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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
WIND RIVER SYSTEMS, INC.,
a Delaware corporation;
UNIVERSITY ACQUISITION CORP.,
a Delaware corporation; and
INTEGRATED SYSTEMS, INC.,
a California corporation
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Dated as of October 21, 1999
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION.................................. 1
1.1 Merger of Merger Sub into the Company....................... 1
1.2 Effect of the Merger........................................ 2
1.3 Closing; Effective Time..................................... 2
Articles of Incorporation and Bylaws; Directors and
1.4 Officers.................................................... 2
1.5 Conversion of Shares........................................ 2
1.6 Closing of the Company's Transfer Books..................... 4
1.7 Exchange of Certificates.................................... 4
1.8 Dissenting Shares........................................... 5
1.9 Tax Consequences............................................ 6
1.10 Accounting Consequences..................................... 6
1.11 Further Action.............................................. 6
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 6
2.1 Due Organization; Subsidiaries; Etc......................... 6
2.2 Articles of Incorporation and Bylaws........................ 7
2.3 Capitalization, Etc......................................... 7
2.4 SEC Filings; Financial Statements........................... 8
2.5 Absence of Changes.......................................... 9
2.6 Title to Assets............................................. 11
2.7 Receivables, Customers...................................... 11
2.8 Real Property; Equipment; Leasehold......................... 12
2.9 Proprietary Assets.......................................... 12
2.10 Contracts................................................... 15
2.11 Sale of Products; Performance of Services................... 17
2.12 Liabilities................................................. 18
2.13 Compliance with Legal Requirements.......................... 18
2.14 Certain Business Practices.................................. 18
2.15 Governmental Authorizations................................. 18
2.16 Tax Matters................................................. 19
2.17 Employee and Labor Matters; Benefit Plans................... 20
2.18 Environmental Matters....................................... 22
2.19 Insurance................................................... 23
2.20 Transactions with Affiliates................................ 23
2.21 Legal Proceedings; Orders................................... 24
Authority; Inapplicability of Anti-takeover Statutes;
2.22 Binding Nature of Agreement................................. 24
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2.23 No Existing Discussions..................................... 25
2.24 Accounting Matters.......................................... 25
2.25 Vote Required............................................... 25
2.26 Non-Contravention; Consents................................. 25
2.27 Fairness Opinion............................................ 26
2.28 Financial Advisor........................................... 26
2.29 Full Disclosure............................................. 26
2.30 Company Rights Agreement.................................... 27
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..... 27
3.1 Due Organization; Subsidiaries; Etc......................... 27
3.2 Certificate of Incorporation and Bylaws..................... 28
3.3 Capitalization, Etc......................................... 28
3.4 SEC Filings; Financial Statements........................... 29
3.5 Absence of Certain Changes or Events........................ 29
3.6 Title to Assets............................................. 29
3.7 Proprietary Assets.......................................... 30
3.8 Contracts................................................... 31
3.9 Liabilities................................................. 32
3.10 Compliance with Legal Requirements.......................... 32
3.11 Certain Business Practices.................................. 32
3.12 Governmental Authorizations................................. 32
3.13 Tax Matters................................................. 32
3.14 Employee and Labor Matters; Benefit Plans................... 33
3.15 Environmental Matters....................................... 34
3.16 Insurance................................................... 34
3.17 Transactions with Affiliates................................ 34
3.18 Legal Proceedings; Orders................................... 34
3.19 Authority; Binding Nature of Agreement...................... 35
3.20 Accounting Matters.......................................... 35
3.21 Vote Required............................................... 35
3.22 Non-Contravention; Consents................................. 35
3.23 Financial Advisor........................................... 36
3.24 Full Disclosure............................................. 36
3.25 Fairness Opinion............................................ 37
3.26 Valid Issuance.............................................. 37
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND PARENT................. 37
4.1 Access and Investigation.................................... 37
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4.2 Operation of the Company's Business......................... 38
4.3 No Solicitation............................................. 41
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES......................... 42
5.1 Registration Statement; Joint Proxy Statement............... 42
5.2 Company Shareholders' Meeting............................... 43
5.3 Parent Stockholders' Meeting................................ 44
5.4 Regulatory Approvals........................................ 45
5.5 Stock Options............................................... 46
5.6 Employee Benefits........................................... 46
5.7 Indemnification of Officers and Directors................... 47
5.8 Pooling of Interests........................................ 48
5.9 Additional Agreements....................................... 48
5.10 Disclosure.................................................. 48
5.11 Affiliate Agreements........................................ 49
5.12 Tax Matters................................................. 50
5.13 Letter of the Company's Accountants......................... 50
5.14 Resignation of Officers and Directors....................... 50
5.15 Listing..................................................... 50
5.16 Board of Directors.......................................... 50
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB... 50
6.1 Accuracy of Representations................................. 51
6.2 Performance of Covenants.................................... 51
6.3 Effectiveness of Registration Statement..................... 51
6.4 Shareholder Approval........................................ 51
6.5 Consents.................................................... 51
6.6 Agreements and Documents.................................... 51
6.7 Employees................................................... 52
6.8 No Material Adverse Effect.................................. 52
6.9 HSR Act..................................................... 52
6.10 Listing..................................................... 52
6.11 No Restraints............................................... 53
6.12 No Governmental Litigation.................................. 53
6.13 No Other Litigation......................................... 53
6.14 Stock Options............................................... 53
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY........... 53
7.1 Accuracy of Representations................................. 53
7.2 Performance of Covenants.................................... 54
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7.3 Effectiveness of Registration Statement..................... 54
7.4 Shareholder Approval........................................ 54
7.5 Documents................................................... 54
7.6 No Material Adverse Effect.................................. 54
7.7 HSR Act..................................................... 54
7.8 Listing..................................................... 54
7.9 No Restraints............................................... 54
SECTION 8. TERMINATION................................................. 55
8.1 Termination................................................. 55
8.2 Effect of Termination....................................... 57
8.3 Expenses; Termination Fees.................................. 57
SECTION 9. MISCELLANEOUS PROVISIONS.................................... 58
9.1 Amendment................................................... 58
9.2 Waiver...................................................... 58
9.3 No Survival of Representations and Warranties............... 59
9.4 Entire Agreement; Counterparts.............................. 59
9.5 Applicable Law; Jurisdiction................................ 59
9.6 Disclosure Schedule......................................... 59
9.7 Attorneys' Fees............................................. 60
9.8 Assignability............................................... 60
9.9 Notices..................................................... 60
9.10 Cooperation................................................. 61
9.11 Construction................................................ 61
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EXHIBITS
Exhibit A Certain Definitions
Exhibit B Form of Articles of Incorporation of Surviving Corporation
Exhibit C Form of Bylaws of Surviving Corporation
Exhibit D Form of Company Affiliate Agreement
Exhibit E Form of Parent Affiliate Agreement
Exhibit F Individuals to Execute Noncompetition Agreements
Exhibit G Form of Noncompetition Agreement
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of October 21, 1999, by and among: WIND RIVER
SYSTEMS, INC., a Delaware corporation ("Parent"); UNIVERSITY ACQUISITION CORP.,
a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub");
and INTEGRATED SYSTEMS, INC., a California corporation (the "Company"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company in accordance with this Agreement and the California
General Corporation Law (the "Merger"). Upon consummation of the Merger, Merger
Sub will cease to exist, and the Company will become a wholly owned subsidiary
of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For financial reporting purposes, it is intended that the
Merger be accounted for as a "pooling of interests."
C. The respective boards of directors of Parent, Merger Sub and the Company
have approved this Agreement and approved the Merger.
D. In order to induce Parent to enter into this Agreement and to consummate
the Merger, concurrently with the execution and delivery of this Agreement, the
Company is entering into a stock option agreement with Parent (the "Stock Option
Agreement"), pursuant to which the Company has granted to Parent an option,
exercisable under the circumstances specified therein, to purchase shares of
Company Common Stock.
1
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the California General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, Five Palo Alto Square, 0000 Xx Xxxxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx, at 10:00 a.m. on a date to be designated by Parent (the "Closing
Date"), which shall be no later than the third business day after the
satisfaction or waiver of the latest to occur of the conditions set forth in
Sections 6 and 7 (other than those conditions that by their nature are to be
fulfilled at the Closing, but subject to the satisfaction or waiver of such
conditions). Subject to the provisions of this Agreement, (i) an agreement of
merger satisfying the applicable requirements of the California General
Corporation Law (the "California Agreement of Merger") shall be duly executed by
Merger Sub and by the Company as the Surviving Corporation and simultaneously
with or as soon as practicable following the Closing delivered to the Secretary
of the State of California for filing, along with appropriate certificates of
the officers of Merger Sub and the Company ("Officers' Certificates"), and
(ii) a certificate of merger satisfying the applicable requirements of the
Delaware General Corporation Law (the "Delaware Certificate of Merger") shall be
duly executed by the Company and simultaneously with or as soon as practicable
following the Closing delivered to the Secretary of State of the State of
Delaware for filing. The Merger shall become effective upon the latest of:
(a) the date and time of the filing of the California Agreement of Merger and
the Officers' Certificates with the Secretary of State of the State of
California, (b) the date and time of the filing of the Delaware Certificate of
Merger with the Secretary of State of the State of Delaware, or (c) such other
date and time as may be specified in the California Agreement of Merger or the
Delaware Certificate of Merger with the consent of Parent (the "Effective
Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation shall be
amended and restated as of the Effective Time to conform to Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to Exhibit C; and
(c) the directors and officers of the Surviving Corporation immediately
after the Effective Time shall be the respective individuals who are
directors and officers of Merger Sub immediately prior to the Effective Time.
1.5 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of Parent, Merger Sub, the Company or any
shareholder of the Company:
(i) any shares of Company Common Stock (together with the associated
Rights under the Company Rights Agreement, as defined in Section 2.3(b))
then held by the Company or any wholly owned Subsidiary of the Company shall
cease to exist, and no consideration shall be delivered in exchange therefor;
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(ii) any shares of Company Common Stock (together with the associated
Rights under the Company Rights Agreement) then held by Parent, Merger
Sub or any other wholly owned Subsidiary of Parent shall cease to exist, and no
consideration shall be delivered in exchange therefor;
(iii) except as provided in clauses "(i)" and "(ii)" above and subject
to Sections 1.5(b), 1.5(c), 1.5(d) and 1.8, each share of Company Common
Stock (together with the associated Right under the Company Rights Agreement)
then outstanding shall be converted into the right to receive 0.92 of a share of
Parent Common Stock; and
(iv) each share of the common stock, $0.001 par value per share, of
Merger Sub then outstanding shall be converted into one share of common
stock of the Surviving Corporation.
(b) The fraction of a share of Parent Common Stock specified in
Section 1.5(a)(iii) (as such fraction may be adjusted in accordance with
this Section 1.5(b)) is referred to as the "Exchange Ratio." If, between the
date of this Agreement and the Effective Time, the outstanding shares of Company
Common Stock or Parent Common Stock are changed into a different number or class
of shares by reason of any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction, then the
Exchange Ratio shall be appropriately adjusted.
(c) If any shares of Company Common Stock outstanding immediately prior
to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company or under which the
Company has any rights, then the shares of Parent Common Stock issued in
exchange for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. The Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates or scrip for any such
fractional shares shall be issued. Any holder of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock issuable to such
holder) shall, in lieu of such fraction of a share and, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.6), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock on the Nasdaq National Market on the date the Merger becomes
effective.
1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time:
(a) all shares of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and shall cease to
exist, and all holders of certificates representing shares of Company Common
Stock that were outstanding immediately prior to the Effective Time shall cease
to have any rights as shareholders of the Company; and (b) the stock transfer
books of the Company shall be closed with respect to all shares of Company
Common Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of Company Common Stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any shares of Company Common Stock (a
"Company Stock Certificate") is presented to the Exchange Agent (as defined in
Section 1.7) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in
Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) On or prior to the Closing Date, Parent shall select a reputable
bank or trust company to act as exchange agent in the Merger (the "Exchange
Agent"). Within three days after the Effective Time, Parent shall deposit with
the Exchange Agent (i) certificates representing the shares of Parent Common
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Stock issuable pursuant to this Section 1, and (ii) cash sufficient to make
payments in lieu of fractional shares in accordance with Section 1.5(d). The
shares of Parent Common Stock and cash amounts so deposited with the Exchange
Agent, together with any dividends or distributions received by the Exchange
Agent with respect to such shares, are referred to collectively as the "Exchange
Fund."
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent will mail to the record holders of Company Stock Certificates
(i) a letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify (including a provision confirming that delivery of
Company Stock Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent), and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock Certificate
to the Exchange Agent for exchange, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent or Parent, (1) the holder of such Company Stock Certificate shall
be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of Section 1.5 (and cash in lieu of any
fractional share of Parent Common Stock), and (2) the Company Stock Certificate
so surrendered shall be canceled. Until surrendered as contemplated by this
Section 1.7, each Company Stock Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive shares of Parent Common
Stock (and cash in lieu of any fractional share of Parent Common Stock) as
contemplated by Section 1. If any Company Stock Certificate shall have been
lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as Parent
may reasonably direct) as indemnity against any claim that may be made against
the Exchange Agent, Parent or the Surviving Corporation with respect to such
Company Stock Certificate.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no shares of Parent Common Stock (or certificates therefor) shall
be issued in exchange for any Company Stock Certificate to any Person who may be
an "affiliate" (as that term is defined in Rule 145 under the Securities Act) of
the Company until such Person shall have delivered to Parent and the Company a
duly executed Affiliate Agreement as contemplated by Section 5.11.
(d) No dividends or other distributions declared or made with respect to
Parent Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Company Stock Certificate with respect
to the shares of Parent Common Stock that such holder has the right to receive
in the Merger until such holder surrenders such Company Stock Certificate in
accordance with this Section 1.7 (at which time such holder shall be entitled,
subject to the effect of applicable escheat or similar laws, to receive all such
dividends and distributions, without interest).
(e) Any portion of the Exchange Fund that remains undistributed to
holders of Company Stock Certificates as of the date 180 days after the date
on which the Merger becomes effective shall be delivered to Parent upon demand,
and any holders of Company Stock Certificates who have not theretofore
surrendered their Company Stock Certificates in accordance with this
Section 1.7 shall thereafter look only to Parent for satisfaction of their
claims for Parent Common Stock, cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent Common
Stock.
(f) Each of the Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Common Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or any provision of state, local or foreign
tax law or under any other applicable Legal Requirement. To the extent such
amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom
4
such amounts would otherwise have been paid.
(g) Neither Parent nor the Surviving Corporation shall be liable to any
holder or former holder of Company Common Stock or to any other Person with
respect to any shares of Parent Common Stock (or dividends or distributions with
respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property law, escheat law or similar Legal
Requirement.
1.8 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the
Effective Time, are or may become "dissenting shares" within the meaning of
Section 1300(b) of the California Corporations Code shall not be converted into
or represent the right to receive Parent Common Stock in accordance with
Section 1.5 (or cash in lieu of fractional shares in accordance with
Section 1.5(d)), and the holder or holders of such shares shall be entitled only
to such rights as may be granted to such holder or holders in Chapter 13 of the
California General Corporation Law; PROVIDED, HOWEVER, that if the status of any
such shares as "dissenting shares" shall not be perfected, or if any such shares
shall lose their status as "dissenting shares," then, as of the later of the
Effective Time or the time of the failure to perfect such status or the loss of
such status, such shares shall automatically be converted into and shall
represent only the right to receive (upon the surrender of the certificate or
certificates representing such shares) Parent Common Stock in accordance with
Section 1.5 (and cash in lieu of fractional shares in accordance with
Section 1.5(d)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Chapter
13 of the California General Corporation Law and of any other demand, notice or
instrument delivered to the Company prior to the Effective Time pursuant to the
California General Corporation Law, and (ii) the opportunity to participate in
all negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand unless Parent shall have
consented in writing to such payment or settlement offer.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.10 ACCOUNTING CONSEQUENCES. For financial reporting purposes, the Merger
is intended to be accounted for as a "pooling of interests."
1.11 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company
represents and warrants to Parent and Merger Sub as follows:
2.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) The Company has no Subsidiaries, except for the corporations
identified in Part 2.1(a)(i) of the Company Disclosure Schedule; and neither
the Company nor any of the other corporations identified in Part 2.1(a)(i) of
the Company Disclosure Schedule owns any capital stock of, or any equity
interest of any nature in, any other Entity, other than the Entities identified
in Part 2.1(a)(ii) of the Company
5
Disclosure Schedule. (The Company and each of its Subsidiaries are referred to
collectively in this Agreement as the "Acquired Corporations.") None of the
Acquired Corporations has agreed or is obligated to make, or is bound by any
Contract under which it may become obligated to make, any future investment in
or capital contribution to any other Entity. None of the Acquired Corporations
has, at any time, been a general partner of any general partnership, limited
partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly organized,
validly existing and in good standing (in jurisdictions that recognize such
concept) under the laws of the jurisdiction of its incorporation and has all
necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as a
foreign corporation, and is in good standing (in jurisdictions that
recognize such concept), under the laws of all jurisdictions where the nature of
its business requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the Acquired Corporations.
2.2 ARTICLES OF INCORPORATION AND BYLAWS. The Company has delivered or made
available to Parent accurate and complete copies of the articles of
incorporation, bylaws and other charter and organizational documents of the
respective Acquired Corporations, including all amendments thereto.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of:
(i) 50,000,000 shares of Company Common Stock, of which 23,831,517 shares
have been issued and are outstanding as of the date of this Agreement; and
(ii) 5,000,000 shares of Preferred Stock, of which no shares are outstanding.
All of the outstanding shares of Company Common Stock have been duly authorized
and validly issued, and are fully paid and nonassessable. As of the date of this
Agreement, there are no shares of Company Common Stock held by any of the other
Acquired Corporations. Except as set forth in Part 2.3(a)(i) of the Company
Disclosure Schedule: (i) none of the outstanding shares of Company Common Stock
is entitled or subject to any preemptive right, right of participation, right of
maintenance or any similar right; (ii) none of the outstanding shares of Company
Common Stock is subject to any right of first refusal in favor of the Company;
and (iii) there is no Acquired Corporation Contract relating to the voting or
registration of, or restricting any Person from purchasing, selling, pledging or
otherwise disposing of (or granting any option or similar right with respect
to), any shares of Company Common Stock. None of the Acquired Corporations is
under any obligation, or is bound by any Contract pursuant to which it may
become obligated, to repurchase, redeem or otherwise acquire any outstanding
shares of Company Common Stock.
