AGREEMENT AND PLAN OF MERGER
among
PLATINUM technology, inc.,
PT ACQUISITION CORPORATION I
and
MASTERING, INC.
Dated as of February 18, 1998
TABLE OF CONTENTS
1. THE MERGER......................................................... 1
1.1 The Merger.................................................... 1
1.2 Effective Time............................................... 1
1.3 Effect of the Merger......................................... 2
1.4 Name; Certificate of Incorporation; Bylaws................... 2
1.5 Directors and Officers....................................... 2
1.6 Effect on Capital Stock...................................... 2
1.7 No Dissenters' Rights........................................ 3
1.8 Surrender of Certificates.................................... 4
1.9 No Further Ownership Rights in Company Capital Stock......... 5
1.10 Lost, Stolen or Destroyed Certificates...................... 5
1.11 Tax and Accounting Consequences............................. 6
1.12 Taking of Necessary Action; Further Action.................. 6
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... 6
2.1 Organization of the Company.................................. 6
2.2 Company Capital Structure.................................... 6
2.3 Obligations With Respect to Capital Stock.................... 7
2.4 Authority; No Conflicts...................................... 8
2.5 SEC Filings; Company Financial Statements.................... 9
2.6 Absence of Certain Changes of Events......................... 10
.......................................................... 10
2.7 Liabilities.................................................. 10
2.8 Taxes........................................................ 10
2.9 Restrictions on Business Activities.......................... 12
2.10 Absence of Liens and Encumbrances........................... 12
2.11 Intellectual Property....................................... 13
2.12 Agreements, Contracts and Commitments....................... 15
2.13 No Default.................................................. 16
2.14 Governmental Authorization.................................. 16
2.15 Litigation.................................................. 17
2.16 Insurance................................................... 17
2.17 Labor Matters............................................... 17
2.18 Employee Benefits........................................... 18
2.19 Relationships with Related Persons.......................... 19
2.20 State "Anti-Takeover" Statutes.............................. 20
2.21 Pooling of Interests........................................ 20
2.22 Change of Control Payments.................................. 20
2.23 Registration Statements; Proxy Statements/Prospectus........ 20
2.24 Board Approval.............................................. 21
2.25 Fairness Opinion............................................ 21
2.26 Brokers' and Finders' Fees.................................. 21
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB................................................ 21
3.1 Organization of Parent....................................... 21
3.2 Absence of Certain Changes of Events......................... 21
(i)
3.3 Capital Structure............................................ 22
3.4 Authority; No Conflict....................................... 24
3.5 SEC Filings; Parent Financial Statements..................... 24
3.6 Pooling of Interests......................................... 25
3.7 Registration Statement; Proxy Statement/Prospectus........... 25
3.8 Board Approval............................................... 26
3.9 Fairness Opinion............................................. 26
3.10 Brokers' and Finders' Fees.................................. 26
3.12 Employee Benefits........................................... 26
3.14 Taxes....................................................... 27
3.15 Intellectual Property....................................... 28
3.16 Governmental Authorization.................................. 28
3.17 Litigation.................................................. 28
4. CONDUCT PRIOR TO THE EFFECTIVE TIME................................ 28
4.1 Conduct of Business of the Company........................... 28
4.2 Conduct by Parent............................................ 31
5. ADDITIONAL AGREEMENTS.............................................. 31
5.1 Proxy Statement/Prospectus; Registration Statement........... 31
5.2 Meeting of Stockholders...................................... 32
5.3 Access to Information; Confidentiality....................... 32
5.4 No Solicitation.............................................. 32
5.5 Expenses..................................................... 34
5.6 Break-Up Fee................................................. 34
5.7 Public Disclosure............................................ 35
5.8 Pooling Accounting........................................... 35
5.9 Auditors' Letters............................................ 35
5.10 Affiliate Agreements........................................ 36
5.11 Legal Requirements.......................................... 36
5.12 Blue Sky Laws............................................... 36
5.13 Reasonable Commercial Efforts and Further Assurances........ 36
5.14 Certain Benefit Plans....................................... 37
5.15 Tax-Free Reorganization..................................... 38
5.16 Nasdaq Listing.............................................. 38
5.17 Indemnification............................................. 38
5.18 Notification................................................ 38
5.19 Company Stock Options; Employee Stock Purchase Plan......... 38
6. CONDITIONS TO THE MERGER........................................... 39
6.1 Conditions to Obligations of Each Party to Effect the Merger. 39
6.2 Additional Conditions to Obligations of The Company.......... 40
6.3 Additional Conditions to Obligations of Parent and Merger Sub 42
7. TERMINATION, AMENDMENT AND WAIVER.................................. 46
7.1 Termination.................................................. 46
7.2 Effect of Termination........................................ 47
7.3 Notice of Termination........................................ 48
(ii)
7.4 Amendment.................................................... 48
7.5 Extension; Waiver............................................ 48
8. GENERAL PROVISIONS................................................. 48
8.1 Non-Survival of Representations and Warranties............... 48
8.2 Notices...................................................... 48
8.3 Interpretation............................................... 49
8.4 Counterparts................................................. 50
8.5 Entire Agreement............................................. 50
8.6 Severability................................................. 50
8.7 Other Remedies............................................... 50
8.8 Governing Law................................................ 50
8.9 Rules of Construction........................................ 50
