joint venture, limited liability company or other business
association or entity.
(c) Except for interests in its Subsidiaries, neither the Company
nor any of its Subsidiaries owns directly or indirectly any material equity
interest in any Person or has any obligation or has made any commitment to
acquire any such interest or make any such investment.
Section 3.2 Articles of Incorporation and Bylaws. The Company has
------------------------------------------
furnished to Parent a complete and correct copy of the Articles of Incorporation
and Bylaws, as amended to the date of this Agreement, of the Company. Such
Articles of Incorporation and Bylaws and all similar organizational documents of
the Subsidiaries of the Company are in full force and effect. The Company is not
in violation of any of the provisions of its Articles of Incorporation or Bylaws
and, except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, none of the Subsidiaries of the Company is in violation
of any similar organizational documents of Subsidiaries of the Company.
Section 3.3 Capitalization. (a) The authorized capital stock of the
--------------
Company consists of 50,000,000 shares of Company Common Stock and 15,000,000
shares of preferred stock, of which 3,373,334 are designated as Series B
Convertible Preferred Stock. No classes or series of preferred stock have been
designated other than such Series B Convertible Preferred Stock. At the close of
business on May 25, 1999 (the "Company Capital Stock Disclosure Date"), (i)
-----------------------------------------
5,577,572 shares of Company Common Stock and 3,208,534 shares of Company
Preferred Stock were issued and outstanding, and (ii) no shares of Company
Common Stock and no shares of Company Preferred Stock were held by the Company
in its treasury. Section 3.3(a) of the Company Disclosure Letter lists the
number of shares of Company Common Stock and Company Preferred Stock reserved
for
- 12 -
issuance as of the Company Capital Stock Disclosure Date under each of the
Benefit Plans or otherwise (including shares of Company Common Stock reserved
for future grants of options or rights under the Company Stock Option Plans as
of the date hereof and securities issuable upon exercise of the Warrants). Since
the Company Capital Stock Disclosure Date, no shares of Company Common Stock or
Company Preferred Stock have been issued or reserved for issuance, except for
(i) shares of Company Common Stock issued in respect of the exercise, conversion
or exchange of Company Equity Rights outstanding as of the Company Capital Stock
Disclosure Date (ii) shares of Company Common Stock issued or reserved for
issuance in connection with the Stock Option Agreement or (iii) shares of
Company Common Stock reserved for issuance in connection with options granted in
accordance with Section 5.1(viii). Section 3.3(a) of the Company Disclosure
Letter sets forth the number and type of Company Equity Rights (including the
number and class of the Company Shares for or into which such Company Equity
Rights are exercisable, convertible or exchangeable and any Benefit Plan
pursuant to which such Company Equity Rights were granted or issued) outstanding
as of the Company Capital Stock Disclosure Date. As of the date hereof, the
conversion price per share of the Company Preferred Stock is $3.00 per share of
Company Common Stock, entitling the holder thereof to acquire 2.5 shares of
Company Common Stock upon conversion of one Company Preferred Share.
(b) There are no outstanding obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any Company Shares
or any Company Equity Rights (except in connection with the exercise, conversion
or exchange of outstanding Company Equity Rights). There are no bonds,
debentures, notes or other indebtedness issued and outstanding having the right
to vote together with the Company's shareholders on any matter in respect of
which the Company's shareholders are entitled to vote. Except for the Voting
Agreements, no shareholders of the Company are party to any voting agreement,
voting trust or similar arrangement with respect to Company Shares to which the
Company or any Subsidiary of the Company is a Party. All of the issued and
outstanding shares of Company Common Stock and Company Preferred Stock are
validly issued, fully paid, nonassessable and free of preemptive rights. The
Company has not repurchased Company Shares since December 31, 1995.
(c) Section 3.3(c) of the Company Disclosure Letter sets forth the
following information for each of the Warrants: (i) the exercise price in effect
as of the date hereof, (ii) the identity of the holder(s), (iii) the number of
shares of Company Common Stock into which such Warrants are exercisable, and
(iv) a list of all amendments to the terms of such Warrants and a list of any
agreements entered into in connection therewith. The Company has provided Parent
with true and correct copies of the Warrants and such agreements as may have
been amended.
- 13 -
Section 3.4 Power and Authority; Authorization; Valid & Binding. (a) The
-----------------------------------------------------
Board of Directors of the Company, at a meeting duly called, duly adopted
resolutions approving this Agreement and the Merger, determining that this
Agreement is advisable and that the Merger is fair to, and in the best interests
of, the Company's shareholders, and recommending that the Company's shareholders
adopt this Agreement. The Company has the necessary corporate power and
authority to enter into and deliver this Agreement and the Stock Option
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby and thereby, except that the Merger is subject
to the adoption and approval of this Agreement and the Merger by the holders of
Company Common Stock and Company Preferred Stock as required by the CGCL. The
execution and delivery of this Agreement and the Stock Option Agreement by the
Company, the performance by it of its obligations hereunder and thereunder and
the consummation by the Company of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action on the part
of the Company (other than with respect to the Merger, the adoption and approval
of this Agreement and the Merger by the holders of Company Common Stock and
Company Preferred Stock as required by the CGCL and the Articles of
Incorporation of the Company). Each of this Agreement and the Stock Option
Agreement has been duly executed and delivered by the Company and assuming the
due authorization, execution and delivery by Parent and Merger Sub of the
Agreement, and by Parent of the Stock Option Agreement, each of the Agreement
and the Stock Option Agreement constitutes a legal, valid and binding obligation
of the Company enforceable against it in accordance with the terms hereof or
thereof, subject to bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 3.5 No Conflict; Required Filings and Consents. (a) The execution
-------------------------------------------
and delivery of this Agreement and the Stock Option Agreement by the Company
does not, and the performance by the Company of its obligations hereunder and
thereunder and the consummation by the Company of the transactions contemplated
hereby and thereby will not, (i) violate or conflict with the Articles of
Incorporation or Bylaws of the Company, (ii) subject to obtaining or making the
notices, reports, filings, waivers, consents, approvals or authorizations
referred to in Section 3.5(b), conflict with or violate any law, regulation,
court order, judgment or decree applicable to the Company or any of its
Subsidiaries or by which any of their respective property is bound or affected,
or (iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, cancellation, vesting, modification, alteration or
acceleration of any obligation under, result in the creation of a lien, claim or
encumbrance on any of the properties or assets of the Company or any of its
Subsidiaries pursuant to, result in the loss of any material
- 14 -
benefit under (including an increase in the price paid by, or cost to, the
Company or any of its Subsidiaries), require the consent of any other party to,
or result in any obligation on the part of the Company or any of its
Subsidiaries to repurchase (with respect to a bond or a note), any agreement,
contract, instrument, bond, note, indenture, permit, license or franchise to
which the Company or any of its Subsidiaries is a party or by which the Company,
any of its Subsidiaries or any of their respective property is bound or
affected, except, in the case of clauses (ii) and (iii) above, as would not,
------
individually or in the aggregate, have a Company Material Adverse Effect, or
materially impair the ability of Parent to own all of the equity of the
Surviving Corporation, or operate its or any of its Subsidiaries' businesses
(including the businesses of the Surviving Corporation and its Subsidiaries),
following the Effective Time.
(b) Except for applicable requirements under the premerger
notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the filing of the Agreement of Merger pursuant
-------
to the CGCL, filings with the SEC under the Securities Act of 1933, as amended
(the "Securities Act") and the Exchange Act and any filings required pursuant to
--------------
any state securities or "blue sky" laws, neither the Company nor any of its
Subsidiaries is required to submit any notice, report or other filing with any
Governmental Entity in connection with the execution, delivery, performance or
consummation of this Agreement, the Stock Option Agreement or the Merger except
for such notices, reports or filings that, if not made, would not, individually
or in the aggregate, have a Company Material Adverse Effect, or materially
impair the ability of Parent to own all of the equity of the Surviving
Corporation, or operate its or any of its Subsidiaries' businesses (including
the businesses of the Surviving Corporation and its Subsidiaries), following the
Effective Time. Except as set forth in the immediately preceding sentence, no
waiver, consent, approval or authorization of any governmental or regulatory
authority, court, agency, commission or other governmental entity or any
securities exchange or other self-regulatory body, domestic or foreign
("Governmental Entity"), is required to be obtained by the Company or any of its
-------------------
Subsidiaries in connection with its execution, delivery, performance or
consummation of this Agreement, the Stock Option Agreement or the transactions
contemplated hereby except for such waivers, consents, approvals or
authorizations that, if not obtained or made, would not, individually or in the
aggregate, have a Company Material Adverse Effect, or materially impair the
ability of Parent to own all of the equity of the Surviving Corporation, or
operate its or any of its Subsidiaries' businesses (including the businesses of
the Surviving Corporation and its Subsidiaries), following the Effective Time.
Section 3.6 SEC Reports; Financial Statements. (a) The Company has timely
----------------------------------
filed all forms, reports and documents (including all Exhibits, Schedules and
Annexes thereto) required to be filed by it with the SEC since January 1, 1996,
including any amendments or supplements thereto (collectively, including any
such forms, reports and documents filed after the date hereof, the "Company SEC
-----------
Reports"), and, with respect to
-------
- 15 -
the Company SEC Reports filed by the Company after the date hereof and prior to
the Closing Date, will promptly deliver or make available, to Parent all of its
Company SEC Reports in the form filed with the SEC. The Company SEC Reports (i)
complied (and any Company SEC Reports filed after the date hereof will comply)
in all material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) as of their respective filing dates
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), did not (and any Company SEC Reports filed
after the date hereof will 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 the light of the circumstances under
which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Company SEC Reports (or incorporated therein by
reference) fairly present in all material respects (or, with respect to
financial statements contained in the Company SEC Reports filed after the date
hereof, will fairly present in all material respects) the consolidated financial
position of the Company and its consolidated Subsidiaries as of the respective
dates thereof and the consolidated results of operations, retained earnings and
cash flows of the Company and its consolidated Subsidiaries for the respective
periods indicated, in each case in accordance with GAAP applied on a consistent
basis throughout the periods involved (except for changes in accounting
principles disclosed in the notes thereto) and the rules and regulations of the
SEC, except that interim financial statements are subject to normal and
recurring year-end adjustments which are not and are not expected to be,
individually or in the aggregate, material in amount and do not include certain
notes which may be required by GAAP but which are not required by Form 10-Q of
the SEC. The financial statements included (or which will be included after the
date of this Agreement) in the Company SEC Reports are (or will be) in all
material respects in accordance with the books and records of the Company and
its Subsidiaries.
(c) Notwithstanding the foregoing, no representation or warranty
is being made in this Section 3.6 with respect to information or statements
(including financial information and statements) that are provided by Parent and
set forth in any Company SEC Report filed after the date hereof or with respect
to any Parent SEC Reports incorporated therein by reference.
Section 3.7 Absence of Certain Changes. Except pursuant to the terms of
---------------------------
this Agreement, the Stock Option Agreement and the transactions contemplated
hereby and thereby, since December 31, 1998, (a) the Company and each of its
Subsidiaries has conducted its business in all material respects in the ordinary
and usual course of its business consistent with past practice and there has not
been any change in the business,
- 16 -
assets, liabilities, results of operation or condition (financial or otherwise)
of the Company and its Subsidiaries, or any development or combination of
developments that, individually or in the aggregate, has had or would have a
Company Material Adverse Effect and (b) there has not been (i) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
capital stock of the Company; (ii) any change by the Company to its accounting
policies, practices or methods (except for immaterial changes required by a
change in GAAP); (iii) any (x) incurrences of indebtedness for borrowed money by
the Company and its Subsidiaries except for indebtedness incurred after the date
hereof as permitted by Section 5.1(xi); (y) transfers, sales or other
dispositions of, or encumbrances placed on, assets or properties by the Company
and its Subsidiaries outside of the ordinary course of business consistent with
past practice; or (z) damage, destruction or other casualty loss of assets or
properties of the Company and its Subsidiaries, whether or not covered by
insurance which has had, or would have, a Company Material Adverse Effect; (iv)
any change or amendment to the terms of any outstanding securities or material
indebtedness of the Company or any of its Subsidiaries; (v) any redemption,
repurchase or re-pricing or amendment to the exercise or conversion price of any
Company Equity Rights and, except as required by applicable law or pursuant to a
contractual obligation in effect as of the relevant date, (A) any execution,
adoption or amendment of any agreement or arrangement relating to severance or
any employee benefit plan or employment or consulting agreement (including
Benefit Plans) or (B) any grant of any stock options or other equity related
award except for stock option grants after the date hereof as permitted by
Section 5.1(iv); (vi) any amendments to the Company's Articles of Incorporation
or Bylaws or similar organizational documents, (vii) any acquisition of any
business or assets, other than transactions that were in the ordinary course of
business consistent with past practice; (viii) any capital expenditures in
excess of $2,000,000 in the aggregate; (ix) any settlement of any threatened or
pending material litigation, suit, action, proceeding or investigation; (x) any
material tax election made or changed, any material audit settled or any
material amended Tax Returns filed; or (xi) any agreement or commitment entered
into with respect to any of the foregoing.