(b) As of the date of this Agreement: (i) 500,000 shares of Company
Preferred Stock, designated Series A Junior Participating Preferred Stock,
are reserved for future issuance upon exercise of the Rights issued pursuant to
the Rights Agreement, dated September 30, 1998, by and between the Company and
ChaseMellon Shareholder Services, as Rights Agent (the "Company Rights
Agreement"); (ii) 2,359,739 shares of Company Common Stock are reserved for
future issuance pursuant to stock options granted and outstanding under the
Company's 1998 Equity Incentive Plan; (iii) 2,566,959 shares of Company Common
Stock are reserved for future issuance pursuant to stock options granted and
outstanding under the Company's 1988 Stock Option Plan; (iv) 49,903 shares of
Company Common Stock are reserved for future issuance pursuant to stock options
granted and outstanding under the Dr. Design 1991 Stock Option Plan;
(v) 225,000 shares of Company Common Stock are reserved for future issuance
pursuant to stock options granted and outstanding under the Company's 1994
Directors Stock Option Plan; and (vi) 840,209 shares of Company Common Stock
(the "ESPP Shares") are reserved for future issuance pursuant to the Company's
1999 Employee Stock Purchase Plan (the "ESPP"). (Stock options granted by the
Company pursuant to the Company's stock option plans and otherwise are referred
to in this Agreement as "Company Options.") Part 2.3(b)(i) of the Company
Disclosure Schedule sets forth the following information (which is accurate in
all material respects) with respect to each Company Option outstanding as of the
6
date of this Agreement: (i) the particular plan pursuant to which such Company
Option was granted; (ii) the name of the optionee; (iii) the number of shares of
Company Common Stock subject to such Company Option; (iv) the exercise price of
such Company Option; (v) the date on which such Company Option was granted;
(vi) the applicable vesting schedules, and the extent to which such Company
Option is vested and exercisable as of the date of this Agreement; and
(vii) the date on which such Company Option expires. The Company has delivered
or made available to Parent accurate and complete copies of all stock option
plans pursuant to which the Company has ever granted stock options, and the
forms of all stock option agreements evidencing such options.
(c) Except as set forth in Part 2.3(b) of the Company Disclosure
Schedule, as of the date of this Agreement there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
the Company; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock or
other securities of the Company; (iii) shareholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which the Company is
or may become obligated to sell or otherwise issue any shares of its capital
stock or any other securities; or (iv) condition or circumstance that may give
rise to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of capital
stock or other securities of the Company.
(d) All outstanding shares of Company Common Stock, all outstanding
Company Options, all outstanding warrants to purchase Company Common Stock
and all outstanding shares of capital stock of each Subsidiary of the Company
have been issued and granted in compliance with (i) all applicable securities
laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of the corporations
identified in Part 2.1(a)(ii) of the Company Disclosure Schedule have been
duly authorized and are validly issued, are fully paid and nonassessable and are
owned beneficially and of record by the Company, free and clear of any
Encumbrances.
(f) The Company has taken all necessary action to terminate the
Company's 1990 Employee Stock Purchase Plan (the "1990 ESPP"), and the 1990
ESPP has been terminated and is no longer in effect.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has delivered or made available to Parent accurate and
complete copies of all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the SEC since January 1, 1999 (the "Company SEC Documents"). All
statements, reports, schedules, forms and other documents required to have been
filed by the Company with the SEC have been so filed on a timely basis. As of
the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Company SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including any related notes)
contained in the Company SEC Documents: (i) complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered (except
as may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by
7
Form 10-Q of the SEC, and except that the unaudited financial statements may not
contain footnotes and are subject to normal and recurring year-end adjustments
which will not, individually or in the aggregate, be material in amount), and
(iii) fairly present the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its Subsidiaries for the periods
covered thereby.
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, between August 31, 1999 and the date hereof:
(a) there has not been any material adverse change in the business,
condition, capitalization, assets, liabilities, operations or financial
performance of the Acquired Corporations taken as a whole, and no event has
occurred or circumstance exists that, in combination with any other events or
circumstances, could reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the assets of any of the
Acquired Corporations (whether or not covered by insurance) that has had or
could reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations;
(c) none of the Acquired Corporations has (i) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise reacquired
any shares of its capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued or granted, or
authorized the issuance of, (i) any capital stock or other security (except
for Company Common Stock issued upon the valid exercise of outstanding Company
Options), (ii) any option, warrant or right to acquire any capital stock or any
other security (except for Company Options and ESPP Shares described in
Part 2.3(b)(i) of the Company Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of the
Company's stock option plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to the articles of incorporation, bylaws
or other charter or organizational documents of any of the Acquired
Corporations, and none of the Acquired Corporations has effected or been a party
to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) none of the Acquired Corporations has received any Acquisition
Proposal;
(h) none of the Acquired Corporations has formed any Subsidiary or
acquired any equity interest or other interest in any other Entity;
(i) none of the Acquired Corporations has made any capital expenditure
which, when added to all other capital expenditures made on behalf of the
Acquired Corporations between August 31, 1999 and the date of this Agreement,
exceeds $350,000 per month;
(j) except in the ordinary course of business and consistent with past
practices, none of the Acquired Corporations has (i) entered into or
permitted any of the assets owned or used by it to become bound by any Material
Contract (as defined in Section 2.10), or (ii) amended or terminated, or waived
any material right or remedy under, any Material Contract;
(k) except in the ordinary course of business and consistent with past
practices, none of the Acquired Corporations has (i) acquired, leased or
licensed any material right or other material asset from any other Person,
(ii) sold or otherwise disposed of, or leased or licensed, any material right or
other material asset to any other Person, or (iii) waived or relinquished any
right;
8
(l) the Company has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness of more than $10,000, and the Acquired Corporations have not
written off as uncollectible, or established any extraordinary reserve with
respect to, any account receivables or other indebtedness of more than $100,000
in the aggregate;
(m) none of the Acquired Corporations has made any pledge of any of its
assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except for pledges of immaterial assets made in the ordinary course
of business and consistent with past practices;
(n) none of the Acquired Corporations has (i) lent money of over
$100,000 to any Person, or (ii) incurred or guaranteed any indebtedness for
borrowed money of over $100,000;
(o) none of the Acquired Corporations has (i) established or adopted any
Plan (as defined in Section 2.17), (ii) caused or permitted any Plan to be
amended in any material respect, or (iii) except in the ordinary course of
business and consistent with past practices, paid any bonus or made any
profit-sharing or similar payment to, or increased the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees;
(p) none of the Acquired Corporations has changed any of its methods of
accounting or accounting practices in any material respect;
(q) none of the Acquired Corporations has made any material Tax
election;
(r) none of the Acquired Corporations has commenced or settled any Legal
Proceeding;
(s) none of the Acquired Corporations has entered into any material
transaction or taken any other material action outside the ordinary course
of business or inconsistent with past practices; and
(t) none of the Acquired Corporations has agreed or committed to take
any of the actions referred to in clauses "(c)" through "(s)" above.
2.6 TITLE TO ASSETS. To the knowledge of the Company, the Acquired
Corporations own, and have good and valid title to, all assets purported to be
owned by them, including: (i) all assets reflected on the Company Unaudited
Interim Balance Sheet (except for assets sold or otherwise disposed of in the
ordinary course of business since the date of the Company Unaudited Interim
Balance Sheet); and (ii) all other assets reflected in the books and records of
the Acquired Corporations as being owned by the Acquired Corporations. To the
knowledge of the Company, all of said assets are owned by the Acquired
Corporations free and clear of any Encumbrances, except for (1) any lien for
current taxes not yet due and payable, (2) liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of any of the Acquired Corporations, and (3) liens
described in Part 2.6 of the Company Disclosure Schedule.
2.7 RECEIVABLES, CUSTOMERS.
(a) All existing accounts receivable of the Acquired Corporations
(including those accounts receivable reflected on the Company Unaudited
Interim Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since August 31, 1999, and have not yet been
collected) (i) represent valid obligations of customers of the Acquired
Corporations arising from bona fide transactions entered into in the ordinary
course of business, (ii) are current and, to the best of the Company's
knowledge, will be collected in full when due, without any counterclaim or set
off (net of an allowance for doubtful accounts not to exceed $1,500,000 in the
aggregate).
(b) Part 2.7(b) of the Company Disclosure Schedule contains an accurate
and complete list as of the date of this Agreement of all loans and advances
made by any of the Acquired Corporations to any employee, director, consultant
or independent contract, other than routine travel advances and other expenses
made to employees in the ordinary course of business.
9
(c) Part 2.7(c) of the Company Disclosure Schedule accurately
identifies, and provides a breakdown that is accurate and complete in all
material respects of the revenues received from, (i) the top 20 customers of the
Company in terms of gross revenue generated in fiscal year 1998, fiscal year
1999 and the first quarter of fiscal year 2000 for the embedded business,
(ii) the top 20 customers of the Company in terms of gross revenue generated in
fiscal year 1998, fiscal year 1999 and the first quarter of fiscal year 2000 for
the design automation business of the Company and (iii) the top six customers in
terms of gross revenue generated in fiscal year 1998, fiscal year 1999 and the
first quarter of fiscal year 2000 for the Dr. Design business. The Company has
not received any notice or other communication (in writing or otherwise), and
has not received any other information, indicating that any of the customers
described in the preceding sentence may cease dealing with the Company or may
otherwise reduce the volume of business transacted by such Person with the
Company below historical levels.
2.8 REAL PROPERTY; EQUIPMENT; LEASEHOLD. All material items of equipment
and other tangible assets owned by or leased to the Acquired Corporations are
adequate for the uses to which they are being put, are in good and safe
condition and repair (ordinary wear and tear excepted) and are adequate for the
conduct of the business of the Acquired Corporations in the manner in which such
business is currently being conducted. Except as set forth in Part 2.8 of the
Company Disclosure Schedule, none of the Acquired Corporations own any real
property or any interest in real property. Part 2.8 of the Company Disclosure
Schedule (a) contains an accurate and complete list of (i) all the Acquired
Corporations' real property leases that involve real estate in the United States
and (ii) each location outside of the United States where any Acquired
Corporation leases any real property, and (b) accurately sets forth in all
material respects the aggregate amounts payable by the Acquired Corporations
under all leases pursuant to which any Acquired Corporation leases real property
outside the United States for each fiscal year beginning with fiscal year 2000
and ending with fiscal year 2004 and the period of fiscal year 2005 and
thereafter.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth, with
respect to each Proprietary Asset owned by the Acquired Corporations and
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Proprietary Asset,
and (ii) the names of the jurisdictions covered by the applicable registration
or application. Part 2.9(a)(ii) of the Company Disclosure Schedule identifies
any ongoing royalty or payment obligations with respect to, each Proprietary
Asset that is licensed or otherwise made available to the Acquired Corporations
by any Person and is material to the business of the Acquired Corporations
(except for any Proprietary Asset that is licensed to the Acquired Corporations
under any third party software license generally available to the public), and
identifies the Contract under which such Proprietary Asset is being licensed or
otherwise made available to such Acquired Corporation. The Acquired Corporations
have good and valid title to all of the Acquired Corporation Proprietary Assets
identified in Part 2.9(a)(i) of the Company Disclosure Schedule and otherwise
owned by any of the Acquired Corporations, free and clear of all Encumbrances,
except for (i) any lien for current taxes not yet due and payable, and
(ii) minor liens that have arisen in the ordinary course of business and that do
not (individually or in the aggregate) materially detract from the value of the
assets subject thereto or materially impair the operations of either of the
Acquired Corporations. The Acquired Corporations have a valid right to use,
license and otherwise exploit all Proprietary Assets identified in
Part 2.9(a)(ii) of the Company Disclosure Schedule. Except as set forth in
Part 2.9(a)(iii) of the Company Disclosure Schedule, none of the Acquired
Corporations has developed jointly with any other Person any Acquired
Corporation Proprietary Asset that is material to the business of the Acquired
Corporations with respect to which such other Person has any rights. Except as
set forth in Part 2.9(a)(iv) of the Company Disclosure Schedule, there is no
Acquired Corporation Contract (with the exception of end user license or porting
agreements in the form previously delivered by the Company to Parent) pursuant
to which any Person has any right (whether or not currently exercisable) to use,
license or otherwise exploit any Acquired Corporation Proprietary Asset.
10
(b) The Acquired Corporations have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value
of all material Acquired Corporation Proprietary Assets (except Acquired
Corporation Proprietary Assets whose value would be unimpaired by disclosure).
Without limiting the generality of the foregoing, except as set forth in
Part 2.9(b) of the Company Disclosure Schedule, (i) all current and former
employees of the Acquired Corporations who are or were involved in, or who have
contributed to, the creation or development of any material Acquired Corporation
Proprietary Asset have executed and delivered to the Acquired Corporations an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement previously delivered or made
available by the Company to Parent, and (ii) all current and former consultants
and independent contractors to the Acquired Corporations who are or were
involved in, or who have contributed to, the creation or development of any
material Acquired Corporation Proprietary Asset have executed and delivered to
the Company an agreement (containing no exceptions to or exclusions from the
scope of its coverage) that is substantially identical to the form of Consultant
Confidential Information and Invention Assignment Agreement previously delivered
or made available to Parent. No current or former employee, officer, director,
shareholder, consultant or independent contractor has any right, claim or
interest in or with respect to any Acquired Corporation Proprietary Asset.
(c) To the knowledge of the Company: (i) all patents, trademarks,
service marks and copyrights held by any of the Acquired Corporations are
valid, enforceable and subsisting; (ii) none of the Acquired Corporation
Proprietary Assets and no Proprietary Asset that is currently being developed by
any of the Acquired Corporations (either by itself or with any other Person)
infringes, misappropriates or conflicts with any Proprietary Asset owned or used
by any other Person; (iii) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by any of the Acquired
Corporations is infringing, misappropriating or making any unlawful or
unauthorized use of any Proprietary Asset owned or used by any other Person, and
since January 1, 1998, none of the Acquired Corporations has received any notice
or other communication (in writing or otherwise) that it has committed any
actual, alleged, possible or potential infringement, misappropriation or
unlawful or unauthorized use of, any Proprietary Asset owned or used by any
other Person; (iv) no other Person is infringing, misappropriating or making any
unlawful or unauthorized use of, and no Proprietary Asset owned or used by any
other Person infringes or conflicts with, any material Acquired Corporation
Proprietary Asset.
(d) The Acquired Corporation Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Acquired Corporations to conduct
their business in the manner in which such business is being conducted. None of
the Acquired Corporations has (i) licensed any of the material Acquired
Corporation Proprietary Assets to any Person on an exclusive basis, or
(ii) entered into any covenant not to compete or Contract limiting its ability
to exploit fully any material Acquired Corporation Proprietary Assets or to
transact business in any market or geographical area or with any Person.
(e) None of the Acquired Corporations has disclosed or delivered to any
Person, or permitted the disclosure or delivery to any escrow agent or other
Person, of any Acquired Corporation Source Code, except for such disclosure or
delivery which has not materially impaired, and which would not reasonably be
expected to materially impair, the business of any of the Acquired Corporations
or the value of any of the Acquired Corporations to Parent. No event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, result in the
disclosure or delivery to any Person of any Acquired Corporation Source Code,
except for such disclosure or delivery which has not materially impaired, and
which would not reasonably be expected to materially impair, the business of any
of the Acquired Corporations or the value of any of the Acquired Corporations to
Parent. Part 2.10(a)(ii) of the Company Disclosure Schedule describes whether
the execution of this Agreement or the consummation of any of the transactions
contemplated hereby could reasonably be expected to result in the release or
disclosure of any Acquired Corporation Source Code.
11
(f) To the knowledge of the Company, except as set forth in
Part 2.9(f)(i) of the Company Disclosure Schedule, each computer, computer
program and other item of software (whether installed on a computer or on any
other piece of equipment, including firmware) that is owned or used by any of
the Acquired Corporations for their internal business operations is Year 2000
Compliant. To the knowledge of the Company, except as set forth in
Part 2.9(f)(ii) of the Company Disclosure Schedule, each computer program and
other item of software that has been designed, developed, sold, licensed or
otherwise made available to any Person by any of the Acquired Corporations is
Year 2000 Compliant. To the knowledge of the Company, except as set forth in
Part 2.9(f)(iii) of the Company Disclosure Schedule, each of the Acquired
Corporations has conducted sufficient Year 2000 compliance testing for each
computer, computer program and item of software referred to in the preceding two
sentences to be able to determine whether such computer, computer program and
item of software is Year 2000 Compliant. Each of the Acquired Corporations has
obtained warranties or other written assurances to the extent offered or
otherwise made available from each of its suppliers of any material Acquired
Corporation Proprietary Assets to the effect that the Acquired Corporation
Proprietary Assets provided by such suppliers to the Acquired Corporations is
Year 2000 Compliant. As used in this Agreement, "Year 2000 Compliant" means,
with respect to a computer, computer program or other item of software (i) the
functions, calculations, and other computing processes of the computer, program
or software (collectively, "Processes") do not perform in an inconsistent or
incorrect manner or with interruption as a result of a correct date on which the
Processes are actually performed or as a result of a date correctly input to the
applicable computer system, whether before, on, or after January 1, 2000;
(ii) the computer, program or software accepts, calculates, compares, sorts,
extracts, sequences, and otherwise processes date inputs and date values;
(iii) the computer, program or software accepts and responds to correct year
input, if any, in a manner that resolves any ambiguities as to century in a
defined, predetermined, and appropriate manner; (iv) the computer, program or
software stores and displays date information in ways that are unambiguous as to
the determination of the century; and (v) leap years will be determined by the
following standard (A) if dividing the year by 4 yields an integer, it is a leap
year, except for years ending in 00, but (B) a year ending in 00 is a leap year
if dividing it by 400 yields an integer.
(g) Except with respect to demonstration or trial copies, no product,
system, program or software module designed, developed, sold, licensed or
otherwise made available by any of the Acquired Corporations to any Person
contains any "back door," "time bomb," "Trojan horse," "worm," "drop dead
device," "virus" or other software routines or hardware components designed to
permit unauthorized access or to disable or erase software, hardware or data
without the consent of the user.
2.10 CONTRACTS.
(a) Part 2.10 of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a "Material Contract." (For
purposes of this Agreement, each of the following shall be deemed to constitute
a "Material Contract":
(i) any Contract relating to the employment of, or the performance of
services by, any employee or consultant, and any Contract pursuant to
which any of the Acquired Corporations is or may become obligated to make any
severance, termination or similar payment to any current or former employee or
director; and any Contract pursuant to which any of the Acquired Corporations is
or may become obligated to make any bonus or similar payment (other than
payments constituting base salary) in excess of $25,000 to any current or former
employee or director;
(ii) any Contract (A) relating to the acquisition, transfer,
development, sharing or license of any Proprietary Asset (except for any
Contract pursuant to which (1) any Proprietary Asset is licensed to the Acquired
Corporations under any third party software license generally available to the
public, or (2) any Proprietary Asset is licensed by any of the Acquired
Corporations to any Person on a non-exclusive basis); or (B) of the type
referred to in Section 2.9(e);
12
(iii) any Contract (A) entered into since January 1, 1996
(1) pursuant to which (x) any of the Acquired Corporations has agreed to
provide an unlimited number of production or "run time" licenses for any period
of time, and (y) no royalty or similar payments (other than up-front payments)
are due during the term of the Contract, and (2) which has not been delivered or
made available to Parent or Parent's counsel in the "data room" at the Company's
headquarters, except in the case of (1) and (2) above for those Contracts that
have up-front payments that would not result in a material reduction in the
future revenue of the Acquired Corporations when compared to the revenue that
the Acquired Corporations would have recognized had such licenses included a
requirement that the Company be paid royalty payments during the term of the
Contract at historical royalty rates charged by the Company under similar
Contracts that required royalty payments over time, or (B) granting any
exclusive rights to any Acquired Corporation Proprietary Asset;
(iv) any Contract which provides for indemnification of any officer,
director, employee or agent;
(v) any Contract imposing any restriction on the right or ability of
any Acquired Corporation (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person,
(C) to solicit, hire or retain any Person as an employee, consultant or
independent contractor, (D) to develop, sell, supply, distribute, offer, support
or service any product or any technology or other asset to or for any other
Person or class or category of Persons, (E) to perform services for any other
Person or class or category of Persons, or (F) to transact business or deal in
any other manner with any other Person or class or category of Persons;
(vi) any Contract (other than Contracts evidencing Company Options)
(A) relating to the acquisition, issuance, voting, registration, sale or
transfer of any securities, (B) providing any Person with any preemptive right,
right of participation, right of maintenance or any similar right with respect
to any securities, or (C) providing any of the Acquired Corporations with any
right of first refusal with respect to, or right to repurchase or redeem, any
securities;
(vii) any Contract relating to any currency hedging;
(viii) any Contract containing "standstill" or similar provisions
entered into by any of the Acquired Corporations since January 1, 1998 in
connection with a possible equity investment or Acquisition Transaction;
(ix) any Contract (A) to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or
(B) directly or indirectly benefiting any Governmental Body (including any
subcontract or other Contract between any Acquired Corporation and any
contractor or subcontractor to any Governmental Body);
(x) any Contract requiring that any of the Acquired Corporations give
any notice or provide any information to any Person prior to considering
or accepting any Acquisition Proposal or similar proposal, or prior to entering
into any discussions, agreement, arrangement or understanding relating to any
Acquisition Transaction or similar transaction;
(xi) any Contract that contemplates or involves the payment or
delivery of cash or other consideration in an amount or having a value in
excess of $250,000 in the aggregate, or contemplates or involves the performance
of services having a value in excess of $250,000 in the aggregate;
(xii) any Contract (not otherwise identified in clauses "(i)" through
"(xii)" of this sentence) that could reasonably be expected to have a
material effect on the business, condition, capitalization, assets, liabilities,
operations or financial performance of any of the Acquired Corporations or to
any of the transactions contemplated by this Agreement; and
(xiii) any other Contract, if a breach of such Contract could
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations.)