8.10 Assignment.................................................. 50
(iii)
GLOSSARY OF DEFINED TERMS
"Acquiring Persons".................................................Section 2.2
"Acquisition Proposal"..............................................Section 5.4
"Affiliates".......................................................Section 5.10
"Agreement"........................................................Introduction
"Certificate of Merger".............................................Section 1.2
"Certificates"......................................................Section 1.8
"Clarification Agreements"..........................................Section 6.3
"Closing"...........................................................Section 1.2
"Closing Date"......................................................Section 1.2
"Code"................................................................Recital D
"Commercial Software"..............................................Section 2.11
"Company"..........................................................Introduction
"Company Affiliate Agreement"......................................Section 5.10
"Company Affiliate Agreements".....................................Section 5.10
"Company Balance Sheet".............................................Section 2.5
"Company Capital Stock".............................................Section 1.6
"Company Employees"................................................Section 5.14
"Company Ex-U.S. Pension Plan".....................................Section 2.18
"Company Financials"................................................Section 2.5
"Company Intellectual Property Rights".............................Section 2.11
"Company Permits"..................................................Section 2.14
"Company Plan".....................................................Section 2.18
"Company Preferred Stock"...........................................Section 2.2
(iv)
GLOSSARY OF DEFINED TERMS
"Company Right".....................................................Section 2.2
"Company Rights Agreement"..........................................Section 2.2
"Company Schedules"...................................................Section 2
"Company SEC Reports"...............................................Section 2.5
"Company Stock Option".............................................Section 5.19
"Company Stock Option Plan.........................................Section 5.19
"Company Stockholders' Meeting"....................................Section 2.23
"Confidentiality Agreements"........................................Section 5.3
"Conversion Shares".................................................Section 1.6
"Company December 31st Financials"..................................Section 2.5
"Delaware Law"......................................................Section 1.1
"Effective Time"....................................................Section 1.2
"End-User Licenses"................................................Section 2.11
"ERISA"............................................................Section 2.18
"ERISA Affiliate"..................................................Section 2.18
"Exchange Act"......................................................Section 2.4
"Exchange Agent"....................................................Section 1.8
"Exchange Ratio"....................................................Section 1.6
"Expenses"..........................................................Section 5.5
"Family"...........................................................Section 2.19
"Governmental Entity"...............................................Section 2.4
"HSR Act"...........................................................Section 2.4
"Material Adverse Effect"..................................Sections 2.6 and 3.2
"Material Contract"................................................Section 2.12
(v)
GLOSSARY OF DEFINED TERMS
"Merger"..............................................................Recital A
"Merger Sub".......................................................Introduction
"Millennial Dates".................................................Section 2.11
"Notes".............................................................Section 3.3
"Parent"...........................................................Introduction
"Parent Affiliate Agreement".......................................Section 5.10
"Parent Balance Sheet"..............................................Section 3.5
"Parent Common Stock"...............................................Section 1.6
"Parent December 31st Financials"...................................Section 3.5
"Parent Financials".................................................Section 3.5
"Parent Intellectual Property Rights"..............................Section 3.15
"Parent Permits"...................................................Section 3.16
"Parent Plan"......................................................Section 3.12
"Parent-Provided Plans"............................................Section 5.14
"Parent Rights".....................................................Section 3.3
"Parent Rights Agreement"...........................................Section 3.3
"Parent Schedules"....................................................Section 3
"Parent SEC Reports"................................................Section 3.5
"Piper Engagement Letter"..........................................Section 2.26
"Proxy Statement"..................................................Section 2.23
"Qualifying Subsequent Parent Acquisition"..........................Section 6.2
"Registration Statement"............................................Section 3.7
"Related Persons"..................................................Section 2.19
"Returns"...........................................................Section 2.8
(vi)
GLOSSARY OF DEFINED TERMS
"Rule 145".........................................................Section 5.10
"Securities Act"....................................................Section 2.4
"Series B Stock"....................................................Section 2.2
"Severance Obligations".............................................Section 6.3
"Share Value".......................................................Section 1.6
"Significant Tax Agreement".........................................Section 2.8
"Stock Option Plans"...............................................Section 5.19
"Substitute Option"................................................Section 5.19
"Superior Proposal".................................................Section 5.4
"Surviving Corporation".............................................Section 1.1
"Tax"...............................................................Section 2.8
(vii)
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of February 18, 1998 among PLATINUM technology, inc., a Delaware
corporation ("Parent"), PT Acquisition Corporation I, a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), and Mastering, Inc., a
Delaware corporation (the "Company").