Section 3.8 Litigation and Liabilities. (a) Except as disclosed in the
----------------------------
Company SEC Reports filed prior to the date hereof, there are no civil, criminal
or administrative actions, suits or claims, proceedings (including condemnation
proceedings) or, to the Knowledge of the Company, hearings or investigations
pending or, to the Knowledge of the Company, threatened against or otherwise
adversely affecting the Company or any of its Subsidiaries or any of their
respective properties and assets, except for any of the foregoing which would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has or is
subject to any liabilities (absolute, accrued, contingent or otherwise) other
than liabilities
- 17 -
(a) adequately reflected on the December 1998 Company Balance Sheet (including
any related notes thereto) or (b) which would not, individually or in the
aggregate, have a Company Material Adverse Effect or (c) permitted to be
incurred pursuant to Section 5.1.
Section 3.9 No Violation of Law; Permits. The business of the Company and
----------------------------
each of its Subsidiaries is being conducted in accordance with all applicable
law, ordinances, regulations, judgments, orders or decrees of any Governmental
Entity, and not in violation of any permits, franchises, licenses,
authorizations or consents granted by any Governmental Entity, and the Company
and each of its Subsidiaries has obtained all permits, franchises, licenses,
authorizations or consents necessary for the conduct of its business, except, in
each case, as would not, individually or in the aggregate, have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is (i)
subject to any cease and desist or other order, judgment, injunction or decree
issued by any Governmental Entity, or (ii) is a party to any written agreement,
consent agreement or memorandum of understanding with any Governmental Entity,
or (iii) is a party to any commitment letter or similar undertaking to any
Governmental Entity, or (iv) to the Knowledge of the Company, is subject to any
order or directive by any Governmental Entity, or (v) has adopted any board
resolutions at the request of any Governmental Entity that in the case of any of
the foregoing clauses (i) through (v) materially restricts the conduct of its
business (whether the type of business, the location thereof or otherwise) and
which, individually or in the aggregate, would have a Company Material Adverse
Effect, nor to the Knowledge of the Company, has the Company been advised in
writing that any Governmental Entity has proposed issuing or requesting any of
the foregoing.
Section 3.10 Benefit Plans. (a) Section 3.10(a) of the Company Disclosure
-------------
Letter contains a list of all Benefit Plans and employment, consulting,
severance or termination agreements between the Company or any of its
Subsidiaries and any Employee (a "Benefit Agreement"). Neither the Company nor
------------------
any of its Subsidiaries has adopted or amended in any material respect any
Benefit Plan since the date of the most recent audited financial statements
included in the Company SEC Reports filed prior to the date hereof.
(b) With respect to each Benefit Plan and Benefit Agreement, the
Company has made available to Parent true, complete and correct copies, where
applicable and to the extent that they exist as of the date of this Agreement,
of (i) the current plan document or agreement, (ii) the two most recent annual
reports on Form 5500 filed with the Internal Revenue Service, (iii) the two most
recent actuarial reports, (iv) the most recent summary plan description, (v) the
most recent determination letter issued by the Internal Revenue Service, and
(vi) the two most recent audited financial reports concerning such Benefit Plans
or Agreements, and any trusts related thereto.
- 18 -
(c) None of the Company, any of its Subsidiaries, any officer of
the Company or any of its Subsidiaries or any of the ERISA Benefit Plans or
Benefit Agreements has on or before the date of this Agreement engaged in a
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) with respect to any ERISA Benefit Plan or Benefit Agreement that could
reasonably be expected to subject the Company, any of its Subsidiaries or any
officer of the Company or any of its Subsidiaries to any tax on prohibited
transactions imposed by Section 4975 of the Code or to any liability under
ERISA. None of the Company, its Subsidiaries or any ERISA Affiliate has at any
time during the five-year period preceding the date hereof contributed to any
ERISA Benefit Plan that is a "multiemployer plan" (as defined in Section 3(37)
of ERISA) or maintained any ERISA Benefit Plan that is subject to Title IV of
ERISA or Section 412 of the Code.
(d) As of the date of this Agreement there is no pending dispute,
arbitration, claim, suit or grievance involving a Benefit Plan or Benefit
Agreement (other than routine claims for benefits payable under any such Benefit
Plan) that would have a Company Material Adverse Effect.
(e) Each Benefit Plan and Benefit Agreement has been established
and maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including without limiting the foregoing, the timely filing of all required
reports, documents and notices.
(f) Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate (i) maintains or contributes to any Benefit Plan which provides, or
has any liability to provide, life insurance, medical, severance or other
employee welfare benefits to any Employee upon or after his retirement or
termination of employment, except as may be required by Section 4980B of the
Code or Title I, subtitle B, part 6 of ERISA; or (ii) has ever represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical, severance or other employee welfare benefits upon
or after their retirement or termination of employment, except to the extent
required by Section 4980B of the Code or Title I, subtitle B, part 6 of ERISA.
(g) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Benefit
Plan, Benefit Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee, or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of the Company or
Parent to amend or terminate any Benefit Plan and Benefit Agreement. No payment
or
- 19 -
benefit agreed to by the Company or any of its Subsidiaries which will or may be
made by the Company, any of its Subsidiaries, Parent or any of their respective
affiliates with respect to any Employee may or will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
(h) The Company and each of its Subsidiaries (i) has withheld all
material amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees; (ii) is not liable for any material
arrears of wages or any Taxes or any penalty for failure to comply with any of
the foregoing; and (iii) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits for
Employees.
Section 3.11 Labor Matters. (a) Except for those matters that would not,
--------------
individually or in the aggregate, have a Company Material Adverse Effect, no
work stoppage, slowdown, lockout or labor strike against the Company or any
Subsidiary of the Company by Employees (or any union that represents them) (i)
is pending or, to the Knowledge of the Company, threatened or (ii) has occurred
since December 31, 1996.
(b) Except as, individually or in the aggregate, would not have a
Company Material Adverse Effect, as of the date of this Agreement, neither the
Company nor any Subsidiary of the Company is involved in or, to the Knowledge of
the Company, threatened with any labor dispute, grievance, or arbitration or
union organizing activity (by it or any of its Employees) involving any
Employees.
Section 3.12 Environmental Matters. (a) Except as would not have a
----------------------
Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries has at all
times been operated, and is, in compliance with all applicable Environmental
Laws, and neither the Company nor any of its Subsidiaries has received any
written communication from any Person or Governmental Entity that alleges that
the Company or any of its Subsidiaries is not in compliance with applicable
Environmental Laws;
(ii) the Company and each of its Subsidiaries has obtained or
has applied for all applicable environmental, health and safety permits,
licenses, variances, approvals and authorizations required under Environmental
Laws (collectively, the "Environmental Permits") necessary for the construction
---------------------
of its facilities or the conduct of its operations, and such Environmental
Permits are in effect or, where applicable, a renewal application has been
timely filed and is pending agency approval, and the Company and its
Subsidiaries are in compliance with all terms and conditions of such
Environmental Permits;
- 20 -
(iii) there is no Environmental Claim pending or threatened
(i) against the Company or any of its Subsidiaries, (ii) against any Person
whose liability for any Environmental Claim has been retained or assumed
contractually by the Company or any of its Subsidiaries, or (iii) against any
real or personal property or operations which the Company or any of its
Subsidiaries owns, leases or operates, in whole or in part;
(iv) there have been no Releases of any Hazardous Materials
that would be reasonably likely to form the basis of any Environmental Claim
against the Company, any of its Subsidiaries or any predecessor thereof, or
against any Person whose liability for any Environmental Claim has been retained
or assumed contractually by the Company or any of its Subsidiaries;
(v) there are, and have been, no underground or aboveground
storage tanks, incinerators or surface impoundments, at, on, under or within any
real property currently or formerly owned, leased or operated by the Company,
its Subsidiaries or any predecessor thereof, that would be reasonably likely to
form the basis of any Environmental Claim against the Company, its Subsidiaries
or any predecessor thereof, or against any Person whose liability for any
Environmental Claim has been retained or assumed contractually by the Company or
any of its subsidiaries; and
(vi) none of the properties currently or formerly owned,
leased or operated by the Company, its Subsidiaries or any predecessor thereof,
are now, or were in the past, listed on the National Priorities List of
Superfund Sites or any analogous state list.
(b) For purposes of this Agreement:
(i) "Environmental Claim" means any and all administrative,
-------------------
regulatory or judicial actions, suits, demands, demand letters, information
requests, directives, claims, liens, investigations, proceedings or notices of
noncompliance, violation or status as a potentially responsible person or
otherwise liable party (written or oral) by any person (including any federal,
state, local or foreign governmental authority) relating to or alleging
potential liability (including, without limitation, potential responsibility for
or liability for enforcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
currently or formerly owned, operated, leased or managed by the Company, any of
its Subsidiaries or any predecessor thereof; or (B) circumstances forming the
basis of any violation or alleged violation of any Environmental Law; or (C) any
and all claims by any third party seeking damages,
- 21 -
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable foreign,
--------------------
federal, state and local laws, rules, requirements, regulations and judicial or
administrative opinions relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human or employee health or safety
including, without limitation, laws and regulations relating to Releases of
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials or relating to management of Hazardous Materials in
buildings.
(iii) "Hazardous Materials" means (A) any petroleum or any
--------------------
by-products or fractions thereof, asbestos or asbestos-containing materials,
urea formaldehyde foam insulation, any form of natural gas, explosives,
polychlorinated biphenyls ("PCBs"), radioactive materials, ionizing radiation,
----
electromagnetic field radiation or microwave transmissions; (B) any chemicals,
materials or substances, whether waste materials, raw materials or finished
products, which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance, whether
waste materials, raw materials or finished products, regulated or forming the
basis of liability under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment (including without limitation ambient air, atmosphere, soil,
surface water, groundwater or property).
Section 3.13 Vote Required; Options. (a) No state takeover or similar
------------------------
statute or regulation of any state in which the Company or any of its
subsidiaries is organized, incorporated or qualified to do business applies to
the Merger, this Agreement, the Stock Option Agreement (including the purchase
of shares of Company Common Stock thereunder), the Voting Agreements or any of
the transactions contemplated hereby or thereby.
(b) The Board of Directors of the Company has duly adopted (and
not withdrawn) a resolution rescinding any authorization previously granted
permitting the Company to repurchase Company Shares.
- 22 -
(c) The affirmative votes at the Company Shareholder Meeting of
(i) the holders of a majority of the outstanding shares of Company Common Stock
and (ii) the holders of a majority of the outstanding shares of Company
Preferred Stock, in each case voting as a separate class, are the only votes of
the holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement, the Merger and the transactions contemplated
hereby.
Section 3.14 Opinion of Financial Advisor. The Company or its Board of
------------------------------
Directors has received the written opinion of Xxxxxx Xxxxxxx & Co. Incorporated
(the "Company Financial Advisor"), dated as of the date hereof, to the effect
---------------------------
that, as of the date hereof, the consideration to be received in the Merger by
the holders of Company Common Shares who hold such Company Common Shares
immediately prior to the Effective Time is fair to the holders of Company Common
Shares from a financial point of view. The Company has been authorized by the
Company Financial Advisor to permit, subject to prior review and consent by such
Company Financial Advisor, the inclusion of such opinion (and appropriate
references thereto) in the Joint Proxy Statement/Prospectus.
Section 3.15 Brokers. The Company and its Subsidiaries have not engaged
-------
any broker, finder, investment banker or other Person (other than the Company
Financial Advisor) entitled to any brokerage, finder's, investment banking or
other similar fee or commission in connection with the transactions contemplated
by this Agreement. The expected amounts of such fees and commissions have been
disclosed in writing to Parent based upon arrangements made by or on behalf of
the Company or any of its Subsidiaries. The Company has previously provided to
Parent copies of any agreements giving rise to any such fee or commission.
Section 3.16 Tax Matters.
-----------
(a) All material Tax Returns required to be filed by the Company
and each of its Subsidiaries either on a separate or combined or consolidated
basis have been or will be prepared in good faith and timely filed with the
appropriate Governmental Entity on or prior to the Effective Time or by the due
date thereof including extensions granted by a Government Entity;
(b) all such Tax Returns are complete and accurate in all material
respects;
(c) all Taxes owed by any of the Company and its Subsidiaries
(whether or not shown on any Tax Return) have been paid;
(d) no deficiencies for any Taxes have been either (A) asserted in
writing, proposed in writing or assessed in writing against the Company or any
of its
- 23 -
Subsidiaries or (B) as to which the Company has Knowledge based upon personal
contact with any agent of a taxing authority;
(e) none of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency and no written requests for
waivers of the time to assess any Taxes of the Company or its Subsidiaries are
pending;
(f) none of the Company and its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return;
(g) the Company has delivered or made available to Parent correct
and complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by any of the Company
and its Subsidiaries since December 31, 1994;
(h) the unpaid Taxes of the Company and its Subsidiaries (A) did
not, as of the month ended April 30, 1999, exceed by any material amount the
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 the balance sheet as of and for the months ended April 30, 1999
(rather than in any notes thereto) and (B) will not exceed by any material
amount that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past customs and practice of the Company and
its Subsidiaries in filing their income Tax Returns;
(i) the Company has not distributed the stock of a "controlled
corporation" (within the meaning of that term as used in section 355(a) of the
Code) in a transaction subject to section 355 of the Code within the past two
years;
(j) no written claim, and to the Knowledge of the Company, no
claim, has ever been made by an authority in a jurisdiction where any of the
Company and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction;
(k) none of the Company and its Subsidiaries has any unrecognized
gains relating to deferred intercompany transactions;
(l) there are no excess loss accounts, as defined in Reg. S
1.1502-19, between or among any members of the affiliated group of corporations
of which Company is the common parent; and
(m) Section 3.16 of the Company Disclosure Letter lists all
federal, state, local and foreign Tax Returns filed with respect to any of the
Company and its
- 24 -
Subsidiaries for taxable periods ending on or after March 31, 1996, indicates
those Tax Returns that have been audited, and indicates those Tax Returns that
currently are subject of an audit.