13
The Company has delivered (or made available in the "data room" at the Company's
headquarters) to Parent as requested by Parent an accurate and complete copy of
each Material Contract.
(b) Each Acquired Corporation Contract that constitutes a Material
Contract is valid and in full force and effect, and is enforceable in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10(c) of the Company Disclosure
Schedule: (i) none of the Acquired Corporations has violated or breached, or
committed any default under, any Acquired Corporation Contract, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations; and, to
the knowledge of the Company, no other Person has violated or breached, or
committed any default under, any Acquired Corporation Contract, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on the Acquired Corporations;
(ii) to the knowledge of the Company, no event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) will or
would reasonably be expected to, (A) result in a violation or breach of any of
the provisions of any Acquired Corporation Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Acquired Corporation
Contract, (C) give any Person the right to receive or require a material rebate,
chargeback, penalty or change in delivery schedule under any Acquired
Corporation Contract, (D) give any Person the right to accelerate the maturity
or performance of any Acquired Corporation Contract, (E) result in the
disclosure, release or delivery of any Acquired Corporation Source Code, or
(F) give any Person the right to cancel, terminate or modify any Acquired
Corporation Contract, except in each such case for defaults, acceleration
rights, termination rights and other rights that have not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations; and (iii) since January 1, 1998, none of the Acquired Corporations
has received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Acquired Corporation Contract,
except in each such case for defaults, acceleration rights, termination rights
and other rights that have not had and would not reasonably be expected to have
a Material Adverse Effect on the Acquired Corporations.
2.11 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Except as set forth in Part 2.11(a) of the Company Disclosure
Schedule, to the knowledge of the Company, each product, system, program,
Proprietary Asset or other asset designed, developed, manufactured, assembled,
sold, installed, repaired, licensed or otherwise made available by any of the
Acquired Corporations to any Person:
(i) conformed and complied in all material respects with the terms
and requirements of any applicable warranty or other Contract and with
all applicable Legal Requirements; and
(ii) was free of any bug, virus, design defect or other defect or
deficiency at the time it was sold or otherwise made available, other
than any immaterial bug or similar defect that would not adversely affect the
Acquired Corporations in any material respect taken as a whole.
(b) All installation services, programming services, repair services,
maintenance services, support services, training services, upgrade services
and other services that have been performed by the Acquired Corporations were
performed properly and in compliance in all material respects with the terms and
requirements of all applicable warranties and other Contracts and with all
applicable Legal Requirements.
(c) Except as set forth in Part 2.11(c) of the Company Disclosure
Schedule and except as will not, and would not reasonably be expected to,
have a Material Adverse Effect on the Acquired Corporations, since January 1,
1998, no customer or other Person has asserted in writing or, to the knowledge
of the Company, threatened to assert any claim against any of the Acquired
Corporations (i) under or based upon any warranty provided by or on behalf of
any of the Acquired Corporations, or (ii) under or based
14
upon any other warranty relating to any product, system, program, Proprietary
Asset or other asset designed, developed, manufactured, assembled, sold,
installed, repaired, licensed or otherwise made available by any of the Acquired
Corporations or any services performed by any of the Acquired Corporations.
2.12 LIABILITIES. None of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured, that
in the aggregate exceed $1,000,000, except for: (a) liabilities identified as
such in the Company Unaudited Interim Balance Sheet or the notes thereto;
(b) liabilities that have been incurred by the Acquired Corporations since
August 31, 1999 in the ordinary course of business and consistent with past
practices; (c) liabilities incurred under this Agreement and the other
agreements contemplated hereby; and (d) liabilities described in Part 2.12 of
the Company Disclosure Schedule.
2.13 COMPLIANCE WITH LEGAL REQUIREMENTS. Each of the Acquired Corporations
is in compliance in all material respects with all applicable Legal
Requirements. Without limiting the generality of the foregoing, except as set
forth in Part 2.13 of the Company Disclosure Schedule, none of the Acquired
Corporation has exported any product, system, program or other Acquired
Corporation Proprietary Asset in violation of any Legal Requirement. Since
January 1, 1998, none of the Acquired Corporations has received any notice or
other communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.14 CERTAIN BUSINESS PRACTICES. None of the Acquired Corporations nor any
director, officer, agent or employee of any of the Acquired Corporations has
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
2.15 GOVERNMENTAL AUTHORIZATIONS.
(a) The Acquired Corporations hold all Governmental Authorizations
necessary to enable the Acquired Corporations to conduct their respective
businesses in the manner in which such businesses are currently being conducted.
All such Governmental Authorizations are valid and in full force and effect.
Each Acquired Corporation is in substantial compliance with the terms and
requirements of such Governmental Authorizations. Since January 1, 1998, none of
the Acquired Corporations has received any notice or other communication from
any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any material Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization.
(b) Part 2.15(b) of the Company Disclosure Schedule describes the terms
of each grant, incentive or subsidy provided or made available to or for the
benefit of any of the Acquired Corporations by any U.S. or foreign Governmental
Body or otherwise. Each of the Acquired Corporations is in compliance in all
material respects with all of the terms and requirements of each grant,
incentive and subsidy identified or required to be identified in Part 2.15(b) of
the Company Disclosure Schedule. Neither the execution, delivery or performance
of this Agreement, nor the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will (with or without notice or
lapse of time) give any Person the right to revoke, withdraw, suspend, cancel,
terminate or modify, any grant, incentive or subsidy identified or required to
be identified in Part 2.15(b) of the Company Disclosure Schedule.
2.16 TAX MATTERS.
(a) Each Tax Return required to be filed by or on behalf of the
respective Acquired Corporations with any Governmental Body with respect to
any taxable period ending on or before the Closing Date (the "Acquired
Corporation Returns") (i) has been or will be filed on or before the applicable
due date
15
(including any extensions of such due date), and (ii) has been, or will be when
filed, prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Acquired Corporation Returns to be due on
or before the Closing Date have been or will be paid on or before the Closing
Date.
(b) The Company Unaudited Interim Balance Sheet fully accrues all actual
and contingent liabilities for Taxes with respect to all periods through
August 31, 1999 in accordance with generally accepted accounting principles.
Each Acquired Corporation will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from August 31, 1999 through the Closing Date.
(c) No Acquired Corporation Return has ever been examined or audited by
any Governmental Body that has resulted in any additional payment by any
Acquired Corporation in excess of $100,000. No examination or audit by any
Governmental Body of any Acquired Corporation Return is currently taking place
that could reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations. No extension or waiver of the limitation period
applicable to any of the Acquired Corporation Returns has been granted (by the
Company or any other Person), and no such extension or waiver has been requested
from any Acquired Corporation.
(d) No claim or Legal Proceeding is pending or, to the knowledge of the
Company, has been threatened against or with respect to any Acquired
Corporation in respect of any material Tax. There are no unsatisfied liabilities
for material Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by any Acquired Corporation with respect to any
material Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Acquired Corporations and with respect to which adequate reserves for payment
have been established on the Company Unaudited Interim Balance Sheet). There are
no liens for material Taxes upon any of the assets of any of the Acquired
Corporations except liens for current Taxes not yet due and payable. None of the
Acquired Corporations has entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code (or any comparable provision of
state or foreign Tax laws). None of the Acquired Corporations has been, and none
of the Acquired Corporations will be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code (or any comparable provision under state or foreign Tax
laws) as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract covering
any employee or independent contractor or former employee or independent
contractor of any of the Acquired Corporations that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the Code
(or any comparable provision of state or foreign Tax laws). None of the Acquired
Corporations is, or has ever been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
2.17 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.17(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program or agreement (collectively,
the "Plans") sponsored, maintained, contributed to or required to be contributed
to by any of the Acquired Corporations for the benefit of any current or former
employee of any of the Acquired Corporations.
(b) Except as set forth in Part 2.17(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or
contributes to, and to the knowledge of the Company, none
16
of the Acquired Corporations has at any time in the past maintained, sponsored
or contributed to, any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any pension benefit plan under the laws of any foreign
jurisdiction, whether or not excluded from coverage under ERISA, for the benefit
of employees or former employees of any of the Acquired Corporations (a "Pension
Plan").
(c) Except as set forth in Part 2.17(a) of the Company Disclosure
Schedule, none of the Acquired Corporations maintains, sponsors or
contributes to any: (i) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) or any welfare benefit plan under the laws of any foreign
jurisdiction, whether or not excluded from coverage under ERISA for the benefit
of any current or former employees or directors of any of the Acquired
Corporations (a "Welfare Plan"), or (ii) self-funded medical, dental or other
similar Plan. None of the Plans identified in the Company Disclosure Schedule is
a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent as
requested by Parent: (i) if such Plan is set forth in writing, an accurate
and complete copy of such Plan (including all amendments thereto); (ii) if such
Plan is not set forth in writing, an accurate and complete description of such
Plan (including all amendments thereto); (iii) an accurate and complete copy of
the annual report, if required under ERISA, with respect to such Plan for the
last two years; (iv) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, (v) if such Plan is funded
through a trust or any third party funding vehicle, an accurate and complete
copy of the trust or other funding agreement (including all amendments thereto)
and accurate and complete copies the most recent financial statements thereof;
(vi) accurate and complete copies of all Contracts relating to such Plan,
including service provider agreements, insurance contracts, minimum premium
contracts, stop-loss agreements, investment management agreements, subscription
and participation agreements and recordkeeping agreements; and (vii) an accurate
and complete copy of the most recent determination letter received from the
Internal Revenue Service with respect to such Plan (if such Plan is intended to
be qualified under Section 401(a) of the Code).
(e) To the knowledge of the Company, none of the Acquired Corporations
is or has ever been required to be treated as a single employer with any
other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. None of the Acquired Corporations has ever been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code.
None of the Acquired Corporations has ever made a complete or partial withdrawal
from a multiemployer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal liability," as such term is defined in Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such liability under
either Section 4207 or 4208 of ERISA).
(f) None of the Acquired Corporations has any plan or commitment to
create any Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable law)
in a manner that would affect any current or former employee or director of any
of the Acquired Corporations.
(g) No Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former employee or director of any
of the Acquired Corporations after any termination of service of such employee
or director (other than (i) benefit coverage mandated by applicable law,
including coverage provided pursuant to Section 4980B of the Code,
(ii) deferred compensation benefits accrued as liabilities on the Company
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former employees or directors of any of the Acquired
Corporations (or their beneficiaries)).
17
(h) With respect to any Plan constituting a group health plan within the
meaning of Section 4980B(g)(2) of the Code, the provisions of Section 4980B
of the Code ("COBRA") have been complied with in all material respects.
(i) Each of the Plans has been operated and administered in all material
respects in accordance with applicable Legal Requirements, including ERISA,
the Code and applicable foreign Legal Requirements. Except for restrictions
imposed by applicable Legal Requirements, to the knowledge of the Company, there
are no restrictions on the rights of the Company or any of the other Acquired
Corporations to amend or terminate any Plan without incurring any liability
thereunder.
(j) Each of the Plans intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service, and the Company is not aware of any reason why any such
determination letter could be revoked.
(k) Neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any bonus, golden parachute,
severance or other payment or obligation to any current or former employee or
director of any of the Acquired Corporations (whether or not under any Plan), or
materially increase the benefits payable or provided under any Plan, or result
in any acceleration of the time of payment or vesting of any such benefits.
Without limiting the generality of the foregoing (and except as set forth in
Part 2.17(k) of the Company Disclosure Schedule), the consummation of the Merger
will not result in the acceleration of vesting of any unvested Company Options.
(l) Part 2.17(l) of the Company Disclosure Schedule contains a list of
all salaried employees of each of the Acquired Corporations as of the date
of this Agreement, and correctly reflects, in all material respects, their
salaries and certain bonus and commission arrangements, and their positions.
None of the Acquired Corporations is a party to any collective bargaining
contract or other Contract with a labor union involving any of its employees.
All of the employees of the Acquired Corporations are "at will" employees.
(m) Each of the Acquired Corporations is in compliance in all material
respects with all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters.
(n) Each of the Acquired Corporations has good labor relations, and none
of the Acquired Corporations has any knowledge of any facts indicating that
(i) the consummation of the Merger or any of the other transactions contemplated
by this Agreement will have a material adverse effect on the labor relations of
any of the Acquired Corporations, or (ii) any of the employees of any of the
Acquired Corporations intends to terminate his or her employment with the
Acquired Corporation with which such employee is employed. For purposes of all
applicable Legal Requirements, each Acquired Corporation has properly classified
each person providing services to such Acquired Corporation as either an
employee or an independent contractor.
2.18 ENVIRONMENTAL MATTERS. Each of the Acquired Corporations is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Corporations of
all permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. None
of the Acquired Corporations has received any notice or other communication (in
writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that any of the Acquired Corporations is not
in compliance with any Environmental Law, and, to the knowledge of the Company,
there are no circumstances that may prevent or interfere with the compliance by
any of the Acquired Corporations with any Environmental Law in the future. To
the knowledge of the Company, (a) all property that is leased to, controlled by
or used by the Company, and all surface water, groundwater and soil associated
with or adjacent to such property, is free of any material environmental
contamination of any nature, (b) none of the property leased to, controlled by
or used by any of the Acquired Corporations
18
contains any underground storage tanks, asbestos, equipment using PCBs or
underground injection xxxxx, and (c) none of the property leased to, controlled
by or used by any of the Acquired Corporations contains any septic tanks in
which process wastewater or any Materials of Environmental Concern have been
disposed. No Acquired Corporation has ever sent or transported, or arranged to
send or transport, any Materials of Environmental Concern to a site that,
pursuant to any applicable Environmental Law (i) has been placed on the
"National Priorities List" of hazardous waste sites or any similar state list,
(ii) is otherwise designated or identified as a potential site for remediation,
cleanup, closure or other environmental remedial activity, or (iii) is subject
to a Legal Requirement to take "removal" or "remedial' action as detailed in any
applicable Environmental Law or to make payment for the cost of cleaning up the
site. (For purposes of this Section 2.18: (i) "Environmental Law" means any
federal, state, local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; and (ii) "Materials of
Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
2.19 INSURANCE. The Company has delivered or made available to Parent a
copy, or summaries thereof, of all material insurance policies and all material
self insurance programs and arrangements relating to the business, assets and
operations of the Acquired Corporations. Each of such insurance policies is in
full force and effect. Since January 1, 1998, none of the Acquired Corporations
has received any notice or other communication regarding any actual or possible
(a) cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any material claim under any insurance policy, or
(c) material adjustment in the amount of the premiums payable with respect to
any insurance policy.
2.20 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Company SEC
Documents filed prior to the date of this Agreement, between the date of the
Company's last proxy statement filed with the SEC and the date of this
Agreement, no event has occurred that would be required to be reported by the
Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Part 2.20 of the Company Disclosure Schedule identifies each person who is (or
who may be deemed to be) an "affiliate" (as that term is defined in Rule 145
under the Securities Act) of the Company as of the date of this Agreement.
2.21 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the knowledge of the
Company) no Person has threatened to commence any Legal Proceeding:
(i) that involves any of the Acquired Corporations or any of the assets owned or
used by any of the Acquired Corporations; or (ii) that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by this
Agreement. To the knowledge of the Company, no event has occurred, and no claim,
dispute or other condition or circumstance exists, that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding. Without limiting the generality of the foregoing, no Person
has made any claim or commenced any Legal Proceedings (and, to the knowledge of
the Company, no Person has threatened to make any claim or commence any Legal
Proceeding) involving any of the Acquired Corporations that relates directly or
indirectly to any malfunction, defect or deficiency in any product, system,
program or other item of property in or with which any Acquired Corporation
Proprietary Asset is incorporated, used or bundled.
(b) There is no material order, writ, injunction, judgment or decree to
which any of the Acquired Corporations, or any of the assets owned or used
by any of the Acquired Corporations, is subject. To the knowledge of the
Company, no officer or key employee of any of the Acquired Corporations is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging
19
in or continuing any conduct, activity or practice relating to the business of
any of the Acquired Corporations.
2.22 AUTHORITY; INAPPLICABILITY OF ANTI-TAKEOVER STATUTES; BINDING NATURE OF
AGREEMENT. Subject to the approval of the Company's shareholders under
applicable law, the Company has all requisite right, power and authority to
enter into and to perform its obligations under this Agreement. The Company has
all requisite right, power and authority to enter into and to perform its
obligations under the Stock Option Agreement. The board of directors of the
Company (at a meeting duly called and held) has (a) unanimously determined that
the Merger is advisable and fair and in the best interests of the Company and
its shareholders, (b) unanimously authorized and approved the execution,
delivery and performance of this Agreement and the Stock Option Agreement by the
Company and unanimously approved the Merger, (c) unanimously recommended the
approval of this Agreement and the Merger by the holders of Company Common Stock
and directed tha t this Agreement and the Merger be submitted for consideration
by the Company's shareholders at the Company Shareholders' Meeting (as defined
in Section 5.2), and (d) to the extent necessary, adopted a resolution having
the effect of causing the Company not to be subject to any state takeover law or
similar Legal Requirement that might otherwise apply to the Merger or any of the
other transactions contemplated by this Agreement. This Agreement and the Stock
Option Agreement constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to (i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. Prior to the execution of those
certain Voting Agreements of even date herewith between Parent and each of the
Persons identified in Part 2.20 of the Company Disclosure Schedule, the Board of
Directors of the Company approved said Voting Agreements and the transactions
contemplated thereby. To the knowledge of the Company, no state takeover statute
or similar statute or regulation applies or purports to apply to the Merger,
this Agreement or any of the transactions contemplated hereby.