RECITALS
A. The Board of Directors of each of the Company, Parent and Merger Sub
believes that it is in the best interests of each company and their respective
stockholders that the Company and Merger Sub combine into a single company
through the merger of Merger Sub with and into the Company (the "Merger") and,
in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares
of Common Stock of the Company shall be converted into shares of Common Stock of
Parent at the rate determined herein.
C. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
E. The parties intend that the Merger shall be recorded for accounting
purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the General Corporation Law of the State of Delaware
("Delaware Law"), Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing the
Certificate of Merger of Merger Sub and the Company substantially in the form of
Exhibit A attached hereto (the "Certificate of Merger")
with the Secretary of State of the State of Delaware, in accordance with the
relevant provisions of Delaware Law (the time of such filing being the
"Effective Time") as soon as practicable on or after the Closing Date (as herein
defined). The closing of the Merger (the "Closing") shall take place at the
offices of Parent at a time and date to be specified by the parties, which shall
be no later than the second business day after the satisfaction or waiver (if
permissible) of the conditions set forth in Article VI, or at such other time,
date and location as the parties hereto agree (the "Closing Date").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 NAME; CERTIFICATE OF INCORPORATION; BYLAWS.
(a) The name of the Surviving Corporation will be Mastering,
Inc.
(b) At the Effective Time, the Certificate of Incorporation of
the Company shall be restated in its entirety and shall read
substantially in the form set forth on Exhibit A to the Certificate of
Merger.
(c) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub shall be the
initial directors of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. The officers of Merger
Sub shall be the initial officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Capital Stock. Subject to the
provisions of subsections (d) and (e) of this Section 1.6, each share
of Common Stock, par value $.001 per share, of the Company (the
"Company Capital Stock") issued and outstanding immediately prior to
the Effective Time (other than any shares of Company Capital Stock to
be canceled pursuant to Section 1.6(b)) will be converted automatically
into .448 shares (the "Conversion Shares") of Common Stock, par value
$0.001 per share, of Parent (the "Parent Common Stock"). All shares of
Company Capital Stock, when converted, shall no longer be outstanding
and shall automatically be canceled and retired and each holder
2
of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive (a) any
dividends and other distributions in accordance with Section 1.8(d),
(b) certificates representing the shares of Parent Common Stock into
which such shares are converted and (c) any cash, without interest, in
lieu of fractional shares to be issued or paid in consideration
therefor upon the surrender of such certificates in accordance with
Section 1.6(e). The ratio of Conversion Shares per share of Company
Capital Stock is sometimes hereinafter referred to as the "Exchange
Ratio."
(b) Cancellation of Parent-Owned Stock. Each share of Company
Capital Stock owned by the Company, Merger Sub, Parent, or any direct
or indirect subsidiary of Parent or the Company, including without
limitation, any shares of Company Capital Stock held as treasury stock
of the Company or any direct or indirect subsidiary of the Company,
immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Capital Stock of Merger Sub. Each share of Common Stock,
par value $.01 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one (1) validly issued, fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership
of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(d) Adjustments to the Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to Parent
Common Stock, any change or conversion of Parent Common Stock into
other securities or any other dividend or distribution with respect to
Parent Common Stock (or if a record date with respect to any of the
foregoing should occur) prior to the Effective Time, appropriate and
proportionate adjustments, if any, shall be made to the Exchange Ratio,
and all references to the Exchange Ratio in this Agreement shall be
deemed to be to the Exchange Ratio as so adjusted.
(e) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each
holder of shares of Company Capital Stock who would otherwise be
entitled to a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall receive from Parent an amount of cash (rounded to
the nearest whole cent) equal to the product of (i) such fraction,
multiplied by (ii) the Share Value as of the Effective Time. For
purposes of this Agreement, the "Share Value" means, as of any date of
determination, the average of the closing (last) prices for a share of
Parent Common Stock, as reported on the Nasdaq National Market (as
reported in The Wall Street Journal, Midwest Edition), for the most
recent ten (10) days that the shares of Parent Common Stock have traded
ending on the trading day immediately prior to such date of
determination.