Section 3.17 Intellectual Property. Neither the Company nor any of its
----------------------
Subsidiaries currently utilizes, or to the Knowledge of the Company, including
the general counsel and members of the legal department of the Company involved
in intellectual property and the Company's chief technology officer, has in the
past utilized, any existing or pending Intellectual Property Rights, except for
those which are owned, possessed or lawfully used by the Company or its
Subsidiaries in their business operations, and neither the Company nor any of
its Subsidiaries infringes upon or unlawfully uses any Intellectual Property
Right owned or validly claimed by another Person except, in each case, as would
not, individually or in the aggregate, have a Company Material Adverse Effect.
The Company and its Subsidiaries own free and clear of all liens and
encumbrances, have a valid license to use or have the right validly to use all
existing and pending Intellectual Property Rights necessary to carry on their
respective business substantially as currently conducted except the failure of
which to own, validly license or have the right validly to use, individually or
in the aggregate, would not have a Company Material Adverse Effect. To the
Knowledge of the Company after due inquiry, no person is infringing the rights
of the Company or any of its Subsidiaries with respect to any Intellectual
Property Right in a manner that would result in a Company Material Adverse
Effect.
Section 3.18 Title to Property. (a) The Company and each of its
-------------------
Subsidiaries have good title to all of their real properties and other material
assets, free and clear of all liens, charges and encumbrances, except liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not materially interfere with the marketability or the present use of
the property affected thereby or which would not, individually or in the
aggregate, have a Company Material Adverse Effect, and except for liens which
secure indebtedness reflected in the December 1998 Company Balance Sheet; and,
to the Company's Knowledge, all leases pursuant to which the Company or any of
its Subsidiaries lease from others material real or personal property are in
good standing, valid and effective in accordance with their respective terms,
and there is not, to the Knowledge of the Company, under any of such leases, any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default), except where the lack of such good
standing, validity and effectiveness, or the existence of such default or event
of default would not, individually or in the aggregate, have a Company Material
Adverse Effect.
(b) Section 3.18(b) of the Company Disclosure Letter identifies
all real property owned by the Company and its Subsidiaries and all material
real property leased or operated by the Company and its Subsidiaries.
- 25 -
Section 3.19 Contracts and Commitments. (a) Section 3.19(a) of the Company
-------------------------
Disclosure Letter contains a complete and accurate list of all material
contracts (written or oral), leases, plans, undertakings, commitments or
agreements which involve (or are reasonably likely to involve) payments or
receipts by the Company or any of its Subsidiaries in excess of $750,000 for a
period of two years from the date of this Agreement ("Contracts") to which the
---------
Company or any of its Subsidiaries is a party or by which any of them is bound
as of the date of this Agreement. As of the date of this Agreement, (i) each of
such Contracts is valid and binding upon the Company or the applicable
Subsidiary (and, to the Company's Knowledge, on all other parties thereto) in
accordance with its terms and is in full force and effect, (ii) neither the
Company nor any of its Subsidiaries is in breach or violation of or in default
in any material respect, or in breach or violation of or in default under, in
any material respect, any Debt Instrument to which it or any of its Subsidiaries
is a party (in each case whether or not such breach, violation or default has
been waived), (iii) to the Knowledge of the Company, no counter-party is in
breach or violation of or in default under, in any material respect, any
Contract to which the Company or any of its Subsidiaries is a party, and (iv) no
event has occurred with respect to the Company or any of its Subsidiaries which,
with notice or lapse of time or both, would constitute a material breach,
violation or default, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a lien, prepayment or acceleration
under any of such Contracts or Debt Instruments.
(b) Section 3.19(b) of the Company Disclosure Letter sets forth a
list of each loan or credit agreement, note, bond, mortgage, indenture and any
other agreement and instrument pursuant to which any Indebtedness in excess of
$750,000 of the Company or any of its Subsidiaries (other than such Indebtedness
payable to the Company or any of its Subsidiaries) is outstanding or may be
incurred (any of the foregoing, a "Debt Instrument"). "Indebtedness" shall mean
--------------- ------------
(i) indebtedness for borrowed money, whether secured or unsecured, (ii)
obligations under conditional sale or other title retention agreements relating
to property purchased by such person, (iii) capitalized lease obligations, (iv)
obligations under interest rate cap, swap, collar or similar transactions or
currency hedging transactions (valued at the termination value thereof), and (v)
guarantees of any such indebtedness of any other person.
Section 3.20 Proxy Statement/Prospectus; Registration Statement. None of
----------------------------------------------------
the information to be supplied by the Company or its Subsidiaries for inclusion
or incorporation by reference from the Company SEC Reports in the Joint Proxy
Statement/Prospectus to be sent to the shareholders of the Company in connection
with the Company Shareholder Meeting or any amendment thereof or supplement
thereto, will, on the date it becomes effective with the SEC, at the time of the
mailing of the Joint Proxy Statement/Prospectus or any amendment or supplement,
at the time of the Company Shareholder Meeting or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary
- 26 -
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. None of the information to be supplied by
the Company or its Subsidiaries for inclusion or incorporation by reference from
the Company SEC Reports in the Form S-4 pursuant to which shares of Parent
Common Stock issued in the Merger will be registered under the Act, of which the
Joint Proxy Statement/Prospectus will form a part, will, at the time the
Registration Statement is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Section 3.21 Pooling of Interests; Reorganization. The Company intends
--------------------------------------
that the Merger be accounted for under the "pooling of interests" method under
the requirements of Opinion 16 of the Accounting Principles Board of the
American Institute of Certified Public Accountants, the Financial Accounting
Standards Board, and the rules and regulations of the SEC. Neither the Company
nor any of its affiliates has taken or agreed to take any action, nor does the
Company have any Knowledge of any fact or circumstance with respect to the
Company, which would prevent the business combination to be effected pursuant to
the Merger from being accounted for as a "pooling of interests" under GAAP or
the rules and regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.
Section 3.22 Restrictions on Business Activities. Except for this
---------------------------------------
Agreement, there is no judgment, injunction, order or decree or material
agreement (including, without limitation, agreements containing provisions
restricting the Company or any of its Subsidiaries from entering or engaging in
any line of business, agreements containing geographic restrictions on the
Company's or any of its Subsidiaries' ability to operate their respective
businesses and agreements containing rights of first refusal, rights of first
offer, exclusivity, "requirements" or similar provisions) binding upon the
Company or any of its Subsidiaries which has or would have the effect of
materially prohibiting or impairing the conduct of the businesses of the Company
or any of its Subsidiaries or, after the Effective Time, Parent or any of its
Subsidiaries.
Section 3.23 Related Party Transactions. Neither the Company nor any of
----------------------------
its Subsidiaries is party to a Contract involving consideration of more than
$100,000 for any individual Contract or series of related Contracts with any
Related Party which are currently in effect or which, to the Knowledge of the
Company, were in effect or were consummated at any time on or after December 31,
1998. For the purpose of this Agreement, "Related Party" means (i) any officer,
-------------
director or greater than 5% shareholder of the Company or any of its
Subsidiaries, (ii) any spouse, former spouse, child, parent, parent of a spouse,
sibling or grandchild of any of the persons listed in clause (i), and (iii) any
affiliate of any of the persons listed in clauses (i) and (ii) other than the
Company or any of its Subsidiaries.
- 27 -
Section 3.24 Insurance. All current material insurance policies are in
---------
full force and effect, all premiums with respect thereto covering all periods up
to and including the Closing Date have been paid or will be paid prior to the
Closing, and no notice of cancellation or termination has been received with
respect to any such policy. Such policies (i) are sufficient for compliance with
all requirements of law and of all Contracts to which the Company or any of its
Subsidiaries is a party, (ii) provide insurance coverage for the assets and
operations of the Company and each of its Subsidiaries consistent with the
coverage customarily maintained by similarly situated companies, and (iii) will
not in any material way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. To the Knowledge of the Company,
during the last three years neither the Company nor any of its Subsidiaries has
been refused any insurance with respect to its assets or operations, nor has its
coverage been limited, by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance.
Section 3.25 Year 2000. (a) All products and services currently provided
---------
by the Company or its Subsidiaries and all products currently supported by the
Company or its Subsidiaries are (i) able to receive, record, store, process,
calculate, manipulate and output dates from and after January 1, 2000, time
periods that include January 1, 2000 and information that is dependent on or
relates to such dates or time periods, in the same manner and with the same
accuracy, functionality, data integrity and performance as when dates or time
periods prior to January 1, 2000 are involved and (ii) able to store and output
date information in a manner that is unambiguous as to century ("Year 2000
---------
Compliant") or can be freely modified by the Company to be made Year 2000
---------
Compliant (without breaching any third party license agreements or otherwise
infringing any Intellectual Property Rights of any third party), except where
such failure to be Year 2000 Compliant would not have a Company Material Adverse
Effect. The Company has the capacity to provide Year 2000 Compliant substitute
products to its and its Subsidiaries' customers for any products which cannot be
so freely modified to be made Year 2000 Compliant (without breaching any third
party license agreements or otherwise infringing any Intellectual Property
Rights of any third party), except where such failure to have such capacity
would not have a Material Adverse Effect. Except as disclosed in Section 3.25 of
the Company Disclosure Letter, all agreements by the Company and its
Subsidiaries with clients that represent that the Company's (or its
Subsidiaries') products and/or services are Year 2000 Complaint contain
provisions excluding consequential, incidental and similar damages.
(b) All systems owned by, licensed to or operated or used by the
Company or any of its Subsidiaries are Year 2000 Compliant or can freely be
modified to be made Year 2000 Compliant without breaching any third party
license agreements or otherwise infringing any intellectual property rights of
any third party, except where such failure to be Year 2000 Compliant would not
have a Company Material Adverse Effect.
- 28 -
(c) The Company has the capacity to effect any of the
modifications referred to in this Section 3.25 and the remaining costs of such
modifications in the aggregate will not have a Company Material Adverse Effect.
Section 3.26 Foreign Corrupt Practices, etc. None of the Company, any of
-------------------------------
its Subsidiaries nor any directors, officers, agents or employees of the Company
or any of its Subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
ARTICLE IV
REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent Disclosure Letter or the Parent
SEC Reports filed with the SEC prior to the date hereof, Parent and Merger Sub
hereby represent and warrant to the Company as follows:
Section 4.1 Organization and Qualification; Subsidiaries. (a) Parent is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Each of
Parent and Merger Sub has the requisite corporate or other organizational power
and authority to own, operate or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, in each case except as would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
(b) All of the outstanding shares of capital stock of Merger Sub
have been validly issued and are fully paid and nonassessable. All of the
outstanding shares of capital stock of Merger Sub are owned by Parent free and
clear of all liens, pledges, security interests or other encumbrances. There are
no subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) entitling any
Person to purchase or otherwise acquire from Parent or Merger Sub at any time,
or upon the happening of any stated event, any shares of capital stock or other
equity securities of Merger Sub.
Section 4.2 Certificate of Incorporation and Bylaws. Parent has furnished,
---------------------------------------
or otherwise made available, to the Company a complete and correct copy of the
Certificate
- 29 -
of Incorporation and Bylaws, as amended to the date of this Agreement, of each
of Parent and Merger Sub. Such Certificate of Incorporation and Bylaws of each
of Parent and Merger Sub are in full force and effect. Neither Parent nor Merger
Sub is in violation of any of the provisions of its respective Certificate of
Incorporation or Bylaws.
Section 4.3 Capitalization. (a) The authorized capital stock of Parent
---------------
consists of 720,000,000 shares of Parent Common Stock and 40,000,000 shares of
Preferred Stock, par value $1.00 per share, of which 1,500,000 are designated as
Junior Participating Preferred Stock and 30,000,000 are designated as Series A
Cumulative Convertible Preferred Stock ("Series A Preferred Stock"). At the
-------------------------
close of business on April 30, 1999, (i) 271,478,652 shares of Parent Common
Stock, no shares of Junior Preferred Stock and 19,741,630 shares of Series A
Preferred Stock were issued and outstanding and (ii) 1,848,901 shares of Parent
Common Stock, and no shares of Junior Preferred Stock and no shares of Series A
Preferred Stock, were held by Parent in its treasury. As of April 30, 1999,
28,212,136 shares of Parent Common Stock were reserved for issuance upon
exercise of Parent Equity Rights (other than the Series A Preferred Stock) and
38,364,212 shares of Parent Common Stock were reserved for issuance upon
conversion of the Series A Preferred Stock.