2.23 NO EXISTING DISCUSSIONS. Since September 1, 1999, none of the Acquired
Corporations, and no Representative of any of the Acquired Corporations, has
been engaged, directly or indirectly, in any discussions or negotiations with
any other Person relating to any Acquisition Proposal.
2.24 ACCOUNTING MATTERS. As of the date hereof, to the knowledge of the
Company, neither the Company nor any "affiliate" (as that term is defined in
Rule 145 under the Securities Act) of any of the Acquired Corporations has taken
or agreed to take, or plans to take, any action that could prevent Parent from
accounting for the Merger as a "pooling of interests."
2.25 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date for the
Company Shareholders' Meeting (the "Required Company Shareholder Vote") is the
only vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the principal terms of the Merger and
the other transactions contemplated by this Agreement.
2.26 NON-CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement by the Company, nor (2) the consummation by the Company of the Merger
or any of the other transactions contemplated by this Agreement or by any other
agreement referred to in this Agreement, will directly or indirectly (with or
without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the articles of incorporation, bylaws or other charter or
organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the shareholders, the board of directors or any committee
of the board of directors of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger or any
of the other transactions contemplated by this Agreement
20
or to exercise any remedy or obtain any relief under, any Legal Requirement or
any order, writ, injunction, judgment or decree to which any of the Acquired
Corporations, or any of the assets owned or used by any of the Acquired
Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any of the Acquired Corporations or that otherwise relates to
the business of any of the Acquired Corporations or to any of the assets owned
or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute a Material Contract, or give any Person the
right to (i) declare a default or exercise any remedy under any such Acquired
Corporation Contract, (ii) a rebate, chargeback, penalty or change in delivery
schedule under any such Acquired Corporation Contract, (iii) accelerate the
maturity or performance of any such Acquired Corporation Contract, or
(iv) cancel, terminate or modify any term of such Acquired Corporation Contract;
(e) result in the imposition or creation of any Encumbrance upon or with
respect to any asset owned or used by any of the Acquired Corporations
(except for liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of any of the Acquired Corporations); or
(f) result in, or increase the likelihood of, the disclosure or delivery
to any escrowholder or other Person of the Acquired Corporation Source Code,
or the transfer of any material asset of any of the Acquired Corporations to any
Person.
Except as may be required by the Exchange Act, the California General
Corporation Law, the HSR Act, any foreign antitrust law or regulation and the
NASD Bylaws (as they relate to the Form S-4 Registration Statement and the Joint
Proxy Statement), none of the Acquired Corporations was, is or will be required
to make any filing with or give any notice to, or to obtain any Consent from,
any Person in connection with (x) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement by the
Company, or (y) the consummation by the Company of the Merger or any of the
other transactions contemplated by this Agreement.
2.27 FAIRNESS OPINION. The Company's board of directors has received the
written opinion of Xxxxxxxxx & Xxxxx LLC, financial advisor to the Company,
dated the date of this Agreement, to the effect that the consideration to be
received by the shareholders of the Company in the Merger is fair to the
shareholders of the Company from a financial point of view. The Company has
furnished an accurate and complete copy of said written opinion to Parent.
2.28 FINANCIAL ADVISOR. Except for Xxxxxxxxx & Xxxxx LLC, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
any of the Acquired Corporations. The total of all fees, commissions and other
amounts that have been paid by the Company to Xxxxxxxxx & Xxxxx LLC and its
affiliates and all fees, commissions and other amounts that may become payable
to Xxxxxxxxx & Xxxxx LLC and its affiliates by the Company if the Merger is
consummated will not exceed $1,000,000. The Company has furnished to Parent
accurate and complete copies of all agreements under which any such fees,
commissions or other amounts have been paid to may become payable and all
indemnification and other agreements related to the engagement of Xxxxxxxxx &
Xxxxx LLC.
2.29 FULL DISCLOSURE.
(a) This Agreement (including the Company Disclosure Schedule) does not,
and the certificate referred to in Section 6.6(h) will not, (i) contain any
representation, warranty or information that is false or
21
misleading with respect to any material fact, or (ii) omit to state any material
fact necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
(b) None of the information supplied or to be supplied by or on behalf
of the Company for inclusion or incorporation by reference in the Form S-4
Registration Statement will, at the time the Form S-4 Registration Statement is
filed with the SEC or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by or on behalf
of the Company for inclusion or incorporation by reference in the Joint Proxy
Statement will, at the time the Joint Proxy Statement is mailed to the
shareholders of the Company or the stockholders of Parent or at the time of the
Company Shareholders' Meeting or the Parent Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
Joint Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder.
2.30 COMPANY RIGHTS AGREEMENT. The Company has amended the Company Rights
Agreement to provide that neither Parent nor Merger Sub nor any of their
respective affiliates shall be deemed to be an Acquiring Person (as such term is
defined in the Company Rights Agreement), that neither a Distribution Date nor a
Shares Acquisition Date (as each such term is defined in the Company Rights
Agreement) shall be deemed to occur, and the Rights will not separate from the
Company Common Stock, as a result of the execution, delivery or performance of
this Agreement, the Stock Option Agreement or the Voting Agreements or the
consummation of the Merger or the other transactions contemplated hereby or
thereby, and that none of the Company, Parent, Merger Sub, nor the Surviving
Corporation, nor any of their respective affiliates, shall have any obligations
under the Company Rights Agreement to any holder (or former holder) of Rights as
of and following the Effective Time.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent Disclosure Schedule, Parent and Merger Sub
represent and warrant to the Company as follows:
3.1 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all necessary power and authority: (i) to conduct its business
in the manner in which its business is currently being conducted; (ii) to own
and use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Contracts by which it is
bound.
(b) Parent and each of Parent's Subsidiaries is duly qualified to do
business as a foreign corporation, and is in good standing, under the laws
of all jurisdictions where the nature of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect on Parent.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Parent has delivered or made
available to the Company accurate and complete copies of the certificate of
incorporation and bylaws of Parent, including all amendments thereto.
22
3.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of: (i) 125,000,000
shares of Parent Common Stock; and (ii) 2,000,000 shares of Parent Preferred
Stock. As of October 18, 1999, 41,913,459 (net of 1,276,895 treasury shares)
shares of Parent Common Stock were issued and outstanding. As of the date of
this Agreement, no shares of Parent Preferred Stock are issued or outstanding.
All of the outstanding shares of Parent Common Stock have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as set forth in
Part 3.3(a)(i) of the Parent Disclosure Schedule: (i) none of the outstanding
shares of Parent Common Stock is entitled or subject to any preemptive right,
right of participation, right of maintenance or any similar right; (ii) none of
the outstanding shares of Parent Common Stock is subject to any right of first
refusal in favor of Parent; and (iii) there is no Contract to which Parent is a
party relating to the voting or registration of, or restricting any Person from
purchasing, selling, pledging or otherwise disposing of (or granting any option
or similar right with respect to), any shares of Parent Common Stock. Parent is
not under any obligation, nor bound by any Contract pursuant to which it may
become obligated, to repurchase, redeem or otherwise acquire any outstanding
shares of Parent Common Stock.
(b) As of the date of this Agreement: (i) 6,438,459 shares of Parent
Common Stock are reserved for future issuance pursuant to stock options
granted and outstanding under Parent's Amended and Restated 1987 Equity
Incentive Plan; (ii) 320,625 shares of Parent Common Stock are reserved for
future issuance pursuant to stock options granted and outstanding under Parent's
1995 Non-Employee Directors' Stock Option Plan; (iii) 3,450,000 shares of Parent
Common Stock are reserved for future issuance pursuant to stock options granted
and outstanding under Parent's 1998 Non-Officer Stock Option Plan;
(iv) 1,500,000 shares of Parent Common Stock are reserved for future issuance
pursuant to stock options granted and outstanding under Parent's 1998 Equity
Incentive Plan; (v) 245,586 shares of Parent Common Stock are reserved for
future issuance pursuant to stock options granted and outstanding under the 1994
RouterWare Stock Option Plan; (vi) 401,141 shares of Parent Common Stock are
reserved for future issuance pursuant to Parent's Employee Stock Purchase Plan;
and (vii) 4,329,897 shares of Parent Common Stock are reserved for future
issuance upon conversion of 5% Convertible Subordinated Notes due 2002. (Stock
options granted by Parent pursuant to Parent's stock option plans and otherwise
are referred to in this Agreement as "Parent Options").
(c) Except as set forth in Section 3.3(b), as of the date of this
Agreement there is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of Parent; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of Parent;
(iii) shareholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which Parent is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or
(iv) condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to
acquire or receive any shares of capital stock or other securities of Parent.
(d) All outstanding shares of Parent Common Stock, all outstanding
Parent Options and all outstanding shares of capital stock of each
Subsidiary of Parent have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal Requirements, and
(ii) all requirements set forth in applicable Contracts.
3.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered or made available to the Company accurate and
complete copies (excluding copies of exhibits) of each report, registration
statement and definitive proxy statement filed by Parent with the SEC since
January 1, 1999 (the "Parent SEC Documents"). All statements, reports,
schedules, forms and other documents required to have been filed by Parent with
the SEC have been so filed on a timely basis. As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of
23
this Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end audit adjustments which will not, individually or in the aggregate, be
material in amount); and (iii) fairly present the consolidated financial
position of Parent and its subsidiaries as of the respective dates thereof and
the consolidated results of operations of Parent and its subsidiaries for the
periods covered thereby.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Between July 31, 1999 and the
date of this Agreement: (i) there has not been any event that has had a Material
Adverse Effect on Parent; and (ii) Parent has not declared, accrued, set aside
or paid any dividend.
3.6 TITLE TO ASSETS. To the knowledge of Parent, Parent owns, and has good
and valid title to, all assets purported to be owned by it, including: (i) all
assets reflected on the Parent Unaudited Interim Balance Sheet (except for
assets sold or otherwise disposed of in the ordinary course of business since
the date of the Parent Unaudited Interim Balance Sheet); and (ii) all other
assets reflected in the books and records of Parent as being owned by Parent. To
the knowledge of Parent, all of said assets are owned by Parent free and clear
of any Encumbrances, except for (1) any lien for current taxes not yet due and
payable, (2) liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of Parent, and
(3) liens described in Part 3.6 of the Parent Disclosure Schedule.
3.7 PROPRIETARY ASSETS.
(a) Parent has good and valid title to all of the Proprietary Assets
owned by Parent that are material to the business of the Parent ("Parent
Proprietary Assets"), free and clear of all Encumbrances, except for (i) any
lien for current taxes not yet due and payable, and (ii) minor liens that have
arisen in the ordinary course of business and that do not (individually or in
the aggregate) materially detract from the value of the assets subject thereto
or materially impair the operations of Parent.
(b) Parent has taken reasonable measures and precautions to protect and
maintain the confidentiality, secrecy and value of all material Parent
Proprietary Assets (except Parent Proprietary Assets whose value would be
unimpaired by disclosure). Without limiting the generality of the foregoing,
except as set forth in Part 3.7(b) of the Parent Disclosure Schedule, (i) all
current and former employees of Parent who are or were involved in, or who have
contributed to, the creation or development of any material Parent Proprietary
Asset have executed and delivered to Parent an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Confidential Information and Invention
Assignment Agreement previously delivered or made available by Parent to the
Company, and (ii) all current and former consultants and independent contractors
to Parent who are or were involved in, or who have contributed to, the creation
or development of any material Parent Proprietary Asset have executed and
delivered to Parent an agreement (containing no exceptions to or exclusions from
the scope of its coverage) that is substantially identical to the form of
Consultant Confidential Information and Invention Assignment Agreement
previously delivered or made available to the Company. No current or former
employee, officer, director, stockholder, consultant or independent contractor
has any right, claim or interest in or with respect to any material Parent
Proprietary Asset.
24
(c) To the knowledge of Parent: (i) all patents, trademarks, service
marks and copyrights held by Parent are valid, enforceable and subsisting;
(ii) none of the Parent Proprietary Assets and no Proprietary Asset that is
currently being developed by Parent (either by itself or with any other Person)
infringes, misappropriates or conflicts with any Proprietary Asset owned or used
by any other Person; (iii) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by Parent is infringing,
misappropriating or making any unlawful or unauthorized use of any Proprietary
Asset owned or used by any other Person, and, except as set forth in
Part 3.7(c) of the Parent Disclosure Schedule, since January 1, 1998, Parent has
not received any notice or other communication (in writing or otherwise) that it
has committed any actual, alleged, possible or potential infringement,
misappropriation or unlawful or unauthorized use of, any Proprietary Asset owned
or used by any other Person; (iv) except as set forth in Part 3.7(c) of the
Parent Disclosure Schedule, no other Person is infringing, misappropriating or
making any unlawful or unauthorized use of, and no Proprietary Asset owned or
used by any other Person infringes or conflicts with, any material Parent
Proprietary Asset.
(d) The Parent Proprietary Assets, together with any Proprietary Assets
currently being licensed to Parent by third parties, constitute all the
Proprietary Assets necessary to enable Parent to conduct its business in the
manner in which such business is being conducted.
(e) To the knowledge of Parent, each computer, computer program and
other item of software (whether installed on a computer or on any other
piece of equipment, including firmware) that is owned or used by Parent for its
internal business operations is Year 2000 Compliant. To the knowledge of Parent,
except as set forth in Part 3.7(e) of the Parent Disclosure Schedule, each
computer program and other item of software that has been designed, developed,
sold, licensed or otherwise made available to any Person by Parent is Year 2000
Compliant. To the knowledge of Parent, except as set forth in Part 3.7(e) of the
Parent Disclosure Schedule, Parent has conducted sufficient Year 2000 compliance
testing for each computer, computer program and item of software referred to in
the preceding two sentences to be able to determine whether such computer,
computer program and item of software is Year 2000 Compliant. Parent has
obtained warranties or other written assurances to the extent offered or
otherwise reasonably made available from each of its suppliers of material
Proprietary Assets to the effect that the Proprietary Assets provided by such
suppliers to Parent is Year 2000 Compliant.
(f) Except with respect to demonstration or trial copies, no product,
system, program or software module designed, developed, sold, licensed or
otherwise made available by Parent to any Person contains any "back door," "time
bomb," "Trojan horse," "worm," "drop dead device," "virus" or other software
routines or hardware components designed to permit unauthorized access or to
disable or erase software, hardware or data without the consent of the user.
3.8 CONTRACTS.
(a) Parent (i) has not violated or breached, or committed any default
under, any material Contract to which Parent is a party, except for
violations, breaches and defaults that have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent; and, to the knowledge of
Parent, no other Person has violated or breached, or committed any default
under, any material Contract to which Parent is a party, except for violations,
breaches and defaults that have not had and would not reasonably be expected to
have a Material Adverse Effect on Parent; (ii) to the knowledge of Parent, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will or would reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any material
Contract to which Parent is a party, (B) give any Person the right to declare a
default or exercise any remedy under any material Contract to which Parent is a
party, (C) give any Person the right to receive or require a material rebate,
chargeback, penalty or change in delivery schedule under any material Contract
to which Parent is a party, (D) give any Person the right to accelerate the
maturity or performance of any material Contract to which Parent is a party, or
give any Person the right to cancel, terminate or modify any material Contract,
except in each such case for defaults, acceleration rights,
25
termination rights and other rights that have not had and would not reasonably
be expected to have a Material Adverse Effect on Parent; and (iii) since
January 1, 1998, Parent has not received any notice or other communication
regarding any actual or possible violation or breach of, or default under, any
material Contract, except in each such case for defaults, acceleration rights,
termination rights and other rights that have not had and would not reasonably
be expected to have a Material Adverse Effect on Parent.
(b) Each material Contract to which Parent is a party is valid and in
full force and effect, and is enforceable in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.9 LIABILITIES.
As of the date of this Agreement, Parent has no accrued, contingent or other
liabilities of any nature, either matured or unmatured, that in the aggregate
exceed $1,000,000, except for: (a) liabilities identified as such in the Parent
Unaudited Interim Balance Sheet; (b) liabilities that have been incurred by
Parent since July 31, 1999 in the ordinary course of business and consistent
with past practices; and (c) liabilities incurred under this Agreement and the
other agreements contemplated hereby.
3.10 COMPLIANCE WITH LEGAL REQUIREMENTS.
Parent is in compliance in all material respects with all applicable Legal
Requirements. Without limiting the generality of the foregoing, except as set
forth in Part 3.10 of the Parent Disclosure Schedule, Parent has not exported
any product, system, program or other Parent Proprietary Asset in violation of
any Legal Requirement. Since January 1, 1998, Parent has not received any notice
or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
3.11 CERTAIN BUSINESS PRACTICES.
Neither Parent nor any director, officer, agent or employee of Parent has
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
3.12 GOVERNMENTAL AUTHORIZATIONS.
Parent holds all Governmental Authorizations necessary to enable Parent to
conduct its business in the manner in which such business is currently being
conducted. All such Governmental Authorizations are valid and in full force and
effect. Parent is in substantial compliance with the terms and requirements of
such Governmental Authorizations, except where the failure to be in compliance
with the terms and requirements of such Governmental Authorizations. Since
January 1, 1998, Parent has not received any notice or other communication from
any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any material Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization.
3.13 TAX MATTERS.
(a) Each Tax Return required to be filed by or on behalf of Parent with
any Governmental Body with respect to any taxable period ending on or before
the Closing Date (the "Parent Returns") (i) has been or will be filed on or
before the applicable due date (including any extensions of such due date), and
(ii) has been, or will be when filed, prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts shown on Parent
Returns to be due on or before the Closing Date have been or will be paid on or
before the Closing Date.
26
(b) The Parent Unaudited Interim Balance Sheet fully accrues all actual
and contingent liabilities for Taxes with respect to all periods through
July 31, 1999 in accordance with generally accepted accounting principles.
Parent will establish, in the ordinary course of business and consistent with
its past practices, reserves adequate for the payment of all Taxes for the
period from July 31, 1999 through the Closing Date.
(c) No claim or Legal Proceeding is pending or, to the knowledge of
Parent, has been threatened against or with respect to Parent in respect of
any material Tax. There are no unsatisfied liabilities for material Taxes
(including liabilities for interest, additions to tax and penalties thereon and
related expenses) with respect to any notice of deficiency or similar document
received by Parent with respect to any material Tax (other than liabilities for
Taxes asserted under any such notice of deficiency or similar document which are
being contested in good faith by Parent and with respect to which adequate
reserves for payment have been established on the Parent Unaudited Interim
Balance Sheet). There are no liens for material Taxes upon any of the assets of
Parent except liens for current Taxes not yet due and payable. Parent has not
entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code (or any comparable provision of state or foreign Tax
laws). Parent has not been, and will not be, required to include any adjustment
in taxable income for any tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code (or any comparable provision under state or
foreign Tax laws) as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing.
3.14 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) To Parent's knowledge, Parent is not and has never been required to
be treated as a single employer with any other Person under
Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
Parent has never been a member of an "affiliated service group" within the
meaning of Section 414(m) of the Code. Parent has never made a complete or
partial withdrawal from a multiemployer plan, as such term is defined in
Section 3(37) of ERISA, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA).