3
1.7 NO DISSENTERS' RIGHTS. Holders of shares of Company Capital Stock
who dissent from the Merger are not entitled to rights of appraisal under
Section 262 of the Delaware Law by virtue of Sections 262(b)(1) and (2) of the
Delaware Law.
1.8 SURRENDER OF CERTIFICATES.
(a) Exchange Agent. The Xxxxxx Trust and Savings Bank, or
another similar institution selected by Parent and reasonably
acceptable to the Company, shall act as the exchange agent (the
"Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, through such reasonable
procedures as Parent may adopt, the shares of Parent Common Stock
issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock, and cash in an amount sufficient for payment in
lieu of fractional shares pursuant to Section 1.6(e).
(c) Exchange Procedures. Promptly after the Effective Time,
the Exchange Agent shall cause to be mailed to each holder of record of
a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding shares of Company
Capital Stock whose shares were converted into shares of Parent Common
Stock pursuant to Section 1.6, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such customary form and have such
other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common
Stock into which the shares represented by the surrendered Certificate
shall have been converted at the Effective Time pursuant to this
Article I, payment in lieu of fractional shares which such holder has
the right to receive pursuant to Section 1.6 and certain dividends and
other distributions in accordance with Section 1.8(d), and the
Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding certificate that, prior to the Effective
Time, represented a share of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than
the payment of dividends or other distributions, to evidence the
ownership of the number of full shares of Parent Common Stock into
which such shares of Company Capital Stock shall have been so converted
and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of
this Agreement with respect to Parent Common Stock with a record date
after the Effective Time will be paid to the holder of any
4
unsurrendered Certificate with respect to the shares of Parent Common
Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest: (i)
at the time of such surrender or as promptly as practicable thereafter,
the amount of any dividends or other distributions theretofore paid
with respect to the shares of Parent Common Stock represented by such
new certificate and having a record date on or after the Effective Time
and a payment date prior to such surrender; (ii) at the appropriate
payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such
shares of Parent Common Stock and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender
or as promptly as practicable thereafter, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to
which such holder is entitled pursuant to Section 1.6(e).
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that the Certificate so
surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have (i)
paid to Parent or any agent designated by it any transfer or other
taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or (ii) established to the
satisfaction of Parent or any agent designated by it that such tax has
been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation
or any party hereto shall be liable to a holder of shares of Parent
Common Stock or Company Capital Stock for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat
or similar law.
1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock, cash for fractional
shares, if any, as may be required pursuant to Section 1.6 and any dividends
5
or other distributions to which the holders thereof are entitled pursuant to
Section 1.8(d); provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a customary bond in such sum as it
may reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
1.11 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and (ii) qualify for accounting treatment as a
pooling of interests.
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Surviving Corporation are fully authorized in the name of and on behalf of the
Company and Merger Sub to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject
to the exceptions disclosed in writing in the disclosure letter supplied by the
Company to Parent (the "Company Schedules") which identifies the Section numbers
hereof to which the disclosures pertain and which is dated as of the date
hereof, as set forth below.
2.1 ORGANIZATION OF THE COMPANY. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own, lease and operate its property and to
carry on its business as now being conducted, and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which such qualification is required by virtue of the nature of the activities
conducted by it, except to the extent that the failure to be so qualified and in
good standing could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company (as hereinafter defined).
The Company Schedules contain a true and complete list of all of the Company's
subsidiaries as of the date hereof and the jurisdiction of incorporation of each
subsidiary. The Company owns, directly or indirectly through one or more
subsidiaries, 100% of the capital stock of each of its subsidiaries and there
are no securities exchangeable into or exercisable for any capital stock of any
such subsidiary issued, reserved for issuance or outstanding. Except as set
forth in the Company Schedules, the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any interest in, any corporation, partnership,
joint venture or other business association or entity. The Company has delivered
or made available to Parent a true and correct copy of the Certificate of
Incorporation and Bylaws of the Company and similar governing instruments of
each of its subsidiaries, each as amended to the date hereof.