(b) There are no outstanding obligations of Parent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or any Parent Equity Rights (except in connection with the
exercise, conversion or exchange of outstanding Parent Equity Rights and except
for redemptions or repurchases of shares of Series A Preferred Stock). All of
the issued and outstanding shares of Parent Common Stock are validly issued,
fully paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, there are no bonds, debentures, notes or other indebtedness issued
and outstanding having the right to vote together with Parent's shareholders on
any matter in respect of which the Parent's shareholders are entitled to vote.
Except as disclosed in the Parent SEC Reports, no shareholders of Parent are
party to any voting agreement, voting trust or similar arrangement with respect
to Parent Shares to which Parent or any Subsidiary of Parent is a party.
Section 4.4 Power and Authority; Authorization; Valid & Binding. Each of
-----------------------------------------------------
Parent and Merger Sub has the necessary corporate power and authority to deliver
this Agreement and to perform its obligations hereunder, as applicable, and to
consummate the transactions contemplated hereby, as applicable. The execution
and delivery by each of Parent and Merger Sub of this Agreement and, in the case
of Parent, the Voting Agreements and the Stock Option Agreement, the performance
by it of its obligations hereunder and thereunder, as applicable, and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby, as applicable, have been duly authorized by all necessary corporate
action on the part of Parent and Merger Sub. No vote of the shareholders of
Parent is required to approve the Merger, this Agreement or
- 30 -
the transactions contemplated hereby. Each of this Agreement, the Voting
Agreements and the Stock Option Agreement has been duly executed and delivered
by Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the other parties thereto, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against such parties in
accordance with the terms hereof or thereof, subject to bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 4.5 No Conflict; Required Filings and Consents. (a) The execution
-------------------------------------------
and delivery of this Agreement by each of Parent and/or Merger Sub and the
Voting Agreements and Stock Option Agreement by Parent does not, and the
performance by each of Parent and Merger Sub of its obligations hereunder and
thereunder and the consummation by each of Parent and Merger Sub of the
transactions contemplated hereby and thereby will not, (i) violate or conflict
with the Certificate of Incorporation or Bylaws of Parent or Merger Sub, (ii)
subject to obtaining or making the notices, reports, filings, waivers, consents,
approvals or authorizations referred to in paragraph (b) below, conflict with or
violate any law, regulation, court order, judgment or decree applicable to
Parent or any of its Subsidiaries (including Merger Sub) or by which any of
their respective property is bound or affected, (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
cancellation, vesting, modification, alteration or acceleration of any
obligation under, result in the creation of a lien, claim or encumbrance on any
of the properties or assets of Parent or any of its Subsidiaries (including
Merger Sub) pursuant to, result in the loss of any material benefit under
(including an increase in the price paid by, or cost to, Parent or any of its
Subsidiaries (including Merger Sub), require the consent of any other party to,
or result in any obligation on the part of Parent or any of its Subsidiaries
(including Merger Sub) to repurchase (with respect to a bond or a note), any
agreement, contract, instrument, bond, note, indenture, permit, license or
franchise to which Parent or any of its Subsidiaries (including Merger Sub) is a
party or by which Parent or any of its Subsidiaries (including Merger Sub) or
any of their respective property is bound or affected, except, in the case of
clauses (ii) and (iii) above, as would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
(b) Except for applicable requirements under the premerger
notification requirements of the HSR Act, the filing of the Agreement of Merger
pursuant to the CGCL, filings with the SEC under the Securities Act and the
Exchange Act, and any filings required pursuant to any state securities or "blue
sky" laws, neither Parent nor any of its Subsidiaries (including Merger Sub) is
required to submit any notice, report or other filing with any Governmental
Entity in connection with the execution, delivery, performance or consummation
of this Agreement, the Voting Agreements, the Stock
- 31 -
Option Agreement or the Merger except for such notices, reports or filings,
that, if not made, would not, individually or in the aggregate, have a Parent
Material Adverse Effect. Except as set forth in the immediately preceding
sentence, no waiver, consent, approval or authorization of any Governmental
Entity is required to be obtained by Parent or any of its Subsidiaries
(including Merger Sub) in connection with its execution, delivery, performance
or consummation of this Agreement, the Voting Agreements, the Stock Option
Agreement or the transactions contemplated hereby and thereby except for such
waivers, consents, approvals or authorizations that, if not obtained or made,
would not, individually or in the aggregate, have a Parent Material Adverse
Effect.
Section 4.6 SEC Reports; Financial Statements. (a) Parent has timely filed
---------------------------------
all forms, reports and documents (including all Exhibits, Schedules and Annexes
thereto) required to be filed by it with the SEC since January 1, 1996,
including any amendments or supplements thereto (collectively, including any
such forms, reports and documents filed after the date hereof, the "Parent SEC
----------
Reports"), and, with respect to the Parent SEC Reports filed by Parent after the
-------
date hereof and prior to the Closing Date, will deliver or make available, to
the Company all of its Parent SEC Reports in the form filed with the SEC. The
Parent SEC Reports (i) complied (and any Parent SEC Reports filed after the date
hereof will comply) in all material respects with the applicable requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) as of their respective filing dates
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), did not (and any Parent SEC Reports filed
after the date hereof will 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 the light of the circumstances under
which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Parent SEC Reports (or incorporated therein by
reference) fairly present in all material respects (or, with respect to
financial statements contained in the Parent SEC Reports filed after the date
hereof, will fairly present in all material respects) the consolidated financial
position of Parent and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of operations, retained earnings and cash
flows of Parent and its consolidated Subsidiaries for the respective periods
indicated, in each case in accordance with GAAP applied on a consistent basis
throughout the periods involved (except for changes in accounting principles
disclosed in the notes thereto) and the rules and regulations of the SEC, except
that interim financial statements are subject to normal and recurring year-end
adjustments which are not and are not expected to be, individually or in the
aggregate, material in amount and do not include certain notes which may be
required by GAAP but which are not required by Form 10-Q of the SEC. The
financial statements included (or which will be included after the date of
- 32 -
this Agreement) in the Parent SEC Reports are (or will be) in all material
respects in accordance with the books and records of Parent and its
Subsidiaries.
(c) Notwithstanding the foregoing, no representation or warranty
is being made in this Section 4.6 with respect to information or statements
(including financial information and statements) that are provided by the
Company and set forth in any Parent SEC Report filed after the date hereof or
with respect to any Company SEC Reports incorporated therein by reference.
Section 4.7 Absence of Certain Changes. Except pursuant to the terms of
---------------------------
this Agreement, the Stock Option Agreement and the transactions contemplated
hereby and thereby (a) since December 31, 1998, there has not been any change in
the business, assets, liabilites, results of operations or condition (financial
or otherwise) of Parent or any development or combination of developments that,
individually or in the aggregate, has had or would have a Parent Material
Adverse Effect and (b) since December 31, 1998 until the date hereof, there has
not been (i) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of Parent, other than cash
dividends on the Series A Preferred Stock consistent with past practice and
payment of the redemption price of shares of Series A Preferred Stock and other
amounts paid to induce conversion of Series A Preferred Stock, (ii) any split,
combination or reclassification of any of its capital stock, or (iii) any change
by Parent to its accounting policies, practices or methods materially affecting
its assets, liabilities or business, except insofar as may have been required by
a change in GAAP.
Section 4.8 Litigation and Liabilities. There are no civil, criminal or
---------------------------
administrative actions, suits or claims, proceedings (including condemnation
proceedings) or, to the Knowledge of Parent, hearings or investigations pending
or, to the Knowledge of Parent, threatened against, or otherwise adversely
affecting Parent or any of its Subsidiaries or any of their respective
properties and assets, except for any of the foregoing which would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.9 No Violation of Law; Permits. The business of Parent is being
----------------------------
conducted in accordance with all applicable law, ordinances, regulations,
judgments, orders or decrees of any Governmental Entity, and not in violation of
any permits, franchises, licenses, authorizations or consents granted by any
Governmental Entity, and Parent has obtained all permits, franchises, licenses,
authorizations or consents necessary for the conduct of its business, except, in
each case, as would not, individually or in the aggregate, have a Parent
Material Adverse Effect. Parent (i) is not subject to any cease and desist or
other order, judgment, injunction or decree issued by any Governmental Entity,
(ii) is not a party to any written agreement, consent agreement or memorandum of
understanding with any Governmental Entity, (iii) is not a party to any
commitment letter
- 33 -
or similar undertaking to any Governmental Entity, (iv) is not subject to any
order or directive by any Governmental Entity, (v) has not adopted any board
resolutions at the request of any Governmental Entity, that in the case of any
of clauses (i) - (v) materially restricts the conduct of its business (whether
the type of business, the location thereof or otherwise) and which, individually
or in the aggregate, would have a Parent Material Adverse Effect, nor to the
Knowledge of Parent, has Parent been advised in writing that any Governmental
Entity has proposed issuing or requesting any of the foregoing.
Section 4.10 Proxy Statement/Prospectus; Registration Statement. None of
----------------------------------------------------
the information to be supplied by Parent or its Subsidiaries for inclusion or
incorporation by reference from the Parent SEC Reports in the Joint Proxy
Statement/Prospectus or any amendment thereof or supplement thereto, will, on
the date it becomes effective with the SEC, at the time of the mailing of the
Joint Proxy Statement/Prospectus or any amendment or supplement, at the time of
the Company Shareholder Meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. None of the
information to be supplied by Parent or its Subsidiaries for inclusion or
incorporation by reference from the Parent SEC Reports in the Form S-4, of which
the Joint Proxy Statement/Prospectus will form a part, will, at the time the
Form S-4 is declared effective by the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 4.11 Pooling of Interests; Reorganization. Parent intends that the
------------------------------------
Merger be accounted for under the "pooling of interests" method under the
requirements of Opinion 16 of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting Standards
Board and the rules and regulations of the SEC. Neither Parent nor any of its
affiliates has taken or agreed to take any action, nor does Parent have any
Knowledge of any fact or circumstance with respect to Parent or Merger Sub,
which would prevent the business combination to be effected pursuant to the
Merger from being accounted for as a "pooling of interests" under GAAP or the
rules and regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.
Section 4.12 Merger Sub. Merger Sub was formed solely for the purpose of
----------
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
- 34 -
Section 4.13 Valid Issuance. The Parent Common Stock to be issued in the
---------------
Merger, when issued in accordance with the provisions of this Agreement will be
validly issued, fully paid and nonassessable.