(b) Each employee benefit plan of Parent has been operated and
administered in all material respects in accordance with applicable Legal
Requirements, including ERISA, the Code and applicable foreign Legal
Requirements. Except for restrictions imposed by applicable Legal Requirements,
to the knowledge of Parent, there are no restrictions on the rights of Parent to
amend or terminate any employee benefit plan of Parent without incurring any
liability thereunder.
(c) Each employee benefit plan of Parent intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service, and Parent is not aware of any reason why any
such determination letter could be revoked.
(d) Parent is in compliance in all material respects with all applicable
Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters. For purposes of all applicable Legal
Requirements, Parent has properly classified each person providing services to
Parent as either an employee or an independent contractor.
3.15 ENVIRONMENTAL MATTERS.
Parent is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes the possession by Parent of all
permits and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. Parent
has not received any notice or other communication (in writing or otherwise),
whether from a Governmental Body, citizens group, employee or otherwise, that
alleges that Parent is not in compliance with any Environmental Law, and, to the
knowledge of Parent, there are no circumstances that may prevent or interfere
with the compliance by Parent with any Environmental Law in the future. To the
27
knowledge of Parent, (a) all property that is leased to, controlled by or used
by Parent, and all surface water, groundwater and soil associated with or
adjacent to such property, is free of any material environmental contamination
of any nature, (b) none of the property leased to, controlled by or used by
Parent contains any underground storage tanks, asbestos, equipment using PCBs or
underground injection xxxxx, and (c) none of the property leased to, controlled
by or used by Parent contains any septic tanks in which process wastewater or
any Materials of Environmental Concern have been disposed. Parent has never sent
or transported, or arranged to send or transport, any Materials of Environmental
Concern to a site that, pursuant to any applicable Environmental Law (i) has
been placed on the "National Priorities List" of hazardous waste sites or any
similar state list, (ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental remedial activity,
or (iii) is subject to a Legal Requirement to take "removal" or "remedial'
action as detailed in any applicable Environmental Law or to make payment for
the cost of cleaning up the site.
3.16 INSURANCE.
Each material insurance policy of Parent is in full force and effect. Since
January 1, 1998, Parent has not received any notice or other communication
regarding any actual or possible (a) cancellation or invalidation of any
insurance policy, (b) refusal of any coverage or rejection of any material claim
under any insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy.
3.17 TRANSACTIONS WITH AFFILIATES.
Except as set forth in the Parent SEC Documents filed prior to the date of
this Agreement, between the date of Parent's last proxy statement filed with the
SEC and the date of this Agreement, no event has occurred that would be required
to be reported by Parent pursuant to Item 404 of Regulation S-K promulgated by
the SEC. Part 3.17 of the Parent Disclosure Schedule identifies each person who
is (or who may be deemed to be) an "affiliate" (as that term is defined in
Rule 145 under the Securities Act) of Parent as of the date of this Agreement.
3.18 LEGAL PROCEEDINGS; ORDERS.
(a) As of the date of this Agreement, there is no pending Legal
Proceeding, and (to the knowledge of Parent) no Person has threatened to
commence any Legal Proceeding: (i) that involves Parent or any of the assets
owned or used by Parent; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
knowledge of Parent, as of the date of this Agreement, no event has occurred,
and no claim, dispute or other condition or circumstance exists, that could
reasonably be expected to, give rise to or serve as a basis for the commencement
of any such Legal Proceeding.
(b) There is no material order, writ, injunction, judgment or decree to
which Parent, or any of the assets owned or used by Parent, is subject. To
the knowledge of Parent, no officer or key employee of Parent is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Parent.
3.19 AUTHORITY; BINDING NATURE OF AGREEMENT.
Subject to the approval of Parent's stockholders, Parent and Merger Sub have
all requisite right, power and authority to perform their obligations under this
Agreement. Parent has all requisite right, power and authority to perform its
obligations under the Stock Option Agreement. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and by Parent of the
Stock Option Agreement have been duly authorized by all necessary action on the
part of the respective boards of directors of Parent and Merger Sub. The board
of directors of Parent (at a meeting duly called and held)
28
has (a) unanimously authorized and approved the execution, delivery and
performance of this Agreement by Parent and unanimously approved the Merger, and
(b) unanimously recommended the approval of the issuance of Parent Common Stock
in the Merger by the holders of Parent Common Stock and directed that such
proposal be submitted for consideration by Parent's stockholders at the Parent
Stockholders' Meeting (as defined in Section 5.3). This Agreement constitutes
the legal, valid and binding obligation of Parent and Merger Sub, and the Stock
Option Agreement constitutes the legal, valid and binding obligation of Parent,
enforceable against them in accordance with their terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.20 ACCOUNTING MATTERS.
As of the date hereof, to the knowledge of Parent, neither Parent nor any
"affiliate" (as that term is defined in Rule 145 under the Securities Act) of
Parent has taken or agreed to take, or plans to take, any action that could
prevent Parent from accounting for the Merger as a "pooling of interests."
3.21 VOTE REQUIRED.
The only vote of Parent's stockholders required to approve the issuance of
Parent Common Stock in the Merger is the vote prescribed by Marketplace
Rule 4310 of the National Association of Securities Dealers (the "Required
Parent Stockholder Vote").
3.22 NON-CONTRAVENTION; CONSENTS.
Neither the execution and delivery of this Agreement by Parent and Merger
Sub nor the consummation by Merger Sub of the Merger will (a) contravene,
conflict with or result in any breach of any provision of the certificate of
incorporation or bylaws of Parent or the certificate of incorporation or bylaws
of Merger Sub or of any resolution adopted by the stockholders, the board of
directors or any committee of the board of directors of Parent; (b) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge the Merger or any of the other transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any order, writ, injunction, judgment or decree
to which Parent, or any of the assets owned or used by Parent, is subject;
(c) contravene, conflict with or result in a violation or breach of, or result
in a default under, any provision of any material Contract to which Parent is a
party, or give any Person the right to declare a default or exercise any remedy
under any such Contract to which Parent is a party; or (d) result in a violation
by Parent or Merger Sub of any order, writ, injunction, judgment or decree to
which Parent or Merger Sub is subject. Except as may be required by the
Securities Act, the Exchange Act, state securities or "blue sky" laws, the
Delaware General Corporation Law, the HSR Act, any foreign antitrust law or
regulation and the NASD Bylaws (as they relate to the S-4 Registration Statement
and the Joint Proxy Statement), Parent is not and will not be required to make
any filing with or give any notice to, or to obtain any Consent from, any Person
in connection with the execution, delivery or performance of this Agreement by
Parent or Merger Sub or the consummation by Merger Sub of the Merger.
3.23 FINANCIAL ADVISOR.
Except for Credit Suisse First Boston Corporation, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
3.24 FULL DISCLOSURE.
(a) This Agreement (including the Parent Disclosure Schedule) does not,
and the certificate referred to in Section 7.5(b) will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact necessary in order
to make the representations, warranties and information contained and to be
contained herein and therein
29
(in the light of the circumstances under which such representations, warranties
and information were or will be made or provided) not false or misleading.
(b) None of the information to be supplied by or on behalf of Parent for
inclusion in the Form S-4 Registration Statement will, at the time the
Form S-4 Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information to be supplied by or on behalf of Parent for
inclusion in the Joint Proxy Statement will, at the time the Joint Proxy
Statement is mailed to the shareholders of the Company or the stockholders of
Parent or at the time of the Company Shareholders' Meeting or the Parent
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Joint Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations promulgated by the SEC thereunder, except that no representation
or warranty is made by Parent with respect to statements made or incorporated by
reference therein based on information supplied by the Company for inclusion or
incorporation by reference in the Joint Proxy Statement.
3.25 FAIRNESS OPINION.
Parent's board of directors has received the written opinion of Credit
Suisse First Boston Corporation, financial advisor to Parent, dated the date of
this Agreement, to the effect that the Exchange Ratio is fair to Parent from a
financial point of view.
3.26 VALID ISSUANCE.
The Parent Common Stock to be issued in the Merger will, when issued in
accordance with the provisions of this Agreement, be validly issued, fully paid
and nonassessable.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND PARENT
4.1 ACCESS AND INVESTIGATION.
(a) During regular business hours in the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), subject to
applicable antitrust laws and regulations relating to the exchange of
information, the Company shall, and shall cause the respective Representatives
of the Acquired Corporations to: (i) provide Parent and Parent's Representatives
with reasonable access to the Acquired Corporations' Representatives, personnel
and assets and to all existing books, records, Tax Returns, work papers and
other documents and information relating to the Acquired Corporations; and
(ii) provide Parent and Parent's Representatives with such copies of the
existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations, and with such additional
financial, operating and other data and information regarding the Acquired
Corporations, as Parent may reasonably request. Without limiting the generality
of the foregoing, during the Pre-Closing Period, the Company shall as promptly
as practicable after any of the following reports, materials, communications,
notices or documents are prepared, sent, filed or received, as the case may be,
provide Parent with copies of: (A) all material operating and financial reports
prepared by the Company and its Subsidiaries for the Company's senior
management, including (1) copies of the unaudited monthly consolidated income
statements of the Company and its consolidated Subsidiaries and the related
unaudited quarterly consolidated balance sheets, statements of shareholders'
equity and statements of cash flows and (2) copies of any sales forecasts,
marketing plans, development plans and hiring reports prepared for the Company's
senior management; (B) any written materials or communications sent by or on
behalf of the Company to its shareholders; (C) any material notice, document or
other communication sent by or on behalf of any of the Acquired Corporations to
any party with respect to any Acquired Corporation Contract or sent to any of
the Acquired Corporations by any party with respect to any Acquired
30
Corporation Contract (other than any communication that relates solely to
commercial transactions between the Company and the other party to any such
Acquired Corporation Contract and that is of the type sent in the ordinary
course of business and consistent with past practices); (D) any notice, report
or other document filed with or sent to any Governmental Body in connection with
the Merger or any of the other transactions contemplated by this Agreement; and
(E) any material notice, report or other document received by any of the
Acquired Corporations from any Governmental Body.
(b) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"), subject to applicable antitrust
laws and regulations relating to the exchange of information, Parent shall, and
shall cause the respective Representatives of Parent to: (i) provide the Company
and the Company's Representatives with reasonable access to Parent's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to Parent; and
(ii) provide the Company and the Company's Representatives with such copies of
the existing books, records, Tax Returns, work papers and other documents and
information relating to Parent, and with such additional financial, operating
and other data and information regarding Parent, as the Company may reasonably
request. Without limiting the generality of the foregoing, during the
Pre-Closing Period, Parent shall as promptly as practicable after any of the
following reports, materials, communications, notices or documents are prepared,
sent, filed or received, as the case may be, provide the Company with copies of:
(A) any written materials or communications sent by or on behalf of Parent to
its stockholders; and (B) any notice, report or other document filed by Parent
with or sent by Parent to any Governmental Body in connection with the Merger or
any of the other transactions contemplated by this Agreement.
4.2 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the Pre-Closing Period: (i) the Company shall ensure that
each of the Acquired Corporations conducts its business and operations
(A) in the ordinary course and in accordance with past practices and (B) in
compliance with all applicable Legal Requirements and the requirements of all
Acquired Corporation Contracts that constitute Material Contracts; (ii) the
Company shall use all commercially reasonable efforts to ensure that each of the
Acquired Corporations preserves intact its current business organization, keeps
available the services of its current officers and employees and maintains its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other Persons having business relationships
with the respective Acquired Corporations; (iii) the Company shall keep in full
force all insurance policies referred to in Section 2.19; (iv) the Company shall
provide all notices, assurances and support required by any Acquired Corporation
Contract relating to any Proprietary Asset in order to ensure that no condition
under such Acquired Corporation Contract occurs which could result in, or could
increase the likelihood of, (A) any transfer or disclosure by any Acquired
Corporation of any Acquired Corporation Source Code that is outside the
Company's ordinary course of business or inconsistent with past practices, or
(B) a release from any escrow of any Acquired Corporation Source Code which has
been deposited or is required to be deposited in escrow under the terms of such
Acquired Corporation Contract; (v) the Company shall promptly notify Parent of
(A) any notice or other communication from any Person alleging that the Consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement, and (B) any Legal Proceedings commenced or, to
the best of its knowledge threatened against, relating to or involving or
otherwise affecting any of the Acquired Corporations which relate to the
consummation of the transactions contemplated by this Agreement; and (vi) the
Company shall (to the extent requested by Parent) cause its officers to report
regularly to Parent concerning the status of the Company's business.
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(b) During the Pre-Closing Period, the Company shall not (without the
prior written consent of Parent), and shall not permit any of the other
Acquired Corporations to:
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other securities;
(ii) sell, issue, grant or authorize the issuance or grant of (A) any
capital stock or other security, (B) any option, call, warrant or right
to acquire any capital stock or other security, or (C) any instrument
convertible into or exchangeable for any capital stock or other security (except
that (1) the Company may issue Company Common Stock (x) upon the valid exercise
of Company Options outstanding as of the date of this Agreement and
(y) pursuant to the ESPP, and (2) the Company may, in the ordinary course of
business and consistent with past practices (x) grant options under its stock
option plans to employees hired by the Company after the date of this Agreement,
and (y) in addition to options granted to employees hired by the Company after
the date of this Agreement, grant options under its stock option plans to
purchase no more than a total of 250,000 shares of Company Common Stock to
employees of the Company);
(iii) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company's stock option plans,
any provision of any agreement evidencing any outstanding stock option or any
restricted stock purchase agreement, or otherwise modify any of the terms of any
outstanding option, warrant or other security or any related Contract;
(iv) amend or permit the adoption of any amendment to its articles of
incorporation or bylaws or other charter or organizational documents, or
effect or become a party to any merger, consolidation, share exchange, business
combination, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(v) form any Subsidiary or acquire any equity interest or other
interest in any other Entity;
(vi) make any capital expenditure (except that the Acquired
Corporations may make capital expenditures that, when added to all other
capital expenditures made on behalf of the Acquired Corporations during the
Pre-Closing Period, do not exceed $500,000 in the aggregate in any fiscal
quarter);
(vii) enter into or become bound by, or permit any of the assets owned
or used by it to become bound by, any Material Contract, or amend or
terminate, or waive or exercise any material right or remedy under, any Material
Contract;
(viii) acquire, lease or license any right or other asset from any
other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary course
of business and consistent with past practices), or waive or relinquish any
material right;
(ix) lend money to any Person, or incur or guarantee any indebtedness
(except that the Company may make routine borrowings in the ordinary
course of business and in accordance with past practices under its line of
credit with Bank One);
(x) establish, adopt or amend any employee benefit plan, pay any bonus
or make any profit-sharing or similar payment to, or increase the amount
of the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees (except
that the Company may make (i) routine, reasonable salary increases in connection
with the Company's customary employee review process and may pay customary
bonuses, (ii) compensation and severance payments pursuant to contractual
obligations that exist as of the date of this Agreement and are disclosed in the
Company Disclosure Schedule, and (iii) customary profit-sharing and similar
payments consistent with past practices payable in accordance with existing
bonus and profit-sharing plans referred to in Part 2.17(a) of the Company
Disclosure Schedule);
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(xi) hire any new employee at the level of vice president or above or
with an annual base salary in excess of $120,000, or promote any employee
except in order to fill a position vacated after the date of this Agreement, or
engage any consultant or independent contractor other than pursuant to a
Contract that can be terminated (without penalty) on notice of 90 days or less;
(xii) materially change any of its pricing policies, product return
policies, product maintenance polices, service policies, product
modification or upgrade policies, personnel policies or other business policies,
or any of its methods of accounting or accounting practices in any respect;
(xiii) take or permit to be taken any action that could preclude
Parent from accounting for the merger as a "pooling of interests" for
accounting purposes;
(xiv) make any material Tax election;
(xv) commence any Legal Proceeding or settle any Legal Proceeding
except for Legal Proceedings involving only the receipt of money by the
Acquired Corporations or the payment by the Acquired Corporations of no more
than $250,000 in the aggregate;
(xvi) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with past
practices; or
(xvii) agree or commit to take any of the actions described in clauses
"(i)" through "(xvi)" of this Section 4.2(b).
(c) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of: (i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material inaccuracy
in any representation or warranty made by the Company in this Agreement if
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement; (iii) any material
breach of any covenant or obligation of the Company; and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Section 6 impossible or unlikely or that has had
or could reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations. Without limiting the generality of the foregoing, the
Company shall promptly advise Parent in writing of any Legal Proceeding or
material claim threatened, commenced or asserted against or with respect to any
of the Acquired Corporations. No notification given to Parent pursuant to this
Section 4.2(c) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of the Company contained in this Agreement.
(d) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of: (i) the discovery by Parent of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Parent in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or
(B) such event, condition, fact or circumstance had occurred, arisen or existed
on or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Parent; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Section 7 impossible or unlikely or that has had or could
reasonably be expected to have a Material Adverse Effect on Parent. Without
limiting the generality of the foregoing, Parent shall
33
promptly advise the Company in writing of any Legal Proceeding or material claim
threatened, commenced or asserted against or with respect to Parent. No
notification given to the Company pursuant to this Section 4.2(d) shall limit or
otherwise affect any of the representations, warranties, covenants or
obligations of Parent contained in this Agreement.
4.3 NO SOLICITATION.
(a) The Company shall not directly or indirectly, and shall not
authorize or permit any of the other Acquired Corporations or any
Representative of any of the Acquired Corporations directly or indirectly to,
(i) solicit, initiate, knowingly encourage, induce or facilitate the making,
submission or announcement of any Acquisition Proposal (including by amending,
or granting any waiver under, the Company Rights Agreement) or take any action
that could reasonably be expected to lead to an Acquisition Proposal,
(ii) furnish any nonpublic information regarding any of the Acquired
Corporations to any Person in connection with or in response to an Acquisition
Proposal or an inquiry or indication of interest that could lead to an
Acquisition Proposal, (iii) engage in discussions or negotiations with any
Person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any Contract contemplating or otherwise relating to any
Acquisition Transaction; PROVIDED, HOWEVER, that prior to the approval of the
principal terms of the Merger by the Required Company Shareholder Vote, this
Section 4.3(a) shall not prohibit the Company from furnishing nonpublic
information regarding the Acquired Corporations to, or entering into discussions
or negotiations with, any Person in response to a Superior Offer that is
submitted to the Company by such Person (and not withdrawn) if (1) neither the
Company nor any Representative of any of the Acquired Corporations shall have
violated any of the restrictions set forth in this Section 4.3, (2) the board of
directors of the Company concludes in good faith, after consultation with its
outside legal counsel, that such action is required in order for the board of
directors of the Company to comply with its fiduciary obligations to the
Company's shareholders under applicable law, (3) at least two business days
prior to furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such Person, the Company gives Parent written
notice of the identity of such Person and of the Company's intention to furnish
nonpublic information to, or enter into discussions with, such Person, and the
Company receives from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all nonpublic
written and oral information furnished to such Person or any of such Person's
Representatives by or on behalf of the Company and containing "standstill"
provisions no less favorable to the Company than the "standstill" provisions
contained in paragraph 3.B. of that certain letter agreement dated October 2,
1999 between the Company and Parent (the "Letter Agreement"), and (4) at least
two business days prior to furnishing any such nonpublic information to such
Person, the Company furnishes such nonpublic information to Parent (to the
extent such nonpublic information has not been previously furnished by the
Company to Parent). Without limiting the generality of the foregoing, the
Company acknowledges and agrees that any violation of any of the restrictions
set forth in the preceding sentence by any Representative of any of the Acquired
Corporations, whether or not such Representative is purporting to act on behalf
of any of the Acquired Corporations, shall be deemed to constitute a breach of
this Section 4.3 by the Company.