6
2.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock, $.001 par value, of which
there were 13,738,832 shares issued and outstanding as of the date hereof plus
any shares issued on the date hereof upon exercise of options outstanding on the
date hereof and 2,000,000 shares of Preferred Stock, $.001 par value ("Company
Preferred Stock"), of which 300,000 shares have been designated as Series B
Participating Preferred Stock ("Series B Stock"). No shares of the Company
Preferred Stock are issued and outstanding as of the date hereof and there will
be no such shares outstanding as of the Effective Time. The registered holders
of Company Capital Stock have the right (a "Company Right") to purchase from the
Company shares of Series B Stock. The description and terms of the Company
Rights are set forth in a Rights Agreement (the "Company Rights Agreement")
between the Company and Xxxxxx Trust and Savings Bank, as Rights Agent, a true
and correct copy of which has been delivered to Parent. On or prior to the date
hereof, the Board of Directors of the Company amended the Company Rights
Agreement to provide that the Parent and Merger Sub are not "Acquiring Persons"
as defined in the Company Rights Agreement with respect to their rights to
acquire Company Capital Stock pursuant to this Agreement. All outstanding shares
of Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement or
document to which the Company is a party or by which it is bound. As of the date
hereof, the Company had reserved 5,515,624 shares of Company Capital Stock, net
of exercises, for issuance to employees pursuant to the Company Stock Option
Plans, under which options are outstanding for 4,783,397 shares of Company
Capital Stock minus any options exercised on the date hereof. All shares of
Company Capital Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. The Company Schedules include a list for each outstanding option
as of the date hereof, of the following: (i) the name of the holder of such
option, (ii) the number of shares subject to such option, and (iii) the exercise
price of such option. No repricing of options has taken place since December 31,
1995. For the offering period ending March 31, 1998 if all current participants
continue to contribute at current levels (assuming the purchase price of such
shares to be 85% of the fair market value of the Company Capital Stock on the
first day of the current offering period), there would be an aggregate of
approximately 10,055 shares issuable pursuant to the Stock Purchase Plan and no
more than 11,000 shares are issuable for such offering period. Since December
31, 1996, there have been no changes in the capital structure of the Company
other than issuances of Company Capital Stock (i) upon the exercise of options
granted under the Company Stock Option Plans and (ii) pursuant to the Stock
Purchase Plan.
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 2.2 hereof, there are no equity securities of any class of the Company,
or any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except for securities the Company
owns, directly or indirectly through one or more subsidiaries, there are no
equity securities of any class of any subsidiary of the Company, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 2.2 hereof, except
for the vesting of options under the Company Stock Option Plans in connection
with a change in control, except for rights to purchase shares of Series B
Preferred Stock pursuant to the Company Rights Agreement all of which rights
shall expire at the Effective Time, and except for obligations of the Company
under the Stock
7
Purchase Plan, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which the Company or any of its
subsidiaries is a party or by which it is bound obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. To the knowledge of the Company,
there are no voting trusts, proxies or other agreements or understandings with
respect to the shares of capital stock of the Company. No existing rights with
respect to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of shares of Company Capital Stock, including, but not
limited to, demand rights or piggy-back registration rights, shall apply with
respect to any shares of Parent Common Stock issuable in connection with the
Merger.
2.4 AUTHORITY; NO CONFLICTS.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to obtaining
requisite stockholder approval, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the vote of the
holders of at least a majority of the Company Capital Stock voting
together as one class. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity.
(b) Except as set forth in the Company Schedules, the
execution and delivery of this Agreement by the Company does not, and
the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of
any benefit under (i) any provision of the Certificate of
Incorporation, as amended, or Bylaws, as amended, of the Company or
similar governing instruments of any of its subsidiaries or (ii) any
mortgage, indenture, lease, contract or other agreement to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or the assets of the Company or any of its
subsidiaries is bound, except for any such conflict, violation,
default, right or loss which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company, or (iii) any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable
to the Company, any of its subsidiaries or their respective properties
or assets, except for any such conflict, violation, default, right or
loss which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
(c) Except as set forth in the Company Schedules, no consent,
approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality ("Governmental
8
Entity"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby,
except (i) in connection, or in compliance, with the provisions of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended ("HSR
Act"), the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents
with the relevant authorities of other states in which the Company or
any of its subsidiaries is qualified to do business, (iii) applicable
requirements, if any, of The Nasdaq National Market and (iv) such other
consents, approvals, orders, authorizations, registrations,
declarations and filings, the failure of which to be obtained or made
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
2.5 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC since March 31, 1996. All such
required forms, reports and documents are referred to herein as the
"Company SEC Reports." As of their respective dates, the Company SEC
Reports (i) complied in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company
SEC Reports, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Except as set forth in the Company Schedules, each of the
consolidated financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports (the "Company
Financials"), including any Company SEC Reports filed after the date
hereof until the Closing, and the consolidated unaudited balance sheet
of the Company and its subsidiaries as of December 31, 1997 and the
consolidated unaudited statement of operations for the twelve month
period then ended, true and correct copies of which were delivered to
the Parent prior to the date hereof (the "Company December 31st
Financials"), (x) complies or complied, as the case may be, as to form
in all material respects with the published rules and regulations of
the SEC with respect thereto, (y) was prepared (or will be prepared, as
the case may be) in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved (except as may be indicated therein or in the notes thereto)
and (z) fairly presented (or will fairly present, as the case may be)
in all material respects the consolidated financial position of the
Company and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited financial statements do not
include footnote disclosure of the type associated with audited
financial statements and (other than the Company December 31st
Financials) were or are subject to normal and recurring year-end
9
adjustments and to any other adjustments described therein. The
consolidated unaudited balance sheet of the Company and its
subsidiaries included in the Company December 31st Financials is
hereinafter referred to as the "Company Balance Sheet."