Section 4.14 Brokers. Parent has not engaged any broker, finder or
-------
investment banker or other Person entitled to any brokerage, finder's,
investment banking or other similar fee or commission in connection with the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Interim Operations of the Company. Between the date of this
-----------------------------------
Agreement and the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to (unless Parent shall otherwise provide its prior written consent
or except as otherwise contemplated by this Agreement):
(i) conduct its business in all material respects in the
ordinary course consistent with past practice and, to the extent consistent
therewith, use reasonable best efforts to (x) preserve intact its business
organization, and (y) maintain its existing relations and goodwill with
customers, suppliers, regulators, distributors, creditors, lessors, and others
having business dealings with it;
(ii) not (A) amend the Articles of Incorporation or Bylaws of
the Company or enter into any agreement with any of its shareholders or other
holders of equity interests in their capacity as such; (B) split, combine,
subdivide or reclassify its outstanding shares of capital stock or other equity
securities; (C) declare, set aside or pay any dividend or distribution payable
in cash, stock or property in respect of any of its shares of capital stock or
other equity securities, or securities convertible, exercisable or exchangeable
for, any of its shares of capital stock or other equity securities, other than
dividends and distributions by wholly owned Subsidiaries of the Company; or (D)
repurchase, redeem or otherwise acquire or permit any of its Subsidiaries to
purchase, redeem or otherwise acquire, any shares of its capital stock or other
equity securities, or securities convertible, exercisable or exchangeable for,
any of its shares of capital stock or other equity securities (it being
understood that this clause (D) shall not prohibit the exercise, or conversion
at the election of the holder thereof of Company Equity Rights outstanding on
the date of this Agreement);
(iii) not take any action that would prevent the business
combination to be effected pursuant to the Merger from qualifying for "pooling
of interests" accounting treatment under GAAP and the rules and regulations of
the SEC and
- 35 -
not take any action that would prevent the business combination to be effected
pursuant to the Merger from qualifying as a "reorganization" within the meaning
of Section 368 of the Code;
(iv) except as required by applicable law or pursuant to
contractual obligations in effect as of the date of this Agreement, not (A)
execute, establish, adopt or amend, or accelerate rights or benefits under, any
Benefit Agreement, any Benefit Plan, or any collective bargaining agreement, (B)
grant any severance or termination pay to any Employee, (C) grant any stock
options or other equity related compensation awards or (D) increase the salary
or wages payable or to become payable to its Employees (other than salary or
wage increases in the ordinary course of business consistent with past
practice); provided, that in the ordinary course of business consistent with
--------
past practice and after giving prior or concurrent notice thereof to Parent, the
Company may grant stock options to employees of the Company (other than those
persons identified on Section 5.1 of the Company Disclosure Letter) in
connection with (x) newly hired employees (up to 30,000 Company Common Shares),
(y) retaining existing employees (up to 20,000 Company Common Shares) and (z) to
employees on certain anniversaries of their employment with the Company (up to
10,000 Company Common Shares) except if the Effective Time has not occurred
prior to September 1, 1999, the Company may thereafter grant options to purchase
up to 40,000 additional Company Common Shares pursuant to this proviso, such
shares to be allocated among such three categories in the Company's discretion
and provided further that the exercise price of any such options granted
pursuant to this proviso may not be less than the fair market value of the
Company Common Stock as of the date of grant;
(v) not forgive any loans to Employees, except as required
by the terms thereof as of the date hereof;
(vi) not make any material capital expenditures or
acquisitions of any business (whether by merger, purchase of stock or assets or
otherwise) or other acquisition outside of the ordinary course of business
consistent with past practice, except as contemplated by the Company's capital
budget set forth in Section 5.1 of the Company Disclosure Letter;
(vii) other than with respect to inventory and services in the
ordinary course of business consistent with past practice, not transfer, lease,
license, sell, mortgage, pledge, encumber or otherwise dispose of any of its
material property or assets;
(viii) not issue, pledge or sell, or authorize or propose the
issuance, pledge or sale of any shares of capital stock of any class (other than
(A) upon exercise of the Company Options upon payment of the exercise price
thereof, (B) upon conversion of shares of Company Series B Preferred Stock in
accordance with the terms of such
- 36 -
Company Series B Preferred Stock or (C) pursuant to and in accordance with the
terms of the instruments creating the Imperial Bank Warrants, the NEXTLINK
Warrants and the Other Warrants), or (D) as permitted by Section 5.1(iv);
(ix) not accelerate, amend, waive or otherwise modify any of
the terms of any option, warrant or stock option plan of the Company or any of
its Subsidiaries, including, without limitation, the Company Options or the
Company Stock Option Plans, or authorize cash payments as a result of or in
connection with the execution, delivery or performance of this Agreement or the
transactions contemplated hereby or in exchange for any options or rights
granted under any such plans except as required by the terms of such plans or
any related agreements (including severance agreements) in effect as of the date
of this Agreement;
(x) not change its accounting policies, practices or methods
except as required by GAAP or by the rules and regulations of the SEC;
(xi) other than borrowings in the ordinary course of business
consistent with past practice under lines of credit existing as of the date of
this Agreement (including extensions thereof), not incur, assume or guarantee
any additional indebtedness for borrowed money in excess of $2,000,000 greater
than the amount of current borrowing capacity;
(xii) not release any third party from, or amend, modify or
waive any provisions or terms of, or grant any exemption under, any
confidentiality or standstill agreement except as provided in Section 5.3(e);
(xiii) not change or amend the terms of any of its outstanding
securities;
(xiv) not make, change or revoke any Tax election under
federal, state, local or foreign tax law;
(xv) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice of liabilities reflected or reserved
against in the December 1998 Company Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since December 31, 1998 and
in accordance with the terms hereof;
(xvi) not (x) take any action (other than pursuant to this
Agreement) to cause the Company Shares to cease to be listed on the Nasdaq Stock
Market, (y) take any action to render inapplicable, or to exempt any third party
from, any provision of the Articles of Incorporation of the Company or any
statute referred to in
- 37 -
Section 6.15 or (z) take any action which would result in an adjustment to the
conversion price or exercise price of any Warrant or of the Company Preferred
Stock;
(xvii) not take any action that would be reasonably likely to
result in any of the conditions to the Merger set forth in Article VII of this
Agreement not being satisfied or that would impair the ability of the Company to
consummate the Merger in accordance with the terms hereof or delay such
consummation; and
(xviii) not enter into any commitments or agreements to do any
of the foregoing.
Section 5.2 Interim Operations of Parent. Between the date of this
--------------------------------
Agreement and the Effective Time, Parent shall (unless the Company shall
otherwise provide its prior written consent or except as otherwise expressly
contemplated by this Agreement):
(i) not take any action that would be reasonably likely to
result in any of the conditions set forth in Article VII hereof not being
satisfied or that would impair the ability of Parent or Merger Sub to consummate
the Merger in accordance with the terms hereof or delay such consummation;
(ii) not (A) declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect of any of its capital
stock, other than cash dividends on the Series A Preferred Stock in amounts
consistent with past practice or dividends payable in stock of Parent or any of
its Subsidiaries and payment of the redemption price of shares of Series A
Preferred Stock and other amounts paid to induce conversion of Series A
Preferred Stock; or (B) repurchase, redeem or otherwise acquire, any shares of
its capital stock or other equity securities other than repurchases of shares of
its capital stock or other equity securities in the ordinary course of business
and redemptions or repurchases of shares of the Series A Preferred Stock (it
being understood that this provision shall not prohibit the exercise, exchange
or conversion of outstanding Parent Equity Rights);
(iii) not take any action that would prevent the business
combination to be effected pursuant to the Merger from qualifying for "pooling
of interests" accounting treatment under GAAP and the rules and regulations of
the SEC and not take any action that would prevent the business combination to
be effected pursuant to the Merger from qualifying as a "reorganization" within
the meaning of Section 368 of the Code;
(iv) not take any action to cause the shares of Parent Common
Stock to cease to be listed on the NYSE; and
- 38 -
(v) not enter into any commitments or agreements to do any
of the foregoing.
Section 5.3 No Solicitation. (a) The Company shall immediately cease and
---------------
terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any Persons conducted heretofore by the Company,
its Subsidiaries or any of their respective Representatives with respect to any
proposed, potential or contemplated Company Acquisition Proposal.
(b) From and after the date hereof, without the prior written
consent of Parent, the Company will not, will not authorize or permit any of its
Subsidiaries to, and shall use its reasonable best efforts to cause all of its
and their respective officers, directors, employees, financial advisors, agents
or representatives (each a "Representative") not to, directly or indirectly,
--------------
solicit, initiate or encourage (including by way of furnishing information) or
take any other action to facilitate any inquiries or the making of any proposal
which constitutes or may reasonably be expected to lead to a Company Acquisition
Proposal from any Person (a "Third Party"), or engage in any discussion or
------------
negotiations relating thereto or accept any Company Acquisition Proposal.
(c) Notwithstanding the provisions of paragraph (b) above, (i) the
Company may, in response to an unsolicited written offer or proposal with
respect to a potential or proposed Company Acquisition Proposal engage in
negotiations or discussions with, or provide information or data to, any Third
Party relating to any Company Acquisition Proposal if (i) the Company
Acquisition Proposal is a Superior Proposal and (ii) the Company's Board of
Directors determines, upon advice from outside legal counsel to the Company,
that the failure to engage in the negotiations or discussions or provide the
information would result in a breach of the fiduciary duties of the Board of
Directors of the Company under applicable law. Any information furnished to any
Third Party in connection with any Company Acquisition Proposal shall be
provided pursuant to a confidentiality and standstill agreement on customary
terms (including without limitation prohibitions on unsolicited tender offers,
acquisitions of equity interests in the Company, proposals to acquire stock or
assets, formation of Section 13(d) groups, public request for release from the
standstill, actions that would require the Company to make a public
announcement, engaging in proxy contests, etc.). Subject to all of the foregoing
requirements, the Company will immediately notify Parent orally and in writing
if any discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any information is requested by any Third Party with
respect to any Company Acquisition Proposal or which could lead to a Company
Acquisition Proposal and immediately notify Parent of all material terms of any
Company Acquisition Proposal, including the identity of the Third Party making
the Company Acquisition Proposal or the request for information, if known, and
thereafter shall inform Parent on a timely, ongoing basis of the status and
content of any discussions or negotiations with a Third Party, including
- 39 -
immediately reporting any changes to the terms and conditions of the Company
Acquisition Proposal.
(d) In the event the Board of Directors of the Company has
determined that a potential or proposed Company Acquisition Proposal constitutes
a Superior Proposal, (i) the Company shall promptly notify the Parent thereof
and (ii) for a period of five business days after delivery of such notice, the
Company and its Representatives, if requested by Parent, shall negotiate in good
faith with Parent to make such adjustments to the terms and conditions of this
Agreement as would enable the Company to proceed with the Merger on such
adjusted terms. After such five business day period, the Board of Directors of
the Company may then (and only then) withdraw or modify its approval or
recommendation of the Merger and this Agreement and recommend such Superior
Proposal.
(e) The Company agrees not to release any Third Party from, or
waive any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, a Company Acquisition Proposal, or who
the Company or any of its Representatives have had discussions with regarding a
proposed, potential or contemplated Company Acquisition Transaction unless the
Company's Board of Directors shall conclude, in good faith, that such action
will lead to a Superior Proposal and after considering applicable provisions of
state law, and upon advice from outside legal counsel to the Company, with
respect to whether such action is required for the Board of Directors to act in
a manner consistent with its fiduciary duties under applicable law.
(f) For purposes of this Agreement:
(i) "Company Acquisition Proposal" shall mean, with respect
----------------------------
to the Company, any inquiry, proposal or offer from any Third Party
relating to any (A) direct or indirect acquisition or purchase of a
business of the Company or any of its Subsidiaries, that constitutes 25%
or more of the consolidated net revenues, net income or assets of the
Company and its Subsidiaries, (B) direct or indirect acquisition or
purchase of 25% or more of any class of equity securities of the Company
or any of its Subsidiaries whose business constitutes 25% or more of the
consolidated net revenues, net income or assets of the Company and its
Subsidiaries, (C) tender offer or exchange offer that if consummated would
result in any person beneficially owning 25% or more of the capital stock
of the Company, or (D) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries whose business
constitutes 25% or more of the consolidated net revenues, net income or
assets of the Company and its Subsidiaries.
- 40 -
(ii) Each of the transactions referred to in clauses (A)-(D)
of the definition of Company Acquisition Proposal, other than any such
transaction to which Parent or any of its Subsidiaries is a party, is
referred to herein as a "Company Acquisition Transaction."
-------------------------------
(iii) "Superior Proposal" means any bona fide written offer
------------------
made by a Third Party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, all of the shares of
Common Stock then outstanding or all or substantially all the assets of
the Company (i) on terms that the Board of Directors of the Company
determines in its good faith judgment (after consultation with a financial
advisor of nationally recognized reputation and taking into account all
the terms and conditions of the offer deemed relevant by such Board of
Directors, including any break-up fees, expense reimbursement provisions,
conditions to consummation, and the ability of the party making such
proposal to obtain financing for such offer) are materially more favorable
from a financial point of view to its stockholders than the Merger; and
(ii) that constitutes a transaction that, in such Board of Directors'
judgment, is reasonably likely to be consummated on the terms set forth,
taking into account all legal, financial, regulatory and other aspects of
such proposal.
(g) Except as expressly permitted by Section 5.3(d), neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors of this
Agreement or the Merger, or (ii) approve or recommend, or propose publicly to
approve or recommend, any Company Acquisition Proposal or Company Acquisition
Transaction. Nothing contained in this Section 5.3 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act.
- 41 -
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Meeting of Shareholders; Record Date. (a) The Company will
---------------------------------------
take all action necessary in accordance with applicable law and its Articles of
Incorporation and Bylaws to, and will, convene a meeting of its shareholders as
promptly as practicable to consider and vote upon the approval of this Agreement
and the Merger (such meeting, the "Company Shareholder Meeting"). Subject only
----------------------------
to Section 5.3(d), the Company shall, through its Board of Directors, recommend
that its shareholders vote in favor of such approval and such recommendation
shall be included in the Joint Proxy Statement/ Prospectus. The Company shall
take all lawful action necessary or advisable to solicit such approval
including, without limitation, timely mailing the Joint Proxy Statement/
Prospectus.
(b) In the event that the Registration Statement of Form S-4 has
not been declared effective by the SEC as of the close of business on July 30,
1999, the Company shall select a record date for determining the holders of
Company Shares entitled to vote at the Company Shareholders Meeting which is not
more than seven calendar days before (i) the date agreed upon by Parent and the
Company as the likely date upon which the Registration Statement on Form S-4
will be declared effective by the SEC, or (ii) after the date on which the
Registration Statement on Form S-4 is declared effective by the SEC, in each
case, unless otherwise agreed by the Company and Parent.
Section 6.2 Filings; Other Actions. Subject to the terms and conditions
------------------------
herein provided, the Company and Parent shall:
(i) within 20 business days from the date hereof, make their
respective filings under the HSR Act with respect to the Merger and thereafter
shall promptly make any other required submissions under the HSR Act;
(ii) use their reasonable best efforts to cooperate with one
another in (A) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, Governmental
Entities in connection with the execution and delivery of this Agreement and the
consummation of the Merger and the transactions contemplated hereby; (B) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; and (C) as promptly as practicable responding to any request
for information from such Governmental Entities; and
(iii) furnish the other party with such necessary information and
reasonable assistance as such other Party and its affiliates may reasonably
request in
- 42 -
connection with their preparation of necessary filings, registrations, or
submissions of information to any Governmental Entities with respect to the
Merger, including without limitation, any filings necessary or appropriate under
the provisions of the HSR Act.