(b) The Company shall promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal, any inquiry or indication of
interest that could lead to an Acquisition Proposal or any request for nonpublic
information) advise Parent orally and in writing of any Acquisition Proposal,
any inquiry or indication of interest that could lead to an Acquisition Proposal
or any request for nonpublic information relating to any of the Acquired
Corporations (including the identity of the Person making or submitting such
Acquisition Proposal, inquiry, indication of interest or request, and the terms
thereof) that is made or submitted by any Person during the Pre-Closing Period.
The Company shall keep Parent fully informed with respect to the status of any
such Acquisition Proposal, inquiry, indication of interest or request and any
modification or proposed modification thereto.
34
(c) The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition
Proposal.
(d) The Company agrees not to release any Person from or waive any
provision of any confidentiality, "standstill" or similar agreement to which
the Company is a party and will use its commercially reasonable efforts to
enforce each such agreement at the request of Parent. The Company also will
promptly request each Person that has executed, within 12 months prior to the
date of this Agreement, a confidentiality or similar agreement in connection
with its consideration of a possible Acquisition Transaction or equity
investment to return all confidential information heretofore furnished to such
Person by or on behalf of the Company.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) As promptly as practicable after the date of this Agreement, Parent
and the Company shall prepare and cause to be filed with the SEC the Joint
Proxy Statement and Parent shall prepare and cause to be filed with the SEC the
Form S-4 Registration Statement, in which the Joint Proxy Statement will be
included as a prospectus; PROVIDED, HOWEVER, that notwithstanding anything to
the contrary contained in this Section 5.1(a), if (and to the extent) Parent so
elects: (i) the Joint Proxy Statement shall initially be filed with the SEC on a
confidential basis as a proxy statement of Parent and the Company under
Section 14 of the Exchange Act; (ii) until such time as Parent has determined
that it is reasonably likely that the SEC will promptly declare the Form S-4
Registration Statement effective under the Securities Act, all amendments to the
Joint Proxy Statement shall be filed with the SEC on a confidential basis as
amendments to the proxy statement of Parent and the Company under Section 14 of
the Exchange Act; and (iii) Parent shall not be obligated to file the Form S-4
Registration Statement with the SEC until such time as Parent has determined
that it is reasonably likely that the SEC will promptly declare the Form S-4
Registration Statement effective under the Securities Act. Each of Parent and
the Company shall use all commercially reasonable efforts to cause the Form S-4
Registration Statement and the Joint Proxy Statement to comply with the rules
and regulations promulgated by the SEC, to respond promptly to any comments of
the SEC or its staff and to have the Form S-4 Registration Statement declared
effective under the Securities Act as promptly as practicable after it is filed
with the SEC. Parent will use all commercially reasonable efforts to cause the
Joint Proxy Statement to be mailed to Parent's stockholders, and the Company
will use all commercially reasonable efforts to cause the Joint Proxy Statement
to be mailed to the Company's shareholders, as promptly as practicable after the
Form S-4 Registration Statement is declared effective under the Securities Act.
The Company shall promptly furnish to Parent all information concerning the
Acquired Corporations and the Company's shareholders that may be required or
reasonably requested in connection with any action contemplated by this
Section 5.1. If any event relating to any of the Acquired Corporations occurs,
or if the Company becomes aware of any information, that should be disclosed in
an amendment or supplement to the Form S-4 Registration Statement or the Joint
Proxy Statement, then the Company shall promptly inform Parent thereof and shall
cooperate with Parent in filing such amendment or supplement with the SEC and,
if appropriate, in mailing such amendment or supplement to the shareholders of
the Company.
(b) Prior to the Effective Time, Parent shall use all commercially
reasonable efforts to obtain all regulatory approvals needed to ensure that
the Parent Common Stock to be issued in the Merger will be registered or
qualified under the securities law of every jurisdiction of the United States in
which any registered holder of Company Common Stock has an address of record on
the record date for determining the shareholders entitled to notice of and to
vote at the Company Shareholders' Meeting; PROVIDED, HOWEVER, that Parent shall
not be required (i) to qualify to do business as a foreign corporation in any
jurisdiction in which it is not now qualified or (ii) to file a general consent
to service of process in any jurisdiction.
35
5.2 COMPANY SHAREHOLDERS' MEETING.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to call, give notice of and hold a meeting of the holders
of Company Common Stock to vote on a proposal to approve the principal terms of
the Merger (the "Company Shareholders' Meeting"). The Company Shareholders'
Meeting shall be held (on a date selected by the Company in consultation with
Parent) as promptly as practicable after the Form S-4 Registration Statement is
declared effective under the Securities Act. The Company shall ensure that all
proxies solicited in connection with the Company Shareholders' Meeting are
solicited in compliance with all applicable Legal Requirements.
(b) Subject to Section 5.2(c): (i) the Joint Proxy Statement shall
include a statement to the effect that the board of directors of the Company
recommends that the Company's shareholders vote to approve the principal terms
of the Merger at the Company Shareholders' Meeting (the recommendation of the
Company's board of directors that the Company's shareholders vote to approve the
principal terms of the Merger being referred to as the "Company Board
Recommendation"); and (ii) the Company Board Recommendation shall not be
withdrawn or modified in a manner adverse to Parent, and no resolution by the
board of directors of the Company or any committee thereof to withdraw or modify
the Company Board Recommendation in a manner adverse to Parent shall be adopted
or proposed.
(c) Notwithstanding anything to the contrary contained in
Section 5.2(b), at any time prior to the approval of the principal terms of
the Merger by the Required Company Shareholder Vote, the Company Board
Recommendation may be withdrawn or modified in a manner adverse to Parent if:
(i) an unsolicited, bona fide written offer to purchase all of the outstanding
shares of Company Common Stock is made to the Company and is not withdrawn;
(ii) the Company provides Parent with at least two business days prior notice of
any meeting of the Company's board of directors at which such board of directors
will consider and determine whether such offer is a Superior Offer; (iii) the
Company's board of directors determines in good faith (based upon a written
opinion of an independent financial advisor of nationally recognized reputation)
that such offer constitutes a Superior Offer; (iv) the Company's board of
directors determines in good faith, based upon the written advice of the
Company's outside counsel, that, in light of such Superior Offer, the withdrawal
or modification of the Company Board Recommendation is required in order for the
Company's board of directors to comply with its fiduciary obligations to the
Company's shareholders under applicable law; (v) the Company Board
Recommendation is not withdrawn or modified in a manner adverse to Parent at any
time within five business days after Parent receives written notice from the
Company confirming that the Company's board of directors has determined that
such offer is a Superior Offer; and (vi) neither the Company nor any of its
Representatives shall have violated any of the restrictions set forth in
Section 4.3.
(d) The Company's obligation to call, give notice of and hold the
Company Shareholders' Meeting in accordance with Section 5.2(a) shall not be
limited or otherwise affected by the commencement, disclosure, announcement or
submission of any Superior Offer or other Acquisition Proposal, or by any
withdrawal or modification of the Company Board Recommendation.
5.3 PARENT STOCKHOLDERS' MEETING.
(a) Parent shall take all action necessary to call, give notice of and
hold a meeting of the holders of Parent Common Stock to vote on the issuance
of Parent Common Stock in the Merger (the "Parent Stockholders' Meeting"). The
Parent Stockholders' Meeting will be held as promptly as practicable after the
Company Shareholders' Meeting is held and the Company's shareholders shall have
taken a final vote on a proposal to approve, and shall have approved, the
principal terms of the Merger. Parent shall ensure that all proxies solicited in
connection with the Parent Stockholders' Meeting are solicited in compliance
with all applicable Legal Requirements.
(b) The Joint Proxy Statement shall include a statement to the effect
that the board of directors of Parent recommends that Parent's stockholders
vote to approve the issuance of Parent Common Stock in
36
the Merger (the recommendation of Parent's board of directors that Parent's
stockholders vote to approve the issuance of Parent Common Stock in the Merger
being referred to as the "Parent Board Recommendation"). The Parent Board
Recommendation shall not be withdrawn or modified in a manner adverse to the
Company, and no resolution by the board of directors of Parent or any committee
thereof to withdraw or modify the Parent Board Recommendation in a manner
adverse to the Company shall be adopted or proposed.
5.4 REGULATORY APPROVALS.
The Company and Parent shall use all commercially reasonable efforts to
file, as soon as practicable after the date of this Agreement, all notices,
reports and other documents required to be filed with any Governmental Body with
respect to the Merger and the other transactions contemplated by this Agreement,
and to submit promptly any additional information requested by any such
Governmental Body. Without limiting the generality of the foregoing, the Company
and Parent shall, promptly after the date of this Agreement, prepare and file
the notifications required under the HSR Act and any applicable foreign
antitrust laws or regulations in connection with the Merger. The Company and
Parent shall respond as promptly as practicable to (i) any inquiries or requests
received from the Federal Trade Commission or the Department of Justice for
additional information or documentation and (ii) any inquiries or requests
received from any state attorney general, foreign antitrust authority or other
Governmental Body in connection with antitrust or related matters. Each of the
Company and Parent shall (1) give the other party prompt notice of the
commencement or threat of commencement of any Legal Proceeding by or before any
Governmental Body with respect to the Merger or any of the other transactions
contemplated by this Agreement, (2) keep the other party informed as to the
status of any such Legal Proceeding or threat, and (3) promptly inform the other
party of any communication to or from (as well as the content of such
communication except as may be prohibited by any Governmental Body or by any
Legal Requirement) the Federal Trade Commission, the Department of Justice or
any other Governmental Body regarding the Merger. Except as may be prohibited by
any Governmental Body or by any Legal Requirement, the Company and Parent will
consult and cooperate with one another, and will consider in good faith the
views of one another, in connection with any analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal made or submitted in connection
with any Legal Proceeding under or relating to the HSR Act or any other foreign,
federal or state antitrust or fair trade law. In addition, except as may be
prohibited by any Governmental Body or by any Legal Requirement, in connection
with any Legal Proceeding under or relating to the HSR Act or any other foreign,
federal or state antitrust or fair trade law or any other similar Legal
Proceeding, each of the Company and Parent will permit authorized
Representatives of the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding.
5.5 STOCK OPTIONS.
(a) Subject to Section 5.5(b), at the Effective Time, all rights with
respect to Company Common Stock under each Company Option then outstanding shall
be converted into and become rights with respect to Parent Common Stock, and
Parent shall assume each such Company Option in accordance with the terms (as in
effect as of the date of this Agreement) of the stock option plan under which it
was issued and the terms of the stock option agreement by which it is evidenced.
From and after the Effective Time, (i) each Company Option assumed by Parent may
be exercised solely for shares of Parent Common Stock, (ii) the number of shares
of Parent Common Stock subject to each such Company Option shall be equal to the
number of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounding down to the nearest whole share, (iii) the per share exercise price
under each such Company Option shall be adjusted by dividing the per share
exercise price under such Company Option by the Exchange Ratio and rounding up
to the nearest cent and (iv) any restriction on the exercise of any such Company
Option shall continue in full force and effect and the term, exercisability,
vesting schedule and other provisions of such Company Option shall otherwise
37
remain unchanged; PROVIDED, HOWEVER, that (A) in accordance with the terms of
those certain agreements between the Company and each of the individuals
identified on Part 2.17(k) of the Company Disclosure Schedule, certain unvested
Company Options referred to therein shall become immediately exercisable as of
the Effective Time, and (B) each Company Option assumed by Parent in accordance
with this Section 5.5(a) shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock dividend,
reverse stock split, reclassification, recapitalization or other similar
transaction subsequent to the Effective Time. Parent shall file with the SEC, no
later than 10 days after the date on which the Merger becomes effective, a
registration statement on Form S-8 relating to the shares of Parent Common Stock
issuable with respect to the Company Options assumed by Parent in accordance
with this Section 5.5(a).
(b) Prior to the Effective Time, the Company shall take all action that may
be necessary (under the plans pursuant to which Company Options are outstanding
and otherwise) or may be requested by Parent to effectuate the provisions of
this Section 5.5 and to ensure that, from and after the Effective Time, holders
of Company Options have no rights with respect thereto other than those
specifically provided in this Section 5.5.
(c) As of the Effective Time, the ESPP shall be terminated. The rights of
participants in the ESPP with respect to any offering period then underway under
the ESPP shall be determined by treating the last business day prior to the
Effective Time as the last day of such offering period and by making such other
pro-rata adjustments as may be necessary to reflect the shortened offering
period but otherwise treating such shortened offering period as a fully
effective and completed offering period for all purposes under such Plan. Prior
to the Effective Time, the Company shall take all actions (including, if
appropriate, amending the terms of the ESPP) that are necessary to give effect
to the transactions contemplated by this Section 5.4(d).
5.6 EMPLOYEE BENEFITS.
Parent agrees that all employees of the Company who continue employment with
Parent or the Surviving Corporation after the Effective Time ("Continuing
Employees") shall be eligible to continue to participate in the Surviving
Corporation's health, vacation and other non-equity based employee benefit
plans; PROVIDED, HOWEVER, that (a) nothing in this Section 5.6 or elsewhere in
this Agreement shall limit the right of Parent or the Surviving Corporation to
amend or terminate any such health, vacation or other employee benefit plan at
any time, and (b) if Parent or the Surviving Corporation terminates any such
health, vacation or other employee benefit plan, then, (i) subject to any
necessary transition period, the Continuing Employees shall be eligible to
participate in Parent's health, vacation and other non-equity based employee
benefit plans, to substantially the same extent as employees of Parent in
similar positions and at similar grade levels, and (ii) if a Continuing Employee
becomes eligible to participate (and participates) in Parent's health, vacation
and other non-equity based employee benefit plans pursuant to clause "(b)(i)" of
this sentence, then, to the extent permitted by such health, vacation or other
non-equity based employee benefit plan, Parent shall credit such Continuing
Employee's service with the Company to the same extent as such service was
credited under the similar employee benefit plans of the Company immediately
prior to the Effective Time, for purposes of determining eligibility to
participate in and vesting under, and for purposes of calculating the benefits
under, such employee benefit plan of Parent (it being understood, however, that
such crediting of service shall not result in the receipt by any Continuing
Employee of duplicate benefits for the same period of service). Nothing in this
Section 5.6 or elsewhere in this Agreement shall be construed to create a right
in any employee to employment with Parent, the Surviving Corporation or any
other Subsidiary of Parent and, subject to any other binding agreement between
an employee and Parent, the Surviving Corporation or any other Subsidiary of
Parent, the employment of each Continuing Employee shall be "at will"
employment.
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5.7 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification existing in favor of those Persons who are
directors and officers of the Company as of the date of this Agreement (the
"Indemnified Persons") for acts and omissions occurring prior to the Effective
Time, as provided in the Company's Articles of Incorporation, Bylaws (as in
effect as of the date of this Agreement) and as provided in the indemnification
agreements between the Company and said Indemnified Persons (as in effect as of
the date of this Agreement) in the forms disclosed by the Company to Parent
prior to the date of this Agreement, shall survive the Merger, and Parent shall
guarantee that all such rights are observed by the Surviving Corporation to the
fullest extent permitted by California law for a period of seven years from the
Effective Time.
(b) From the Effective Time until the seventh anniversary of the Effective
Time, the Surviving Corporation shall maintain in effect, for the benefit of the
Indemnified Persons with respect to acts or omissions occurring prior to the
Effective Time, the existing policy of directors' and officers' liability
insurance maintained by the Company as of the date of this Agreement in the form
disclosed by the Company to Parent prior to the date of this Agreement (the
"Existing Policy"); PROVIDED, HOWEVER, that (i) the Surviving Corporation may
substitute for the Existing Policy a policy or policies of comparable coverage,
and (ii) the Surviving Corporation shall not be required to pay annual premiums
for the Existing Policy (or for any substitute policies) in excess of $235,638
in the aggregate. In the event any future annual premiums for the Existing
Policy (or any substitute policies) exceed $235,638 in the aggregate, the
Surviving Corporation shall be entitled to reduce the amount of coverage of the
Existing Policy (or any substitute policies) to the amount of coverage that can
be obtained for a premium equal to $235,638.
5.8 POOLING OF INTERESTS.
Each of the Company and Parent agrees, and the Company agrees to cause the
Acquired Corporations, (a) not to take any action during the Pre-Closing Period
that would adversely affect the ability of Parent to account for the Merger as a
"pooling of interests," and (b) to use all commercially reasonable efforts to
attempt to ensure that none of its "affiliates" (as that term is defined in
Rule 145 under the Securities Act) takes any action that could adversely affect
the ability of Parent to account for the Merger as a "pooling of interests."
Each party agrees to provide to PricewaterhouseCoopers LLP such letters as shall
be reasonably requested by PricewaterhouseCoopers LLP in connection with the
letters referred to in Section 6.6.
5.9 ADDITIONAL AGREEMENTS.
(a) Subject to Section 5.9(b), Parent and the Company shall use all
commercially reasonable efforts to take, or cause to be taken, all actions
necessary to consummate the Merger and make effective the other transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, but subject to Section 5.9(b), each party to this Agreement
(i) shall make all filings (if any) and give all notices (if any) required to be
made and given by such party in connection with the Merger and the other
transactions contemplated by this Agreement, (ii) shall use all commercially
reasonable efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or otherwise) by such
party in connection with the Merger or any of the other transactions
contemplated by this Agreement, and (iii) shall use all commercially reasonable
efforts to lift any restraint, injunction or other legal bar to the Merger. The
Company shall promptly deliver to Parent a copy of each such filing made, each
such notice given and each such Consent obtained by the Company during the
Pre-Closing Period. Parent shall promptly deliver to the Company a copy of each
such filing made, each such notice given and each such Consent obtained by
Parent during the Pre-Closing Period. Nothing contained in this Section 5.9(a)
or elsewhere in this Agreement shall limit the obligation of the Company to
obtain Parent's consent to the taking of any action that would otherwise give
rise to a violation of Section 4.2.
(b) Notwithstanding anything to the contrary contained in this Agreement,
Parent shall not have any obligation under this Agreement: (i) to dispose or
transfer or cause any of its Subsidiaries to dispose of or
39
transfer any assets, or to commit to cause any of the Acquired Corporations to
dispose of any assets; (ii) to discontinue or cause any of its Subsidiaries to
discontinue offering any product or service, or to commit to cause any of the
Acquired Corporations to discontinue offering any product or service; (iii) to
license or otherwise make available, or cause any of its Subsidiaries to license
or otherwise make available, to any Person, any technology, software or other
Proprietary Asset, or to commit to cause any of the Acquired Corporations to
license or otherwise make available to any Person any technology, software or
other Proprietary Asset; (iv) to hold separate or cause any of its Subsidiaries
to hold separate any assets or operations (either before or after the Closing
Date), or to commit to cause any of the Acquired Corporations to hold separate
any assets or operations; (v) to make or cause any of its Subsidiaries to make
any commitment (to any Governmental Body or otherwise) regarding its future
operations or the future operations of any of the Acquired Corporations; or
(vi) to contest any Legal Proceeding relating to the Merger if Parent determines
in good faith that contesting such Legal Proceeding might not be advisable.