(c) As of the date hereof, there are no material amendments or
modifications to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the
Securities Act or the Exchange Act, which have not yet been filed with
the SEC but which are required to be filed.
2.6 ABSENCE OF CERTAIN CHANGES OF EVENTS. Except as described in the
Company SEC Reports filed prior to the date hereof or the Company Schedules,
since the date of the Company Balance Sheet, except with respect to the actions
contemplated by this Agreement, each of the Company and its subsidiaries has
conducted its business only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i) any Material
Adverse Effect on the Company or any development that could reasonably be
expected to have a Material Adverse Effect on the Company; (ii) any damage,
destruction or loss (whether or not covered by insurance) on the Company or any
of its subsidiaries that has had or could reasonably be expected to have a
Material Adverse Effect on the Company; (iii) any material change by the Company
or any of its subsidiaries in its accounting methods, principles or practices;
(iv) any material revaluation by the Company or any of its subsidiaries of any
of its assets, including, without limitation, writing down the value of
capitalized software or inventory or deferred tax assets or writing off notes or
accounts receivable other than in the ordinary course of business; (v) any labor
dispute or charge of unfair labor practice, which could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company, or, to the knowledge of the Company, any activity or proceeding by a
labor union or representative thereof to organize any employee of the Company or
any of its subsidiaries or any campaign being conducted to solicit authorization
from employees to be represented by such labor union; (vi) any waiver by the
Company or any of its subsidiaries of any rights of material value; or (vii) any
other action or event that would have required the consent of the Parent
pursuant to Section 4.1 had such action or event occurred after the date of this
Agreement. In this Agreement, the term "Material Adverse Effect" used in
reference to the Company or any of its subsidiaries means any event, change or
effect materially adverse to the financial condition, assets, liabilities,
results of operations or business of the Company and its subsidiaries, taken as
a whole, other than changes resulting solely from changes in general economic or
computer industry conditions.
2.7 LIABILITIES. Except (a) for liabilities incurred in the ordinary
course of business consistent with past practice, (b) for transaction expenses
incurred in connection with this Agreement, (c) for liabilities set forth on the
balance sheet included in the Company December 31st Financials, or (d) as set
forth in the Company Schedules, since December 31, 1997, neither the Company nor
any of its subsidiaries has incurred any material liabilities that would be
required to be reflected or reserved against in a consolidated balance sheet of
the Company and its subsidiaries prepared in accordance with generally accepted
accounting principles as applied in preparing the consolidated balance sheet of
the Company and its subsidiaries as of December 31, 1997 contained in the
Company December 31st Financials.
10
2.8 TAXES.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and
foreign, taxes, assessments and other governmental charges, duties,
impositions and liabilities relating to taxes, including taxes based
upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
together with all interest, penalties and additions imposed with
respect to such amounts and including any liability for taxes of a
predecessor entity. For purposes of this Agreement, a "Significant Tax
Agreement" is any agreement to which the Company or any subsidiary of
the Company is a party under which the Company or such subsidiary could
reasonably be expected to be liable to another party under such
agreement in an amount in excess of $10,000 in respect of Taxes payable
by such other party to any taxing authority.