Section 6.3 Publicity. The Parties agree that the initial press release
---------
with respect to the Merger shall be a joint press release. Thereafter, subject
to their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), the Parties shall consult with each other,
and use reasonable best efforts to agree upon the text of any press release,
before issuing any such press release or otherwise making public statements with
respect to the Merger and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
Section 6.4 Registration Statement. The Parties shall cooperate and
-----------------------
promptly prepare and Parent shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act
--------
with respect to the Parent Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meeting of the shareholders of the Company to approve the
transactions contemplated hereby (the "Joint Proxy Statement/Prospectus"). The
---------------------------------
Parties will use their respective reasonable best efforts to cause the Joint
Proxy Statement/Prospectus to be filed no later than July 6, 1999. The Parties
will cause the Joint Proxy Statement/Prospectus and the Form S-4 to comply as to
form in all material respects with the applicable provisions of the Securities
Act, the Exchange Act and the rules and regulations thereunder. Parent shall use
its reasonable best efforts to, and the Company will cooperate with Parent to,
have the Form S-4 declared effective by the SEC as promptly as practicable
(taking into account the circumstances described in the Parent Disclosure
Letter). Parent shall use its reasonable best efforts to obtain, prior to the
effective date of the Form S-4, all necessary state securities law or "blue sky"
permits or approvals required to carry out the Merger (provided that Parent
shall not be required to qualify to do business in any jurisdiction in which it
is not now so qualified). Each of the Parties agree that the information
provided by it for inclusion in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time it is filed or becomes effective at
the time of mailing thereof, and at the Shareholder Meeting Date, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 6.5 Listing Application. Parent shall as soon as practicable
--------------------
prepare and submit to the NYSE and all other securities exchanges on which the
shares of Parent Common Stock are listed a listing application with respect to
the shares of Parent Common Stock issuable in the Merger, and shall use its
reasonable best efforts to obtain,
- 43 -
prior to the Effective Time, approval for the listing of such Parent Common
Stock on such exchange, subject to official notice of issuance.
Section 6.6 Further Action. Each of the Parties shall, subject to the
---------------
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, use its reasonable best
efforts to perform such further acts and execute such documents as may be
reasonably required to effect the transactions contemplated hereby. Each of the
Parties will comply in all material respects with all applicable laws and with
all applicable rules and regulations of any Governmental Entity in connection
with the execution, delivery and performance of this Agreement and the Stock
Option Agreement and the transactions contemplated hereby and thereby. Each of
the Parties agrees to use its reasonable best efforts to obtain in a timely
manner all necessary waivers, consents, approvals and opinions and to effect all
necessary registrations and filings, and to use its reasonable best efforts to
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the Merger.
Section 6.7 Expenses. Whether or not the Merger is consummated, all costs
--------
and expenses incurred in connection with this Agreement and the transactions
contemplated thereby, including the Merger shall be paid by the Party hereto
incurring such expenses except as expressly provided elsewhere herein (including
Section 8.2) and except that (a) the filing fees in connection with the filing
of the Form S-4 and the Joint Proxy Statement/Prospectus with the SEC, (b) all
filing fees in connection with any filings, permits or approvals required under
applicable state securities or "blue sky" laws, and (c) the expenses incurred in
connection with printing and mailing of the Form S-4 and the Joint Proxy
Statement/Prospectus shall be shared by Parent and the Company equally.
Section 6.8 Notification of Certain Matters. Each Party shall give prompt
--------------------------------
notice to the other Party of the following:
(a) the occurrence of or failure to occur of any event the
occurrence or failure to occur of which would be likely to result in (i) any
representation or warranty of such Party being untrue or inaccurate in any
material respect at the date of this Agreement and at the Effective Time (or
with respect to any representation or warranty made as of a specific date such
representation or warranty being untrue or inaccurate in any material respect as
of such specific date), (ii) any condition set forth in Article VII being
incapable of being satisfied or (iii) a Company Material Adverse Effect or a
Parent Material Adverse Effect;
(b) any failure of such Party to comply in any material respect
with any of its covenants or agreements hereunder;
- 44 -
(c) the status of matters relating to completion of the Merger,
including promptly furnishing the other with copies of any notice or other
communication received by any Party or any of its respective Subsidiaries from
any Governmental Entity or other third party with respect to this Agreement or
the transactions contemplated hereby, including the Merger; and
(d) any facts relating to that Party which would make it necessary
or advisable to amend the Joint Proxy Statement/Prospectus or the Form S-4 in
order to make the statements therein not misleading or to comply with applicable
law; provided, however, that the delivery of any notice pursuant to this Section
6.8 shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
Section 6.9 Access to Information. (a) From this date to the Effective
----------------------
Time, each of the Parties shall, and shall cause its officers, directors,
employees, auditors, counsel and agents to afford the officers, employees,
auditors, counsel and agents of the other Party reasonable access at reasonable
times upon reasonable notice to each of the Party's officers, employees,
auditors, counsel, agents, properties, offices and other facilities and to all
of their respective books and records, and shall furnish the other Party with
all financial, operating and other data and information as such other Party may
reasonably request, in each case only to the extent, in the judgment of counsel
to such Party, permitted by law, including antitrust law, and provided no Party
shall be obligated to make any disclosure which would cause forfeiture of
attorney-client privilege or would violate confidentiality agreements (so long
as such Party shall have used commercially reasonable efforts to obtain a
release or waiver from the applicable confidentiality agreement in respect of
such disclosure).
(b) Each of Parent and the Company agrees that all information so
received from the other party shall be deemed received pursuant to the
Confidentiality Agreement, and that party shall, and shall cause its affiliates
and each of its and their Representatives to, comply with the provisions of the
applicable Confidentiality Agreement with respect to such information.
(c) From this date to the Effective Time, Parent and its
representatives (including without limitation any environmental consultant
engaged by Parent) shall have the right at reasonable times and upon reasonable
notice to the Company to (i) inspect all data and information relating to
environmental matters in the possession of the Company or any of its
subsidiaries and (ii) conduct such environmental assessments and investigations
(including without limitation any soil or groundwater sampling relating thereto)
of the Company or any of its Subsidiaries as Parent or its representatives shall
deem appropriate.
- 45 -
Section 6.10 Review of Information. Subject to applicable laws relating to
---------------------
the exchange of information, each Party shall have the right to review in
advance, and to the extent practicable each will consult the other on, all the
information relating to it, or any of its respective Subsidiaries, that appear
in any filing made with, or written materials submitted to, any third party
and/or any Governmental Entity in connection with the Merger. In exercising the
foregoing right, each of the Parties shall act reasonably and as promptly as
practicable.
Section 6.11 Insurance; Indemnity. (a) Parent shall, or shall cause the
---------------------
Surviving Corporation to maintain in effect for a period of six years after the
Effective Time the Company's current directors' and officers' insurance policies
(or policies containing substantially similar coverage) with respect to acts or
failures to act prior to or as of the Effective Time (other than to the extent
the available limit of any such insurance policy may be reduced or exhausted by
reason of the payment of claims thereunder); provided, however, that in order to
-------- -------
maintain or procure such coverage, neither Parent nor the Surviving Corporation
shall be required to pay an annual premium in excess of 175% of the current
annual premium paid by the Company for its existing coverage (the "Cap Amount");
----------
and provided, further, that if equivalent coverage cannot be obtained, or can be
-------- -------
obtained only by paying an annual premium in excess of the Cap Amount, Parent
and the Surviving Corporation shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to the Cap Amount. From and
after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, indemnify and hold harmless to the full extent permitted under
the Articles of Incorporation of the Company as in effect on the date hereof,
each person who is a current or former officer or director of the Company, or
its Subsidiaries (each, an "Indemnified Party") against all losses, claims,
------------------
damages, liabilities, costs or expenses (including reasonable attorneys' fees),
judgments, fines, penalties and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time (and Parent
and the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under the Articles of Incorporation of the Company as
in effect on the date hereof provided the Indemnified Party to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification). In
the event of any such claim, action, suit, proceeding or investigation (an
"Action"), the indemnifying party shall control the defense of such Action with
------
counsel selected by it; provided, however, that the Indemnified Party shall be
--------
permitted to participate in the defense of such Action through counsel selected
by it at the Indemnified Party's expense.
(b) Parent and the Surviving Corporation agree that the provisions
of the Company's Articles of Incorporation and Bylaws in effect as of the date
of this Agreement affecting the Indemnified Parties' rights to indemnification
and limitation of
- 46 -
liability existing in favor of the Indemnified Parties as provided in the
Company's Articles of Incorporation and Bylaws as in effect as of the date of
this Agreement shall survive the Merger and shall continue in full force and
effect, without any amendment thereto (unless required by the CGCL or federal
law), for a period of six years from the Effective Time.
(c) In the event that Parent or any of its successors or assigns
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger proper provision
shall be made so that the successors and assigns of Parent assume the
obligations set forth in this Section 6.11.
Section 6.12 Employee Benefits. (a) Parent shall take all necessary action
-----------------
so that, for eligibility and vesting purposes under each Benefit Plan (but not
benefit accrual or early retirement subsidies) maintained by Parent or any of
its Subsidiaries in which Employees of the Company and its Subsidiaries become
eligible to participate upon or after the Effective Time, each such person shall
be given credit for all service with the Company and its Subsidiaries (or all
service credited by the Company or its Subsidiaries) to the same extent as if
rendered to Parent or any of its Subsidiaries. Parent shall use reasonable best
efforts to permit participation by the Employees in Parent's employee benefit
plans as soon as is reasonably practicable after the Effective Time.
(b) Except as otherwise provided in this Section or in Section
6.13, nothing in this Agreement shall be interpreted as limiting the power of
Parent or Surviving Corporation to amend or terminate any particular Benefit
Plan, Benefit Agreement or any other particular employee benefit plan, program,
agreement or policy or as requiring the Parent or the Surviving Corporation to
offer to continue (other than as required by its terms) any written employment
contract; provided, however, that no such termination or amendment may impair
-------- -------
the rights of any person with respect to benefits or any other payments already
accrued as of the time of such termination or amendment without the consent of
such person.
(c) Parent shall, or shall cause the Company and the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Employees of the Company and its Subsidiaries
under any welfare or fringe benefit plan in which such Employees may be eligible
to participate after the Effective Time, other than limitations or waiting
periods that are in effect with respect to such Employees and that have not been
satisfied under the corresponding welfare or fringe benefit plan maintained by
the Company for the Employees prior to the Effective Time, and (ii) provide each
Employee with credit under any welfare plans in which such Employee becomes
eligible to participate after the Effective Time for any co-payments and
- 47 -
deductibles paid by such Employee for the then current plan year under the
corresponding welfare plans maintained by the Company prior to the Effective
Time.
Section 6.13 Options. (a) Prior to the Effective Time, the Board of
-------
Directors of the Company or the committee of the Board of Directors
administering the Company Stock Option Plans and the ESPP shall adopt such
resolutions or shall take such other actions as are required to approve the
transactions contemplated by this Section 6.13 and Section 2.14. The Company
shall use reasonable best efforts to obtain any necessary consents of the
holders of Company Options issued pursuant to the Company Stock Option Plans and
the ESPP to effect this Section 6.13 and Section 2.14.
(b) The Company shall cause each Company stock option granted
pursuant to the Employee Stock Purchase Program (such program, the "ESPP" and
----
any such option, the "ESPP Option") which is outstanding but not yet exercisable
-----------
to become immediately exercisable for a period of twenty (20) days preceding the
Company Shareholder Meeting. The Company shall notify all participants twenty
(20) days prior to the anticipated Company Shareholder Meeting that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.
At the Effective Time, the Company shall cause any ESPP Option (to the extent
that such ESPP Stock Option has not yet been exercised) to be terminated and
cancelled, and shall ensure that no ESPP Option shall be exercisable for Company
Common Stock following the Effective Time.
Section 6.14 Affiliates. Not less than 45 days prior to the Closing Date,
----------
the Company (i) shall have delivered to Parent a letter identifying all Persons
who may be, as of the Shareholder Meeting Date, the Company's "affiliates" for
purposes of Rule 145 under the Securities Act, and (ii) shall use its reasonable
best efforts to cause each Person who is identified as an "affiliate" of the
Company in such letter to deliver, as promptly as practicable but in no event
later than 35 days prior to the Closing (or after such later date as the parties
may agree), a signed agreement to the Company and Parent substantially in the
form attached as Exhibit D hereto. The Company shall notify Parent from time to
---------
time after the delivery of the letter described in the prior sentence of any
Person not identified on such letter who then is, or may be, an "affiliate" of
the Company and use reasonable best efforts to cause each additional Person who
is identified as an "affiliate" to execute a signed agreement as set forth in
this Section 6.14.