5.10 DISCLOSURE.
(a) The Company shall not, and shall not permit any of its Representatives
to, issue any press release or otherwise publicly disseminate any document or
other written material relating to the Merger or any of the other transactions
contemplated by this Agreement unless (i) Parent shall have approved such press
release or written material (it being understood that Parent shall not
unreasonably withhold its approval of any such press release or written
material), or (ii) the Company shall have been advised by its outside legal
counsel that the issuance of such press release or the dissemination of such
written material is required by any applicable law or regulation, and the
Company shall have consulted with Parent prior to issuing such press release or
disseminating such written material. The Company shall use all commercially
reasonable efforts to ensure that none of its Representatives makes any public
statement that is materially inconsistent with any press release issued or any
written material publicly disseminated by the Company with respect to the Merger
or with respect to any of the other transactions contemplated by this Agreement.
(b) Parent shall not, and shall not permit any of its Representatives to,
issue any press release or otherwise publicly disseminate any document or other
written material relating to the Merger or any of the other transactions
contemplated by this Agreement unless (i) the Company shall have approved such
press release or written material (it being understood that the Company shall
not unreasonably withhold its approval of any such press release or written
material), or (ii) Parent shall have been advised by its outside legal counsel
that the issuance of such press release or the dissemination of such written
material is required by any applicable law or regulation, and Parent shall have
consulted with the Company prior to issuing such press release or disseminating
such written material. Parent shall use all commercially reasonable efforts to
ensure that none of its Representatives makes any public statement that is
materially inconsistent with any press release issued or any written material
publicly disseminated by Parent with respect to the Merger or with respect to
any of the other transactions contemplated by this Agreement.
5.11 AFFILIATE AGREEMENTS.
(a) The Company shall use all commercially reasonable efforts to cause each
Person identified in Part 2.20 of the Company Disclosure Schedule and each other
Person who is or becomes (or may be deemed to be) an "affiliate" (as that term
is defined in Rule 145 under the Securities Act) of the Company to execute and
deliver to Parent, prior to the date of the mailing of the Joint Proxy Statement
to the Company's shareholders, an Affiliate Agreement in the form of Exhibit D.
Neither Parent nor the Company shall register, or allow its transfer agent to
register, on its books any transfer of any shares of Parent Common Stock or
Company Common Stock of any "affiliate" of the Company who has not provided a
signed Affiliate Agreement in accordance with this Section 5.11.
(b) Parent shall use all commercially reasonable efforts to cause each
Person identified in Part 3.17 of the Parent Disclosure Schedule and each other
Person who is or becomes (or may be deemed to be) an "affiliate" (as that term
is defined in Rule 145 under the Securities Act) of Parent to execute and
deliver to
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the Company, prior to the date of the mailing of the Joint Proxy Statement to
Parent's stockholders, an Affiliate Agreement in the form of Exhibit E.
5.12 TAX MATTERS.
At or prior to the filing of the Form S-4 Registration Statement, the
Company and Parent shall execute and deliver to Xxxxxx Godward LLP and to
Fenwick & West LLP tax representation letters in customary form. Parent, Merger
Sub and the Company shall each confirm to Xxxxxx Godward LLP and to Fenwick &
West LLP the accuracy and completeness as of the Effective Time of the tax
representation letters delivered pursuant to the immediately preceding sentence.
Parent and the Company shall use all commercially reasonable efforts prior to
the Effective Time to cause the Merger to qualify as a tax-free reorganization
under Section 368(a)(1) of the Code. Following delivery of the tax
representations letters pursuant to the first sentence of this Section 5.12,
each of Parent and the Company shall use its commercially reasonable efforts to
cause Xxxxxx Godward LLP and Fenwick & West LLP, respectively, to deliver to it
a tax opinion satisfying the requirements of Item 601 of Regulation S-K
promulgated under the Securities Act. In rendering such opinions, each of such
counsel shall be entitled to rely on the tax representation letters referred to
in this Section 5.12.
5.13 LETTER OF THE COMPANY'S ACCOUNTANTS.
The Company shall use all commercially reasonable efforts to cause to be
delivered to Parent a letter of PricewaterhouseCoopers LLP, dated no more than
two business days before the date on which the Form S-4 Registration Statement
becomes effective (and reasonably satisfactory in form and substance to Parent),
that is customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4 Registration Statement.
5.14 RESIGNATION OF OFFICERS AND DIRECTORS.
The Company shall use all commercially reasonable efforts to obtain and
deliver to Parent prior to the Closing the resignation of each officer and
director of each of the Acquired Corporations.
5.15 LISTING.
Parent shall use commercially reasonable efforts to cause the shares of
Parent Common Stock being issued in the Merger to be approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
5.16 BOARD OF DIRECTORS.
Prior to the Effective Time, Parent shall use all commercially reasonable
efforts to cause the board of directors of Parent to consist, as of the
Effective Time, of seven directors, (a) five of whom shall be Persons designated
by Parent, and (b) two of whom shall be Persons designated by the Company who
were directors of the Company prior to the Effective Time. If any such Persons
are not able to serve as directors of Parent as of the Effective Time, the party
on whose board such Person presently sits shall select a replacement. Prior to
the Effective Time, Parent's board of directors shall use all commercially
reasonable efforts to attempt to cause Xxxxx X. Xxxxxxx to serve as Chairman of
the Board of Parent as of the Effective Time, Xxxxxx St. Xxxxxx to serve as
Chief Executive Officer and a director of Parent as of the Effective Time, and
Xxxxxxxx Xxxxx to serve as Vice Chairman and a director of Parent as of the
Effective Time.
41
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties of the Company contained in this
Agreement shall be accurate in all respects as of the Closing Date as if made on
and as of the Closing Date, except that any inaccuracies in such representations
and warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a Material Adverse Effect on the Acquired
Corporations; PROVIDED, HOWEVER that, for purposes of determining the accuracy
of such representations and warranties, (i) all "Material Adverse Effect"
qualifications and other materiality qualifications, and any similar
qualifications, contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Company Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded.
6.2 PERFORMANCE OF COVENANTS.
Each covenant or obligation that the Company is required to comply with or
to perform at or prior to the Closing shall have been complied with and
performed in all material respects.
6.3 EFFECTIVENESS OF REGISTRATION STATEMENT.
The Form S-4 Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order shall
have been issued, and no proceeding for that purpose shall have been initiated
or be threatened, by the SEC with respect to the Form S-4 Registration
Statement.
6.4 SHAREHOLDER APPROVAL.
The principal terms of the Merger shall have been duly approved by the
Required Company Shareholder Vote, and the issuance of Parent Common Stock in
the Merger shall have been duly approved by the Required Parent Stockholder
Vote.
6.5 CONSENTS.
All material Consents required to be obtained in connection with the Merger
and the other transactions contemplated by this Agreement (including the
Consents identified in Part 6.5 of the Company Disclosure Schedule) shall have
been obtained and shall be in full force and effect.
6.6 AGREEMENTS AND DOCUMENTS.
Parent and the Company shall have received the following agreements and
documents, each of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit D, executed by each Person
who could reasonably be deemed to be an "affiliate" (as that term is defined in
Rule 145 under the Securities Act) of the Company;
(b) Noncompetition Agreements in the form of Exhibit G, executed by the
individuals identified on Exhibit F;
(c) a letter from PricewaterhouseCoopers LLP, dated as of the Closing Date
and addressed to Parent, reasonably satisfactory in form and substance to
Parent, updating the letter referred to in Section 5.13;
(d) a letter from PricewaterhouseCoopers LLP, dated as of the Closing Date
(which may contain customary qualifications and assumptions), to the effect that
PricewaterhouseCoopers LLP concurs with the Company management's conclusion that
no condition exists related to the Company which would preclude Parent from
accounting for the Merger as a "pooling of interests" in accordance with
generally accepted
42
accounting principles, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC;
(e) a letter from PricewaterhouseCoopers LLP, dated as of the Closing Date
(which may contain customary qualifications and assumptions), and addressed to
Parent, reasonably satisfactory in form and substance to Parent, to the effect
that PricewaterhouseCoopers LLP concurs with Parent management's conclusion that
Parent may account for the Merger as a "pooling of interests" in accordance with
generally accepted accounting principles, Accounting Principles Board Opinion
No. 16 and all published rules, regulations and policies of the SEC;
(f) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing Date and
addressed to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that (i) in rendering such opinion, Xxxxxx Godward LLP may rely upon
the tax representation letters referred to in Section 5.12, and (ii) if Xxxxxx
Godward LLP does not render such opinion or withdraws or modifies such opinion,
this condition shall nonetheless be deemed to be satisfied if Fenwick & West LLP
renders such opinion to Parent);
(g) a certificate executed on behalf of the Company by its Chief Executive
Officer confirming that the conditions set forth in Sections 6.1, 6.2, 6.4 (as
it relates to the Required Company Shareholder Vote), 6.5, 6.6(a), 6.7, 6.8,
6.11, 6.12, and 6.13 have been duly satisfied; and
(h) the written resignations of all officers and directors of each of the
Acquired Corporations, effective as of the Effective Time.
6.7 EMPLOYEES.
Not more than one of the seven executive officers identified on
Schedule 6.7 shall have ceased to be employed by the Company (other than by
reason of death or permanent disability) or shall have expressed an intention to
terminate his or her employment with the Company or to decline to accept
employment with Parent.
6.8 NO MATERIAL ADVERSE EFFECT.
Since the date of this Agreement, there shall not have occurred any Material
Adverse Effect on the Acquired Corporations, and no event shall have occurred or
circumstance shall exist that, alone or in combination with any other events or
circumstances, could reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations.
6.9 HSR ACT.
The waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated and, on the Closing Date, there
shall not be in effect any voluntary agreement between Parent and the Federal
Trade Commission or the Department of Justice pursuant to which Parent has
agreed not consummate the Merger for a period of time; any similar waiting
period under any applicable foreign antitrust law or regulation shall have
expired or been terminated; and any Consent required under any applicable
foreign antitrust law or regulation shall have been obtained.
6.10 LISTING.
The shares of Parent Common Stock to be issued in the Merger shall have been
approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
6.11 NO RESTRAINTS.
No temporary restraining order, preliminary or permanent injunction or other
order preventing the consummation of the Merger shall have been issued by any
court of competent jurisdiction and remain in effect, and there shall not be any
Legal Requirement enacted or deemed applicable to the Merger that makes
consummation of the Merger illegal.
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6.12 NO GOVERNMENTAL LITIGATION.
There shall not be pending or threatened any Legal Proceeding in which a
Governmental Body is or is threatened to become a party or is otherwise
involved: (a) challenging or seeking to restrain or prohibit the consummation of
the Merger or any of the other transactions contemplated by this Agreement;
(b) relating to the Merger and seeking to obtain from Parent or any of its
Subsidiaries any damages that would reasonably be expected to be material to
Parent; (c) seeking to prohibit or limit in any material respect Parent's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation;
(d) which would materially and adversely affect the right of Parent, the
Surviving Corporation or any Subsidiary of Parent to own the assets or operate
the business of the Acquired Corporations; or (e) seeking to compel Parent or
the Company, or any Subsidiary of Parent or the Company, to dispose of or hold
separate any material assets, as a result of the Merger or any of the other
transactions contemplated by this Agreement.
6.13 NO OTHER LITIGATION.
There shall not be pending any Legal Proceeding in which, in the reasonable
judgment of Parent, there is a reasonable possibility of an outcome that would
have a Material Adverse Effect on the Acquired Corporations or on Parent (it
being understood that a pending Legal Proceeding against the Acquired
Corporations that resulted directly from the public announcement or pendency of
the Merger shall be disregarded for purposes of determining whether this
condition is satisfied).
6.14 STOCK OPTIONS.
Parent shall have received assurances reasonably satisfactory to Parent that
there will be no Company Options outstanding to purchase capital stock of the
Surviving Corporation after the Effective Time.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS.
The representations and warranties of Parent contained in this Agreement
shall be accurate in all respects as of the Closing Date as if made on and as of
the Closing Date, except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected have, a Material Adverse Effect on Parent; PROVIDED,
HOWEVER, that, for purposes of determining the accuracy of such representations
and warranties as of the Closing Date, (i) all "Material Adverse Effect"
qualifications and other materiality qualifications, and any similar
qualifications, contained in such representations and warranties shall be
disregarded and (ii) any update of or modification to the Parent Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded.
7.2 PERFORMANCE OF COVENANTS.
All of the covenants and obligations that Parent and Merger Sub are required
to comply with or to perform at or prior to the Closing shall have been complied
with and performed in all material respects.
7.3 EFFECTIVENESS OF REGISTRATION STATEMENT.
The Form S-4 Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order shall
have been issued, and no proceeding for that purpose shall have been initiated
or be threatened, by the SEC with respect to the Form S-4 Registration
Statement.
44
7.4 SHAREHOLDER APPROVAL.
The principal terms of the Merger shall have been duly approved by the
Required Company Shareholder Vote, and the issuance of Parent Common Stock in
the Merger shall have been duly approved by the Required Parent Stockholder
Vote.
7.5 DOCUMENTS.
The Company shall have received the following documents:
(a) a legal opinion of Fenwick & West LLP, dated as of the Closing Date, to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368 of the Code (it being understood that (i) in rendering such
opinion, Fenwick & West LLP may rely upon the tax representation letters
referred to in Section 5.12, and (ii) if Fenwick & West LLP does not render such
opinion or withdraws or modifies such opinion, this condition shall nonetheless
be deemed to be satisfied if Xxxxxx Godward LLP renders such opinion to the
Company); and
(b) a certificate executed on behalf of Parent by an executive officer of
Parent, confirming that conditions set forth in Sections 7.1, 7.2, 7.4 (as it
relates to the Required Parent Stockholder Vote) and 7.6 have been duly
satisfied.
7.6 NO MATERIAL ADVERSE EFFECT.
Since the date of this Agreement, there shall not have occurred any Material
Adverse Effect on Parent, and no event shall have occurred or circumstance shall
exist that, alone or in combination with any other events or circumstances,
could reasonably be expected to have a Material Adverse Effect on Parent.
7.7 HSR ACT.
The waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated and, on the Closing Date, there
shall not be in effect any voluntary agreement between Parent and the Federal
Trade Commission or the Department of Justice pursuant to which Parent has
agreed not consummate the Merger for a period of time.
7.8 LISTING.
The shares of Parent Common Stock to be issued in the Merger shall have been
approved for listing (subject to notice of issuance) on the Nasdaq National
Market.
7.9 NO RESTRAINTS.
No temporary restraining order, preliminary or permanent injunction or other
order preventing the consummation of the Merger by the Company shall have been
issued by any court of competent jurisdiction and remain in effect, and there
shall not be any Legal Requirement enacted or deemed applicable to the Merger
that makes consummation of the Merger by the Company illegal.
SECTION 8. TERMINATION
8.1 TERMINATION.
This Agreement may be terminated prior to the Effective Time (whether before
or after approval of the principal terms of the Merger by the Company's
shareholders and whether before or after approval of the issuance of Parent
Common Stock in the Merger by Parent's stockholders):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by the End Date (as defined below in this Section 8.1) (unless the
failure to consummate the Merger is attributable to a failure on the part of the
party seeking to terminate this Agreement to perform any material obligation
required to be performed by such party at or prior to the Effective Time);
45
(c) by either Parent or the Company if a court of competent jurisdiction or
other Governmental Body shall have issued a final and nonappealable order,
decree or ruling, or shall have taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger;
(d) by either Parent or the Company if (i) the Company Shareholders' Meeting
(including any adjournments or postponements thereof) shall have been held and
completed and the Company's shareholders shall have taken a final vote on a
proposal to approve the principal terms of the Merger, and (ii) the principal
terms of the Merger shall not have been approved at such meeting by the Required
Company Shareholder Vote (and shall not have been approved at any adjournment or
postponement thereof); PROVIDED, HOWEVER, that (A) a party shall not be
permitted to terminate this Agreement pursuant to this Section 8.1(d) if the
failure to obtain such shareholder approval is attributable to a failure on the
part of such party to perform any material obligation required to be performed
by such party at or prior to the Effective Time, and (B) the Company shall not
be permitted to terminate this Agreement pursuant to this Section 8.1(d) unless
the Company shall have made the payment required to be made to Parent pursuant
to Section 8.3(a) and shall have paid to Parent any fee required to be paid to
Parent pursuant to Section 8.3(b);
(e) by either Parent or the Company if (i) the Parent Stockholders' Meeting
(including any adjournments or postponements thereof) shall have been held and
completed and Parent's stockholders shall have taken a final vote on the
issuance of shares of Parent Common Stock in the Merger, and (ii) the issuance
of Parent Common Stock in the Merger shall not have been approved at such
meeting (and shall not have been approved at any adjournment or postponement
thereof) by the Required Parent Stockholder Vote; PROVIDED, HOWEVER, that (A) a
party shall not be permitted to terminate this Agreement pursuant to this
Section 8.1(e) if the failure to obtain such stockholder vote is attributable to
a failure on the part of the party seeking to terminate this Agreement to
perform any material obligation required to be performed by such party at or
prior to the Effective Time, and (B) Parent shall not be permitted to terminate
this Agreement pursuant to this Section 8.1(e) unless Parent shall have made the
payment required to be made to the Company pursuant to Section 8.3(a);
(f) by Parent (at any time prior to the approval of the principal terms of
the Merger by the Required Company Shareholder Vote) if a Company Triggering
Event shall have occurred;
(g) by the Company (at any time prior to the approval of the issuance of
Parent Common Stock in the Merger by the Required Parent Stockholder Vote) if a
Parent Triggering Event shall have occurred;
(h) by Parent if (i) any of the Company's representations and warranties
contained in this Agreement shall be inaccurate as of the date of this
Agreement, or shall have become inaccurate as of a date subsequent to the date
of this Agreement (as if made on such subsequent date), such that the condition
set forth in Section 6.1 would not be satisfied (it being understood that, for
purposes of determining the accuracy of such representations and warranties as
of the date of this Agreement or at any subsequent date, (A) all "Material
Adverse Effect" qualifications and other materiality qualifications, and any
similar qualifications, contained in such representations and warranties shall
be disregarded and (B) any update of or modification to the Company Disclosure
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded), or (ii) any of the Company's covenants contained in this
Agreement shall have been breached such that the condition set forth in
Section 6.2 would not be satisfied; PROVIDED, HOWEVER, that if an inaccuracy in
the Company's representations and warranties or a breach of a covenant by the
Company is curable by the Company and the Company is continuing to exercise all
commercially reasonable efforts to cure such inaccuracy or breach, then Parent
may not terminate this Agreement under this Section 8.1(h) on account of such
inaccuracy or breach;
(i) by the Company if (i) any of Parent's representations and warranties
contained in this Agreement shall be inaccurate as of the date of this
Agreement, or shall have become inaccurate as of a date subsequent to the date
of this Agreement (as if made on such subsequent date), such that the condition
set forth in Section 7.1 would not be satisfied (it being understood that, for
purposes of determining the
46
accuracy of such representations and warranties as of the date of this Agreement
or at any subsequent date, (A) all "Material Adverse Effect" qualifications and
other materiality qualifications, and any similar qualifications, contained in
such representations and warranties shall be disregarded and (B) any update of
or modification to the Parent Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded), or (ii) if any of
Parent's covenants contained in this Agreement shall have been breached such
that the condition set forth in Section 7.2 would not be satisfied; PROVIDED,
HOWEVER, that if an inaccuracy in Parent's representations and warranties or a
breach of a covenant by Parent is curable by Parent and Parent is continuing to
exercise all commercially reasonable efforts to cure such inaccuracy or breach,
then the Company may not terminate this Agreement under this Section 8.1(i) on
account of such inaccuracy or breach;
(j) by Parent if, since the date of this Agreement, there shall have
occurred any Material Adverse Effect on the Acquired Corporations, or there
shall have occurred any event or circumstance that, in combination with any
other events or circumstances, could reasonably be expected to have a Material
Adverse Effect on the Acquired Corporations; or
(k) by the Company if, since the date of this Agreement, there shall have
occurred any Material Adverse Effect on Parent, or there shall have occurred any
event or circumstance that, in combination with any other events or
circumstances, could reasonably be expected to have a Material Adverse Effect on
Parent.