(b) Tax Returns and Audits. Except as set forth in the Company
Schedules:
(i) The Company and each of its subsidiaries has
timely filed all federal, state, local and foreign returns,
information statements and reports relating to Taxes
("Returns") required by applicable Tax law to be filed by the
Company and each of its subsidiaries, except for any such
failures to file that could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect on the Company. All Taxes owed by the Company or any of
its subsidiaries to a taxing authority, or for which the
Company or any of its subsidiaries is liable, whether to a
taxing authority or to other persons or entities under a
Significant Tax Agreement, as of the date hereof, have been
paid and, as of the Effective Time, will have been paid,
except for any such failure to pay that could not reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company has made
(A) accruals for Taxes on the Company Balance Sheet and (B)
with respect to periods after the date of the Company Balance
Sheet, provisions on a periodic basis consistent with past
practice on the Company's or one of its subsidiaries' books
and records or financial statements, in each case which are
adequate to cover any Tax liability of the Company and each of
its subsidiaries determined in accordance with generally
accepted accounting principles through the date of the Company
Balance Sheet or the date of the provision, as the case may
be, except where failures to make such accruals or provisions
could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
(ii) Except to the extent that any such failure to
withhold could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
the Company, the Company and each of its subsidiaries have
withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes required to be
withheld.
11
(iii) There is no Tax deficiency outstanding,
proposed or assessed against the Company or any of its
subsidiaries, except any such deficiency that, if paid, could
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. Neither
the Company nor any of its subsidiaries executed or requested
any waiver of any statute of limitations on or extending the
period for the assessment or collection of any federal or
material state Tax.
(iv) No federal or state Tax audit or other
examination of the Company or any of its subsidiaries is
presently in progress, nor has the Company or any of its
subsidiaries been notified in writing of any request for such
federal or material state Tax audit or other examination,
except in all cases for Tax audits and other examinations
which could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
(v) Neither the Company nor any of its subsidiaries
has filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(vi) Neither the Company nor any of its subsidiaries
is a party to (A) any agreement with a party other than the
Company or any of its subsidiaries providing for the
allocation or payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary
Return which Return includes or included the Company or any
subsidiary or (B) any Significant Tax Agreement other than any
Significant Tax Agreement described in (A).
(vii) Except for the group of which the Company and
its subsidiaries are now presently members, neither the
Company nor any of its subsidiaries has ever been a member of
an affiliated group of corporations within the meaning of
Sections 1504 of the Code.
(viii) Neither the Company nor any of its
subsidiaries has agreed to make nor is it required to make any
adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise provided, however,
that the Company is required to make an adjustment under
Section 481(a) of the Code by reason of change in accounting
method related to the acquisition of Graphic Media, Inc. and
the change in its accounting method from cash to accrual, and
the full amount of the adjustment (which will not exceed
$400,000 of taxable income) will be recognized by the Company
on its timely filed federal and state income tax returns for
the tax year ended December 31, 1997.
(ix) The Company is not, and has not at any time
been, a "United States Real Property Holding Corporation"
within the meaning of Section 897(c)(2) of the Code.
12
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in the
Company Schedules, there is no agreement, judgment, injunction, order or decree
binding upon the Company or its subsidiaries or their properties (including,
without limitation, their intellectual properties) which has or could reasonably
be expected to have the effect of prohibiting or materially impairing any
material acquisition of property by the Company or any of its subsidiaries or
the conduct of the business by the Company or any of its subsidiaries, including
any exclusive distribution or licensing agreements.
2.10 ABSENCE OF LIENS AND ENCUMBRANCES. Each of the Company and its
subsidiaries has good, valid, and marketable title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its properties and
assets (whether real, personal or mixed, and whether tangible or intangible),
necessary for the conduct of its business, free and clear of any liens and
encumbrances, except (i) as reflected in the Company December 31st Financials,
(ii) liens for Taxes not yet due and payable, and (iii) such liens and
encumbrances that could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
2.11 INTELLECTUAL PROPERTY.
(a) Except as disclosed in the Company Schedules, the Company
or its subsidiaries owns, or is licensed, or otherwise possesses
legally enforceable rights, to use, sell or license, as applicable, all
patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, schematics, technology, trade
secrets, know-how, computer software (in both source code and object
code form), and tangible or intangible proprietary information or
material (excluding in each case Commercial Software (as defined
below)) that are material to the business of the Company or its
subsidiaries as currently conducted (the "Company Intellectual Property
Rights"). Except as disclosed in the Company Schedules, each of the
Company and its subsidiaries has licenses for all Commercial Software
used in its business and neither the Company nor any subsidiary has any
obligation to pay fees, royalties and other amounts at any time
pursuant to any such license. "Commercial Software" means packaged
commercially available software programs generally available to the
public which have been licensed to the Company or any of its
subsidiaries pursuant to end-user licenses and which are used in the
Company's or any of its subsidiaries' respective businesses.