Section 6.15 Takeover Statutes. If any "fair price," "moratorium,"
------------------
"control share acquisition" or other similar anti-takeover statute or regulation
is or may become applicable to the transactions contemplated hereby, each of the
parties hereto and its board of directors shall grant such approvals and take
all such actions as are legally permissible so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate
- 48 -
or minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 6.16 Pooling of Interests. Each of the Parties will use its
----------------------
reasonable best efforts to cause the Merger to be accounted for as a pooling of
interests in accordance with GAAP and the rules and regulations of the SEC.
Section 6.17 Tax-Free Reorganization. Each of the Parties will use its
------------------------
reasonable best efforts to cause the Merger to qualify as a tax-free
"reorganization" under Section 368 of the Code.
Section 6.18 Accountant's Comfort Letters. Each Party shall use its
------------------------------
reasonable best efforts to cause to be delivered to the other Party two letters
from its independent public accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one dated
the Closing Date, in form and substance reasonably satisfactory to the recipient
and customary in scope and substance for comfort letters delivered by
independent accountants in connection with registration statements similar to
the Form S-4.
Section 6.19 Accountant's Pooling Letters. (a) The Company shall use its
-----------------------------
reasonable best efforts to cause Ernst & Young LLP ("E&Y") to issue a letter
---
dated as of the Effective Time addressed to the Company (and shall provide
Parent with a copy of such letter) in which E&Y concurs with the Company's
management's conclusion that no conditions exist related to the Company that
would preclude Parent from accounting for the Merger as a "pooling of interests"
in accordance with GAAP and the applicable rules and regulations of the SEC.
(b) Parent shall use its reasonable best efforts to cause E&Y to
issue a letter dated as of the Effective Time addressed to Parent (and shall
provide the Company with a copy of such letter) in which E&Y concurs with
Parent's management's conclusion that the Merger will qualify as a "pooling of
interests" in accordance with GAAP and the applicable rules and regulations of
the SEC.
Section 6.20 Warrants
--------
(a) Prior to the Effective Time, Parent shall negotiate in good
faith with each of the holders of the Warrants new forms of Warrants and warrant
agreements providing for substantially similar terms as provided for by the
terms of such Warrants and warrant agreements as in effect on the date hereof.
Each of the new forms of Warrants and new warrant agreements will provide that
the holder(s) of the Warrants will be entitled, upon exercise of such Warrants,
to receive Parent Common Shares as provided by Section 2.15 hereof.
- 49 -
(b) Company shall use its reasonable best efforts to facilitate
the negotiations contemplated by the foregoing clause (a) and shall cooperate
with Parent in accomplishing the foregoing.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1 Conditions to Obligations of the Parties to Consummate the
--------------------------------------------------------------
Merger. The respective obligations of each party to consummate the Merger shall
------
be subject to the satisfaction or waiver of each of the following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the requisite vote of the holders of the Company
Common Shares and the holders of the Company Preferred Shares in accordance with
the CGCL and the Articles of Incorporation and Bylaws of the Company.
(b) Legality. No statute, rule, regulation or other law shall have
--------
been enacted, issued or promulgated and no order, decree or injunction shall
have been entered or issued by any Governmental Entity of competent jurisdiction
which (i) has the effect of making the consummation of the transactions
contemplated hereby illegal, (ii) materially restricts, prevents or prohibits
consummation of any of the transactions contemplated hereby or (iii) would
impair the ability of Parent to own the outstanding shares of the Surviving
Corporation, or operate its or any of its Subsidiaries' businesses (including
the businesses of the Surviving Corporation or any of its Subsidiaries),
following the Effective Time. Each Party agrees that, in the event that any such
order, decree or injunction shall be entered or issued, it shall use all
reasonable best efforts to cause such order, decree or injunction to be lifted
or vacated.
(c) HSR Act. The waiting period (or extension thereof) under the
-------
HSR Act applicable to the Merger shall have expired or been terminated.
(d) Registration Statement Effective. The Form S-4 shall have
----------------------------------
become effective prior to the mailing by the Company of the Joint Proxy
Statement/Prospectus to its shareholders and no stop order suspending the
effectiveness of the Form S-4 shall then be in effect and no proceedings for
that purpose shall have been initiated or, to the Knowledge of Parent or the
Company, threatened by the SEC. All necessary state securities authorizations
relating to the issuance of the Parent Common Stock shall have been received.
- 50 -
(e) Stock Exchange Listing. The shares of Parent Common Stock to
-----------------------
be issued pursuant to the Merger shall have been duly approved for listing on
the NYSE, subject to official notice of issuance.
(f) Dissenting Shareholders. Effective demands for payment under
------------------------
Chapter 13 of the CGCL shall not have been received with respect to Company
Shares such that cash would be payable with respect to such Company Shares and
payable in respect of fractional shares in an aggregate amount equal to 10% or
more of the value of the Total Merger Consideration. "Total Merger
--------------
Consideration" means the aggregate value as of the Effective Time of the Parent
-------------
Common Stock to be issued in the Merger together with any cash to be paid in
respect of such dissenters' demands and cash to be paid in lieu of fractional
shares to be issued in the Merger.
Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub.
-------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate the Merger shall also be
subject to the satisfaction or waiver of each of the following conditions:
(a) Representations and Warranties. Each of the representations
-------------------------------
and warranties of the Company contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Effective Time as if made
at and as of the Effective Time and each of such representations and warranties
that is not so qualified shall be true and correct in all material respects at
and as of the Effective Time as if made as of the Effective Time, in each case,
except (i) as contemplated or permitted by this Agreement and (ii) to the extent
that such representations or warranties shall have been expressly made as of an
earlier date, in which case such representations and warranties shall have been
true and correct as of such earlier date.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or before the Effective
Time.
(c) Certificates. Parent shall have received a certificate of the
------------
Company executed on its behalf by the Chief Executive Officer and the Chief
Financial Officer of the Company, certifying that the conditions set forth in
paragraphs (a) and (b) above have been satisfied.
(d) Consents. The Company shall have obtained all consents,
--------
approvals, releases or authorizations ("Consents") from, and the Company shall
--------
have made all filings and registrations ("Filings") to or with, any Person,
-------
including without limitation any Governmental Entity, necessary to be obtained
or made in order for Parent and Merger Sub to consummate the Merger or issue
shares of Parent Common Stock pursuant thereto,
- 51 -
as applicable, unless the failure to obtain such Consents or make such Filings
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
(e) Tax Opinion. Parent shall have received an opinion of Fried,
------------
Frank, Harris, Xxxxxxx & Xxxxxxxx, dated as of the Closing Date, in form and
substance reasonably satisfactory to it, substantially to the effect that, on
the basis of the facts and assumptions described in the opinion, the Merger
constitutes a reorganization within the meaning of Section 368 of the Code. In
rendering such opinion, counsel may require and rely upon representations and
covenants including those contained in this Agreement or in certificates of
officers of the Parties and others.
(f) Accountants Letters. Parent shall have received each of the
--------------------
accountants' letters contemplated by Sections 6.18 and 6.19 to be received by
it.
(g) Voting Agreements. Each of the parties to the Voting
-------------------
Agreements other than Parent shall have complied in all material respects with
all agreements and covenants under the Voting Agreements required to be
performed by it on or before the Effective Time.
Section 7.3 Additional Conditions to Obligations of the Company. The
-------------------------------------------------------
obligations of the Company to consummate the Merger shall also be subject to the
satisfaction or waiver of each of the following conditions:
(a) Representations and Warranties. Each of the representations
-------------------------------
and warranties of Parent and Merger Sub contained in this Agreement that is
qualified by materiality shall be true and correct at and as of the Effective
Time as if made at and as of the Effective Time and each of such representations
and warranties that is not so qualified shall be true and correct in all
material respects at and as of the Effective Time as if made as of the Effective
Time, in each case, except (i) as contemplated or permitted by this Agreement
and (ii) to the extent that such representations or warranties shall have been
expressly made as of an earlier date, in which case such representations and
warranties shall have been true and correct as of such earlier date.
(b) Agreements and Covenants. Each of Parent and Merger Sub shall
------------------------
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or before the Effective Time.
(c) Certificates. The Company shall have received a certificate of
------------
Parent executed on its behalf by two officers of Parent at the level of senior
vice president or above, certifying that the conditions set forth in paragraphs
(a) and (b) above have been satisfied.
- 52 -
(d) Consents. Parent shall have obtained all Consents from, and
--------
Parent shall have made all Filings to or with, any Person, including without
limitation any Governmental Entity, necessary to be obtained or made in order
for the Company to consummate the Merger, unless the failure to obtain such
Consents or make such Filings would not, individually or in the aggregate, have
a Parent Material Adverse Effect.
(e) Tax Opinion. The Company shall have received an opinion of
------------
Xxxxxx & Xxxxxxx (or other counsel reasonably satisfactory to it), dated as of
the Closing Date, in form and substance reasonably satisfactory to it,
substantially to the effect that, on the basis of the facts and assumptions
described in the opinion, the Merger constitutes a reorganization within the
meaning of Section 368 of the Code. In rendering such opinion, counsel may
require and rely upon representations and covenants including those contained in
this Agreement or in certificates of officers of the Parties and others.
(f) Accountants Letters. The Company shall have received each of
--------------------
the accountants' letters contemplated by Sections 6.18 and 6.19 hereof to be
received by it.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
-----------
before the Effective Time (except as otherwise provided) as follows:
(a) by mutual written consent of each of Parent and the Company;
(b) by either Parent or the Company, if the Effective Time shall
not have occurred on or before December 31, 1999 (the "Termination Date");
-----------------
provided, however, that the right to terminate this Agreement under this Section
-------- -------
8.1(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date;
(c) by either Parent or the Company, if a Governmental Entity
shall have issued an order, decree or injunction having the effect of making the
Merger illegal or permanently prohibiting the consummation of the Merger, and
such order, decree or injunction shall have become final and nonappealable (but
only if such Party shall have used its reasonable best efforts to cause such
order, decree or injunction to be lifted or vacated);
(d) by either Parent or the Company, if (x) there shall have been
a breach by the other (or Merger Sub if the Company is the terminating party) of
any of its representations, warranties, covenants or agreements contained in
this Agreement, which
- 53 -
breach would result in the failure to satisfy one or more of the conditions set
forth in Section 7.2(a) or (b) (in the case of a breach by the Company) or
Section 7.3(a) or (b) (in the case of a breach by Parent or Merger Sub), and
such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the Party alleged to be in breach;
(e) by Parent, if the Board of Directors of the Company or any
committee of the Board of Directors of the Company (w) shall withdraw or modify
in any manner adverse to Parent, its approval or recommendation of this
Agreement or the Merger, (x) shall fail to reaffirm such approval or
recommendation within 15 days of Parent's request, (y) shall approve or
recommend any Company Acquisition Proposal or Company Acquisition Transaction or
(z) shall resolve to take any of the actions specified in clauses (w), (x) or
(y) above;
(f) by either Parent or the Company, if the required approval and
adoption of this Agreement and the Merger by the shareholders of the Company
shall not have been obtained at a duly held shareholders meeting called for the
purpose of obtaining such approval, including any adjournments or postponements
thereof;
(g) by Parent if any of the parties to the Voting Agreements other
than Parent shall have violated any of the terms of the Voting Agreements in any
material respect; or
(h) by Parent, if (x) as of the close of business on July 30,
1999, the Registration Statement on Form S-4 has not been declared effective by
the SEC and (y) as of August 13, 1999, the Requisite Conversion has not
occurred; provided that the termination right under this clause (h) may only be
--------
exercised by Parent prior to August 20, 1999.
The term "Requisite Conversion" means the conversion (or the written
--------------------
agreement to convert on or before the Trigger Date) by one or more Preferred
Holders of such number of shares of Company Preferred Stock into shares of
Company Common Stock so that, as of the Trigger Date, at least 37.9% of the
shares of the Company Common Stock are committed to vote in favor of the Merger
at the Company Shareholder Meeting pursuant to the Voting Agreements.
The term "Trigger Date" means the record date established by the
-------------
Company for determining the holders of Company Shares entitled to vote at the
Company Shareholder Meeting.
Section 8.2 Effect of Termination. (a) In the event that
---------------------
- 54 -
(x) (1) any person shall have made a Company Acquisition Proposal to
the Company or to its shareholders and thereafter this Agreement is
terminated (i) by either party pursuant to Section 8.1(b) or Section
8.1(h) or (ii) by either party pursuant to Section 8.1(f) and (2)
within 18 months after the termination of this Agreement any Company
Acquisition Transaction shall have been consummated or any written
agreement with respect to a Company Acquisition Transaction entered
into, or
(y) this Agreement is terminated by Parent pursuant to Section
8.1(e),
then, in any such case, the Company shall in no event later than (A) the date of
consummation of such Company Acquisition Transaction, in the case of a
termination described in clause (x), or (B) two days after such termination, in
the case of a termination described in clause (y), pay Parent a fee of
$4,000,000 (a "Termination Fee"), which amount shall be payable by wire transfer
---------------
of same day funds to a bank account designated by Parent.