For purposes of Section 8.1(b), the term "End Date" shall mean May 31, 2000;
PROVIDED, HOWEVER, that if on May 31, 2000 (i) (A) the waiting period applicable
to the consummation of the Merger under the HSR Act shall not have expired or
been terminated or there shall be in effect a voluntary agreement between Parent
and the Federal Trade Commission or the Department of Justice pursuant to which
Parent has agreed not to consummate the Merger for a period of time or a
temporary restraining order issued upon the motion of the Federal Trade
Commission or the Department of Justice is in effect precluding the consummation
of the Merger, (B) any similar waiting period under any applicable foreign
antitrust law or regulation shall not have expired or been terminated, or
(C) any Consent required under any applicable foreign antitrust law or
regulation shall not have been obtained, and (ii) all other conditions contained
in Sections 6 and 7 that are not related to any of the matters referred to in
clause "(A)," "(B)" or "(C)" of this sentence shall have been satisfied or
waived, then the End Date shall be July 31, 2000.
8.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in
Section 8.1, this Agreement shall be of no further force or effect; PROVIDED,
HOWEVER, that (i) this Section 8.2, Section 8.3 and Section 9 (and those certain
letter agreements dated September 7, 1999 and referred to in Section 9.4) shall
survive the termination of this Agreement and shall remain in full force and
effect, and (ii) the termination of this Agreement shall not relieve any party
from any liability for any willful breach of any representation, warranty or
covenant contained in this Agreement.
8.3 EXPENSES; TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; PROVIDED, HOWEVER, that: (i) Parent and the Company shall
share equally all fees and expenses, other than attorneys' fees, incurred in
connection with (A) the filing, printing and mailing of the Form S-4
Registration Statement and the Joint Proxy Statement and any amendments or
supplements thereto and (B) the filing of the premerger notification and report
forms relating to the Merger under the HSR Act and the filing of any notice or
other document under any applicable foreign antitrust law or regulation;
(ii) if this Agreement is terminated by Parent or the Company pursuant to
Section 8.1(d), then, at the time specified in the next sentence, the Company
shall make a nonrefundable cash payment to Parent (in addition to any other
amount that may be payable
47
pursuant to Section 8.3(b) or otherwise) in an amount equal to the aggregate
amount of all fees and expenses (including all reasonable attorneys' fees,
accountants' fees, financial advisory fees and filing fees up to a maximum of
$2,000,000) that have been paid or that may become payable by or on behalf of
Parent in connection with the preparation and negotiation of this Agreement and
the Stock Option Agreement and otherwise in connection with the Merger; and
(iii) if this Agreement is terminated by Parent or the Company pursuant to
Section 8.1(e), then, at the time specified in the last sentence of this
Section 8.3(a), Parent shall make a nonrefundable cash payment to the Company in
an amount equal to the aggregate amount of all fees and expenses (including all
reasonable attorneys' fees, accountants fees, financial advisory fees and filing
fees up to a maximum of $2,000,000) that have been paid or that may become
payable by or on behalf of the Company in connection with the preparation and
negotiation of this Agreement and the Stock Option Agreement and otherwise in
connection with the Merger. In the case of termination of this Agreement by the
Company pursuant to Section 8.1(d), the nonrefundable payment referred to in
clause "(ii)" of the proviso to the first sentence of this Section 8.3(a) shall
be made by the Company prior to such termination; and in the case of termination
of this Agreement by Parent pursuant to Section 8.1(d), the nonrefundable
payment referred to in clause "(ii)" of the proviso to the first sentence of
this Section 8.3(a) shall be made by the Company within two business days after
such termination. In the case of termination of this Agreement by Parent
pursuant to Section 8.1(e), the nonrefundable payment referred to in clause
"(iii)" of the proviso to the first sentence of this Section 8.3(a) shall be
made by Parent prior to such termination; and in the case of termination of this
Agreement by the Company pursuant to Section 8.1(e), the nonrefundable payment
referred to in clause "(iii)" of the proviso to the first sentence of this
Section 8.3(a) shall be paid by Parent within two business days after such
termination.
(b) If (i) (A) this Agreement is terminated by Parent or the Company
pursuant to Section 8.1(d) and (B) at or prior to the time of such termination
an Acquisition Proposal shall have been disclosed, announced, commenced,
submitted or made, or (ii) this Agreement is terminated by Parent pursuant to
Section 8.1(f), then, in either such case, the Company shall pay to Parent, in
cash at the time specified in the next sentence (and in addition to any payment
required to be made pursuant to Section 8.3(a)), a nonrefundable fee in the
amount of $16,000,000. In the case of termination of this Agreement by the
Company pursuant to Section 8.1(d), the fee referred to in the preceding
sentence shall be paid by the Company prior to such termination, and in the case
of termination of this Agreement by Parent pursuant to Section 8.1(d) or
Section 8.1(f), the fee referred to in the preceding sentence shall be paid by
the Company within two business days after such termination.
(c) If this Agreement is terminated by the Company pursuant to
Section 8.1(g), then Parent shall pay to the Company, in cash within two
business days after such termination, a nonrefundable fee in the amount of
$16,000,000.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT.
This Agreement may be amended with the approval of the respective boards of
directors of the Company and Parent at any time (whether before or after
approval of the principal terms of the Merger by the shareholders of the Company
and whether before or after approval of the issuance of Parent Common Stock in
the Merger by Parent's stockholders); PROVIDED, HOWEVER, that (i) after any such
approval of the principal terms of the Merger by the Company's shareholders, no
amendment shall be made which by law requires further approval of the
shareholders of the Company without the further approval of such shareholders,
and (ii) after any such approval of the issuance of Parent Common Stock in the
Merger by Parent's stockholders, no amendment shall be made which by law or NASD
regulation requires further approval of Parent's stockholders without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
48
9.2 WAIVER.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any party
in exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy.
(b) No party shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
9.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties contained in this Agreement or in
any certificate delivered pursuant to this Agreement shall survive the Merger.
9.4 ENTIRE AGREEMENT; COUNTERPARTS.
This Agreement and the Stock Option Agreement constitute the entire
agreement and supersede the Letter Agreement and all other prior agreements and
understandings, both written and oral, among or between any of the parties with
respect to the subject matter hereof and thereof; PROVIDED, HOWEVER, that those
certain letter agreements dated September 7, 1999 between the Company and Parent
(relating to the protection of confidential information) shall not be superceded
and shall remain in full force and effect. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
9.5 APPLICABLE LAW; JURISDICTION.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof. In any action
between any of the parties arising out of or relating to this Agreement or any
of the transactions contemplated by this Agreement: (a) each of the parties
irrevocably and unconditionally consents and submits to the exclusive
jurisdiction and venue of the state and federal courts located in the State of
California; (b) if any such action is commenced in a state court, then, subject
to applicable law, no party shall object to the removal of such action to any
federal court located in the Northern District of California; (c) each of the
parties irrevocably waives the right to trial by jury; and (d) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 9.9.
9.6 DISCLOSURE SCHEDULE.
The Company Disclosure Schedule shall be arranged in separate parts
corresponding to the numbered and lettered sections contained in Section 2, and
the information disclosed in any numbered or lettered part shall be deemed to
relate to and to qualify the particular representation or warranty set forth in
the corresponding numbered or lettered section in Section 2 and all other
applicable representations or warranties to which the relevancy of such
disclosure is readily apparent. The Parent Disclosure Schedule shall be arranged
in separate parts corresponding to the numbered and lettered sections contained
in Section 3, and the information disclosed in any numbered or lettered part
shall be deemed to relate to and to qualify the particular representation or
warranty set forth in the corresponding numbered or lettered section in
Section 3 and all other applicable representations or warranties to which the
relevancy of such disclosure is readily apparent.
49
9.7 ATTORNEYS' FEES.
In any action at law or suit in equity to enforce this Agreement or the
rights of any of the parties hereunder, the prevailing party in such action or
suit shall be entitled to receive a reasonable sum for its attorneys' fees and
all other reasonable costs and expenses incurred in such action or suit.
9.8 ASSIGNABILITY.
This Agreement shall be binding upon, and shall be enforceable by and inure
solely to the benefit of, the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that neither this Agreement nor any of the rights
hereunder may be assigned by any party without the prior written consent of the
other parties, and any attempted assignment of this Agreement or any of such
rights hereunder without such consent shall be void and of no effect. Nothing in
this Agreement, express or implied, is intended to or shall confer upon any
Person (other than the parties hereto) any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
9.9 NOTICES.
Any notice or other communication required or permitted to be delivered to
any party under this Agreement shall be in writing and shall be deemed properly
delivered, given and received when delivered (by hand, by registered mail, by
courier or express delivery service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other parties hereto):
IF TO PARENT OR MERGER SUB:
Xxxxxxx X. Xxxxxx
Wind River Systems, Inc.
000 Xxxx Xxxxx Xxx
Xxxxxxx, XX 00000
Facsimile No. (000) 000-0000
WITH A COPY TO:
Xxxx X. Xxxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Xxxxx X. Xxxxx, Esq.
Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Facsimile No. (000) 000-0000
IF TO THE COMPANY:
Xxxxxxx X. Xxxxxxxxxx
Integrated Systems, Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile No. (000) 000-0000
50
WITH A COPY TO:
Xxxx X. Xxxxxxxx, Esq.
Xxxxxxx Xxxxxxxxx, Esq.
Fenwick & West LLP
Two Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Facsimile No. (000) 000-0000
9.10 COOPERATION.
The Company agrees to cooperate fully with Parent and to execute and deliver
such further documents, certificates, agreements and instruments and to take
such other actions as may be reasonably requested by Parent to evidence or
reflect the transactions contemplated by this Agreement and to carry out the
intent and purposes of this Agreement.
9.11 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include masculine
and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
51
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
WIND RIVER SYSTEMS, INC.
By:
-----------------------------------------
Name:
Title:
UNIVERSITY ACQUISITION CORP.
By:
-----------------------------------------
Name:
Title:
INTEGRATED SYSTEMS, INC.
By:
-----------------------------------------
Name:
Title:
52
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
ACQUIRED CORPORATION CONTRACT. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
ACQUIRED CORPORATION PROPRIETARY ASSET. "Acquired Corporation Proprietary
Asset" shall mean any Proprietary Asset owned by or licensed to any of the
Acquired Corporations or otherwise used by any of the Acquired Corporations.
ACQUIRED CORPORATION SOURCE CODE. "Acquired Corporation Source Code" shall
mean any source code, or any portion, aspect or segment of any source code,
relating to any Proprietary Asset owned by or licensed to any of the Acquired
Corporations or otherwise used by any of the Acquired Corporations.
ACQUISITION PROPOSAL. "Acquisition Proposal" shall mean any offer,
proposal, inquiry or indication of interest (other than an offer, proposal,
inquiry or indication of interest by Parent) contemplating or otherwise relating
to any Acquisition Transaction.
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction or series of transactions involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which any of the Acquired Corporations
is a constituent corporation, (ii) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires beneficial or record ownership of securities representing
more than 20% of the outstanding securities of any class of voting securities of
any of the Acquired Corporations, or (iii) in which any of the Acquired
Corporations issues securities representing more than 20% of the outstanding
securities of any class of voting securities of any of the Acquired
Corporations;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses or assets that constitute or
account for 20% or more of the consolidated net revenues, net income or assets
of any of the Acquired Corporations; or
(c) any liquidation or dissolution of any of the Acquired Corporations.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
COMPANY COMMON STOCK. "Company Common Stock" shall mean the Common Stock,
no par value, of the Company.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by the Company in accordance with the
requirements of Section 9.6 of the Agreement and that has been delivered by the
Company to Parent on the date of this Agreement and signed by the President of
the Company.
COMPANY PREFERRED STOCK. "Company Preferred Stock" shall mean the Preferred
Stock, no par value, of the Company.
1
COMPANY TRIGGERING EVENT. A "Company Triggering Event" shall be deemed to
have occurred if: (i) the board of directors of the Company shall have failed to
recommend that the Company's shareholders vote to approve the principal terms of
the Merger, or shall have withdrawn or modified in a manner adverse to Parent
the Company Board Recommendation, or shall have taken any other action which is
reasonably determined by Parent to suggest that the board of directors of the
Company might not support the Merger or might not believe that the Merger is in
the best interests of the Company's shareholders; (ii) the Company shall have
failed to include in the Proxy Statement the Company Board Recommendation or a
statement to the effect that the board of directors of the Company has
determined and believes that the Merger is in the best interests of the
Company's shareholders; (iii) the board of directors of the Company fails to
reaffirm the Company Board Recommendation, or fails to reaffirm its
determination that the Merger is in the best interests of the Company's
shareholders, within five business days after Parent requests in writing that
such recommendation or determination be reaffirmed; (iv) the board of directors
of the Company shall have approved, endorsed or recommended any Acquisition
Proposal; (v) the Company shall have entered into any letter of intent or
similar document or any Contract relating to any Acquisition Proposal; (vi) the
Company shall have failed to hold the Company Shareholders' Meeting as promptly
as practicable and in any event within 45 days after the Form S-4 Registration
Statement is declared effective under the Securities Act; (vii) a tender or
exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its securityholders, within 10 business
days after the commencement of such tender or exchange offer, a statement
disclosing that the Company recommends rejection of such tender or exchange
offer; (viii) an Acquisition Proposal is publicly announced, and the Company
(A) fails to issue a press release announcing its opposition to such Acquisition
Proposal within five business days after such Acquisition Proposal is announced
or (B) otherwise fails to actively oppose such Acquisition Proposal; or
(ix) any of the Acquired Corporations or any Representative of any of the
Acquired Corporations shall have violated any of the restrictions set forth in
Section 4.3.
COMPANY UNAUDITED INTERIM BALANCE SHEET. "Company Unaudited Interim Balance
Sheet" shall mean the unaudited consolidated balance sheet of the Company and
its consolidated Subsidiaries as of August 31, 1999 included in the Company SEC
Documents.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
FORM S-4 REGISTRATION STATEMENT. "Form S-4 Registration Statement" shall
mean the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with issuance of Parent Common
2
Stock in the Merger, as said registration statement may be amended prior to the
time it is declared effective by the SEC.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR ACT. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
JOINT PROXY STATEMENT. "Joint Proxy Statement" shall mean the joint proxy
statement/prospectus to be sent to the Company's shareholders in connection with
the Company Shareholders' Meeting and to Parent's stockholders in connection
with the Parent Stockholders' Meeting.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body (or under the
authority of the Nasdaq National Market).
MATERIAL ADVERSE EFFECT. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement but for the
presence of "Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, in such representations and warranties) had or would
have a material adverse effect on (i) the business, condition, capitalization,
assets, liabilities, operations or financial performance of the Acquired
Corporations taken as a whole, (ii) the ability of the Company to consummate the
Merger or any of the other transactions contemplated by the Agreement or to
perform any of its obligations under the Agreement, or (iii) Parent's ability to
vote, receive dividends with respect to or otherwise exercise ownership rights
with respect to the stock of the Surviving Corporation; PROVIDED, HOWEVER, that
in no event shall any of the following, in and of themselves, constitute a
Material Adverse Effect on the Acquired Corporations: (A) a material decline in
revenues or net income recorded by the Acquired Corporations after the date of
the Agreement, or a material loss of customers or employees by the Acquired
Corporations after the date of the Agreement, or any other change in the
business of the Acquired Corporations after the date of the Agreement, to the
extent that such decline, loss or change resulted directly from the public
announcement or pendency of the Merger, and (B) a change in the Company's stock
price. An event, violation, inaccuracy, circumstance or other matter will be
deemed to have a "Material Adverse Effect" on Parent if such event, violation,
inaccuracy, circumstance or other matter (considered together with all other
matters that would constitute exceptions to the representations and warranties
set forth in the Agreement but for the presence of "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, in such
representations
3
and warranties) had or would have a material adverse effect on the business,
condition, capitalization, assets, liabilities, operations or financial
performance of Parent and its Subsidiaries taken as a whole; PROVIDED, HOWEVER,
that in no event shall any of the following, in and of themselves, constitute a
Material Adverse Effect on Parent: (A) a material decline in revenues or net
income recorded by Parent after the date of the Agreement, or a material loss of
customers or employees by Parent after the date of the Agreement, or any other
change in the business of Parent after the date of the Agreement, to the extent
that such decline, loss or change resulted directly from the public announcement
or pendency of the Merger, and (B) a change in Parent's stock price.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the Common Stock,
$.001 par value per share, of Parent.
PARENT PREFERRED STOCK. "Parent Preferred Stock" shall mean the Preferred
Stock, $0.001 par value, of Parent.
PARENT TRIGGERING EVENT. A "Parent Triggering Event" shall be deemed to
have occurred if: (i) the board of directors of Parent shall have failed to
recommend that Parent's stockholders vote to approve the issuance of Parent
Common Stock in the Merger, or shall for any reason have withdrawn or shall have
modified in a manner adverse to the Company the Parent Board Recommendation; or
(ii) Parent shall have failed to include in the Joint Proxy Statement the Parent
Board Recommendation.
PARENT UNAUDITED INTERIM BALANCE SHEET. "Parent Unaudited Interim Balance
Sheet" shall mean the unaudited consolidated balance sheet of Parent and its
consolidated Subsidiaries as of July 31, 1999 included in the Parent SEC
Documents.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
SUBSIDIARY. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record, an
amount of voting securities of other interests in such Entity that is sufficient
to enable such Person to elect at leased a majority of the members of such
Entity's board of directors or other governing body, or (b) at least 50% of the
outstanding equity or financial interests of such Entity.
SUPERIOR OFFER. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase all of the outstanding Company
Common Stock on terms that the board of directors of the Company determines, in
its reasonable judgment, based upon a written opinion of an independent
financial advisor of nationally recognized reputation, to be more favorable to
the Company's shareholders than the terms of the Merger; PROVIDED, HOWEVER, that
any such offer shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not reasonably capable of being obtained by such third party.
4
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
5
SCHEDULE 6.7
1. Xxxxxxx X. Xxxxxxxxxx
2. Xxxxxxx X. Xxxxx
3. Xxxxx X. Challenger, Jr.
4. Xxxx-Xxxxxx Xxxxxx
5. Xxxx Xxxxxxxx
6. Xxx Xxxxxxx
7. Xxxxxx Xxxxxx
6
EXHIBIT F
1. Xxxxxxxx Xxxxx
2. Xxxxxxx X. Xxxxxxxxxx
7