(b) In the event that (x) any person shall have made a Company
Acquisition Proposal to the Company or its shareholders and thereafter this
Agreement is terminated (i) by either party pursuant to Section 8.1(b), or (y)
this Agreement is terminated by Parent pursuant to Section 8.1(e), or by either
party pursuant to Section 8.1(f), after any such termination, the Company shall
reimburse Parent, promptly after being requested to do so by Parent, for all
out-of-pocket costs and expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, fees and expenses of accountants, attorneys, financial advisors,
commercial banks, experts and consultants and fees and expenses otherwise
allocated to the Parent pursuant to Section 6.7.
(c) The Company acknowledges that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Parent and Merger Sub would not
enter into this Agreement; accordingly, if the Company fails to promptly pay the
amount due pursuant to this Section 8.2, and in order to obtain such payment
Parent commences a suit which results in a judgment against the Company for the
fees and expenses set forth in this Section 8.2, the Company shall pay to Parent
its costs and expenses (including attorneys' fees) in connection with such suit.
(d) In the event of termination of this Agreement pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability under the terms of the Agreement
(other than as set forth in this Section 8.2) on the part of any party hereto;
provided, however, no such termination shall relieve any party hereto from any
liability for breach of this Agreement.
- 55 -
Section 8.3 Amendment. This Agreement may be amended at any time before
---------
the Effective Time, whether before or after this Agreement and the Merger shall
have been approved and adopted by the shareholders of the Company, but only
pursuant to a writing executed and delivered by Parent and the Company.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations, Warranties and Agreements.
--------------------------------------------------------------
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.1, as the case may be, except that (a) the agreements set forth in
Sections 1.3, 6.11 and 6.12 shall survive the Effective Time, and (b) the
agreements set forth in Sections 6.7 and 8.2 shall survive termination
indefinitely.
Section 9.2 Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, to the applicable party at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to the Company:
PulsePoint Communications
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Counsel
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
and
- 56 -
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telecopy No.: (000) 000-0000
(b) if to Parent or Merger Sub:
Xxxxxx Xxxxxxxxxxx
Xxxxxx Xxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Xx.
Xxxxxxx X. Xxxxxx
Telecopy No.:(000) 000-0000
Section 9.3 Certain Definitions; Interpretation. (a) For purposes of this
------------------------------------
Agreement, the following terms shall have the following meanings (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined):
"affiliate" of a Person means a Person that directly or
---------
indirectly, through one or more intermediaries, Controls, is controlled by, or
is under common control with, the first mentioned Person.
"Benefit Plan" means any bonus, pension, profit sharing,
-------------
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical, employee stock purchase, stock appreciation,
restricted stock or other employee benefit plan, policy, arrangement or
understanding (whether in writing or not) providing benefits to any Employees.
"Company Disclosure Letter" means the disclosure letter
----------------------------
delivered by the Company to Parent dated as of the date hereof.
- 57 -
"Company Equity Rights" means subscriptions, options,
-------------------------
warrants, calls, commitments, agreements, conversion rights or other rights of
any character (contingent or otherwise) to purchase or otherwise acquire from
the Company or any of its Subsidiaries at any time, or upon the happening of any
stated event, any shares of the capital stock of the Company.
"Company Material Adverse Effect" means any change in or
----------------------------------
effect (x) that is or would be likely to be materially adverse to the business,
assets, liabilities, results of operations or condition (financial or otherwise)
of the Company and its Subsidiaries taken as a whole, or (y) that will or would
be likely to prevent or materially impair or materially delay the Company's
ability to consummate the transactions contemplated by this Agreement; provided,
--------
that in determining whether a Company Material Adverse Effect has occurred,
changes or effects relating to United States economic conditions or financial
markets in general or to the telecommunications or information technology
industries in general, shall not be considered.
"Company Preferred Stock" or "Company Preferred Shares" means
------------------------ ------------------------
the Series B Convertible Preferred Stock, no par value, of the Company.
"Company Shares" means Company Common Shares together with
---------------
Company Preferred Shares.
"Confidentiality Agreement" means the Mutual Non-Disclosure
--------------------------
Agreement between Parent and Company as of the date hereof.
"Control" (including the terms "controlled by" and "under
-------
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise.
"December 1998 Company Balance Sheet" means the audited
---------------------------------------
consolidated balance sheet of the Company as of December 31, 1998 included in
the Company's Form 10-K for the fiscal year ended December 31, 1998.
"December 1998 Parent Balance Sheet" means the audited
---------------------------------------
consolidated balance sheet of Parent as of December 31, 1998 included in
Parent's Form 10-K for the fiscal year ended December 31, 1998.
"Employee" means each current, former, or retired employee,
--------
officer or director of the Company or any of its Subsidiaries as of the
Effective Time (including each such person who is on vacation, layoff, approved
leave of absence, sick leave, or short term or long term disability).
- 58 -
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended, together with the rules and regulations promulgated
thereunder.
"ERISA Affiliate" means each business or entity which is a
----------------
member of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company within the meaning of Sections
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
"ERISA Benefit Plan" means a Benefit Plan maintained as of the
------------------
date of this Agreement which is also an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or which is also an "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA).
"Excluded Shares" means (i) those shares of Company Common
----------------
Stock and Company Preferred Stock held in the treasury of the Company, by any of
its Subsidiaries or by Parent or any of its Subsidiaries immediately prior to
the Effective Time and (ii) those Company Shares as to which dissenters' rights
are perfected.
"Imperial Bank Warrants" shall mean the warrants to acquire
------------------------
shares of the Company Common Stock issued pursuant to that certain Warrant
Purchase Agreement dated October 30, 1997 by and between the Company and
Imperial Bank.
"Intellectual Property Rights" means all intellectual property
----------------------------
rights worldwide, including patents, trademarks, service marks, copyrights, and
registrations and applications therefor, trade names, know-how, trade secrets,
computer software programs and proprietary information, firmware and mask works,
whether owned, used or licensed for use.
"Junior Preferred Stock" means the junior participating
------------------------
preferred stock issuable pursuant to the Parent Rights Agreement.
"Knowledge" means to the knowledge of a Party, without a duty
---------
of investigation.
"Nasdaq" means the National Association of Securities Dealers
------
Automated Quotation System.
"NEXTLINK Warrants" means the warrants issued and to be issued
-----------------
to NEXTLINK Communications Inc. pursuant to that certain Warrant Agreement dated
June 5, 1998 by and between the Company and NEXTLINK Communications Inc.
- 59 -
"Nondisclosure Agreement" means the Nondisclosure Agreement
------------------------
between Parent and Company dated as of October 12, 1998.
"NYSE" means the New York Stock Exchange.
----
"Other Warrants" means the warrants issued and to be issued to
--------------
TBCC Funding Trust II, Priority Capital Resources and Leap Wireless
International, Inc. pursuant to those certain agreements by and between the
Company and those Persons dated November 10, 1998, November 10, 1998 and January
21, 1999, respectively.
"Parent Disclosure Letter" means the disclosure letter
----------------------------
delivered by the Parent to the Company dated as of the date hereof.
"Parent Equity Rights" means subscriptions, options, warrants,
--------------------
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise acquire from Parent
at any time, or upon the happening of any stated event, any shares of any
capital stock of Parent; provided that Parent Equity Rights does not include the
--------
Rights (as defined in the Parent Rights Agreement).
"Parent Material Adverse Effect" means any change in or effect
------------------------------
(x) that is or would be likely to be materially adverse to the business, assets,
liabilities, results of operations or condition (financial or otherwise) of
Parent and its Subsidiaries taken as a whole, or (y) that will or would be
likely to prevent or materially impair or materially delay Parent's ability to
consummate the transactions contemplated by this Agreement; provided, that in
--------
determining whether a Parent Material Adverse Effect has occurred, changes or
effects relating to United States economic conditions or financial markets in
general or to the telecommunications or information technology industries in
general, shall not be considered.
"Parent Rights Agreement" means the Rights Agreement dated as
------------------------
of March 7, 1986 between Xxxxxxxxx Corporation and Xxxxxx Trust Company of New
York, as Rights Agent, as amended.
"Person" or "person" means an individual, corporation,
------ ------
partnership, limited liability company, association, trust, unincorporated
organization, entity or group (as defined in the Exchange Act).
"Shareholder Meeting Date" means the date of the Shareholder
-------------------------
Meeting.
"Subsidiary" of a Person means any corporation or other legal
----------
entity of which such Person (either alone or through or together with any other
Subsidiary or
- 60 -
Subsidiaries) is the general partner or managing entity or of which at least 50%
of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or others performing
similar functions of such corporation or other legal entity is directly or
indirectly owned or controlled by such Person (either alone or through or
together with any other Subsidiary or Subsidiaries).
"Tax" " means any federal, state, local or foreign net income,
---
gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, franchise, employment, profits, environmental
(including Taxes under section 59A of the Code), capital stock, severance,
stamp, unemployment, disability, transfer, occupation, social security (or
similar) registration, payroll, withholding, alternative or add-on minimum or
any other tax, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty, addition to tax
or additional amount imposed by any Governmental Entity.
"Tax Return" means any return, report or similar statement
-----------
required to be filed with respect to any tax including, without limitation, any
schedule or attachment thereto, any information return, claim for refund,
amended return or declaration of estimated tax.
"Warrants" means collectively the Imperial Bank Warrants, the
--------
Other Warrants and the NEXTLINK Warrants.
(b) When a reference is made in this Agreement to Articles,
Sections, or Exhibits, such reference is to an Article or a Section of, or an
Exhibit to, this Agreement, unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be understood to be followed by the words "without
limitation."
Section 9.4 Headings. The headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.5 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect
- 61 -
the original intent of the Parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
maximum extent possible.
Section 9.6 Entire Agreement; No Third-Party Beneficiaries. This
------------------------------------------------------
Agreement, the Stock Option Agreement, the Voting Agreements, the Nondisclosure
Agreement and the Confidentiality Agreement constitute the entire agreement and
supersede any and all other prior agreements and undertakings, both written and
oral, among the parties hereto, or any of them, with respect to the subject
matter hereof and, except for Section 6.11, does not, and is not intended to,
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
Section 9.7 Assignment. This Agreement shall not be assigned by any party
----------
hereto by operation of law or otherwise without the express written consent of
each of the other parties.
Section 9.8 Governing Law; Jurisdiction. This Agreement shall be governed
---------------------------
by and construed in accordance with, the laws of the State of New York without
regard, to the fullest extent permitted by law, to the conflicts of laws
provisions thereof which might result in the application of the laws of any
other jurisdiction. (The laws of the State of California pertaining to the
fiduciary obligations of directors of a California corporation shall apply to
such directors.) Each of the parties hereto submits to the non-exclusive
jurisdiction of the state and federal courts of the United States located in the
City of New York, County of New York, with respect to any claim or cause of
action arising out of this Agreement or the transactions contemplated hereby.
Section 9.9 Trial by Jury. Each of the Parties hereto hereby irrevocably
-------------
and unconditionally waives any right it may have to trial by jury in connection
with any litigation arising out of or relating to this Agreement, the Stock
Option Agreement, the Voting Agreements, the Nondisclosure Agreement, the
Confidentiality Agreement or Merger or any of the other transactions
contemplated hereby or thereby.
Section 9.10 Enforcement. The parties hereto agree that irreparable damage
-----------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, such remedy being in addition to any other remedy to which
any party is entitled at law or in equity.
Section 9.11 Obligations of Subsidiaries. Whenever this Agreement requires
---------------------------
any Subsidiary of the Company to take any action or Merger Sub to take any
action, such requirement shall be deemed to include an undertaking on the part
of the Company to
- 62 -
cause such Subsidiary to take such action or Parent to cause Merger Sub to take
such action, as the case may be.
Section 9.12 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement; it being understood that all parties need
not execute the same counterpart.
[Remainder of Page Intentionally Left Blank]
- 63 -
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
XXXXXX XXXXXXXXXXX
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President and
Chief Financial Officer
SHELLCO INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: President
PULSEPOINT COMMUNICATIONS
By: /s/ Xxxx X. Xxxx
-----------------------------
Name: Xxxx X. Xxxx
Title: President and C.E.O.
[Signature Page to Agreement and Plan of Merger]
- 64 -
EXHIBIT A
TO THE MERGER AGREEMENT
LIST OF PERSONS EXECUTING VOTING AGREEMENTS
1. Xxxxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx
2. Citiventure 96 Partnership Fund, X.X.
Xxxxxxxxxx Private Capital Offshore Partners II, X.X.
Xxxxxxxxxx Private Capital Partners III, X.X.
Xxxxxxxxxx Private Capital Offshore Partners I, C.V.
3. Microsoft Corporation
4. Oak Investment Partners III, L.P.
Oak Investment Partners VII, L.P.
Oak VII Affiliates Fund, L.P.
Oak Investment Partners V, LP
Oak V Affiliates Fund, X.X.
Xxxxxx X. Xxxxxx
5. Xxxxx Global Investments, Ltd.
Remington Investment Strategies, L.P.