(b) The Company Schedules set forth a complete list of all
licenses, sublicenses and other agreements as to which the Company or
any of its subsidiaries is a party (as licensor, licensee or otherwise)
and pursuant to which the Company or any of its subsidiaries or any
other person is authorized to use, sell, or license any Company
Intellectual Property Rights (excluding object code end-user licenses
granted to end-users pursuant to the Company's standard form of
end-user license in the ordinary course of business that permit use of
software products without a right to modify, distribute or sublicense
the same ("End-User Licenses")). Neither the Company nor any of its
subsidiaries is in violation of any such license, sublicense or
agreement, except for such violations that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
13
(c) Except as disclosed in the Company Schedules, the Company
or one of its subsidiaries is the sole and exclusive owner of the
Company Intellectual Property Rights (free and clear of any liens or
encumbrances), and has sole and exclusive rights to the use and
distribution therefor or the material covered thereby in connection
with the services or products in respect of which such Company
Intellectual Property Rights are currently being used. Except as
disclosed on the Company Schedules, the Company or one of its
subsidiaries is a non-exclusive licensee as to all other Company
Intellectual Property Rights with rights to the use and distribution
therefor or the material covered thereby in connection with the
services or products in respect of which such Company Intellectual
Property Rights are currently being used. Neither the Company nor any
of its subsidiaries is contractually obligated to pay compensation to
any third party with respect to any Company Intellectual Property
Rights, except pursuant to the agreements disclosed on the Company
Schedules.
(d) Except as disclosed in the Company Schedules, neither the
Company nor any of its subsidiaries has infringed on any intellectual
property rights of any third persons, except for infringements that
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(e) Except as disclosed in the Company Schedules, no claims
with respect to the Company Intellectual Property Rights are pending
or, to the knowledge of the Company, threatened by the Company or any
third party, (i) alleging that the manufacture, sale, licensing or use
of any Company Intellectual Property Rights as now manufactured, sold,
licensed or used by the Company or any of its subsidiaries or any third
party infringes on any intellectual property rights of any third party
or the Company, (ii) against the use by the Company or any of its
subsidiaries or any third party of any technology, know-how or computer
software used in the Company's business as currently conducted or (iii)
challenging the ownership by the Company or any of its subsidiaries,
validity or effectiveness of any such Company Intellectual Property
Rights; provided, however, no disclosure pursuant to this paragraph (e)
shall be required with respect to any Company Intellectual Property
Rights which are licensed to the Company or any of its subsidiaries on
a non-exclusive basis, unless the Company has knowledge of the pending
or threatened claim and such claim, if true, could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
(f) Except as disclosed in the Company Schedules, neither the
Company nor any of its subsidiaries has entered into any agreement
under which the Company or its subsidiaries is restricted from selling,
licensing or otherwise distributing any products to any class or type
of customers, in any geographic area or during any period of time.
(g) The Company or one of its subsidiaries has taken
reasonable security measures to safeguard and maintain their respective
property rights in, all Company Intellectual Property Rights owned by
the Company or any of its subsidiaries. Except for clerical and other
lower level internal support personnel (e.g. mail room, messengers,
etc.), all officers, employees and consultants of the Company or any of
its subsidiaries have executed and delivered to the Company or one of
its subsidiaries an agreement
14
regarding the protection of proprietary information, and (i) the
assignment to the Company or one of its subsidiaries of all Company
Intellectual Property Rights arising from the services performed for
the Company or any of its subsidiaries by such persons, or (ii) the
ownership by the Company or one of its subsidiaries of all Company
Intellectual Property Rights arising from the services performed for
the Company or one of its subsidiaries by such persons. To the
knowledge of the Company, no current or prior officers, employees or
consultants of the Company or any of its subsidiaries claim, and
neither the Company nor any of its subsidiaries is aware of any grounds
to assert a claim to, any ownership interest in any Company
Intellectual Property Right as a result of having been involved in the
development of such property while employed by or consulting to the
Company or one of its subsidiaries, or otherwise.
(h) Except as disclosed in the Company Schedules, the
occurrence in or use by any computer software included in the Company
Intellectual Property Rights, of dates on or after January 1, 2000 (the
"Millennial Dates") will not adversely affect the performance of such
software with respect to date dependent data, computations, output or
other functions (including without limitation, calculating, computing
and sequencing) and such software will create, sort and generate output
data related to or including Millennial Dates without any material
errors or omissions.
(i) No government funding or university or college facilities
were used in the development of the computer software programs or
applications owned by the Company or one of its subsidiaries.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in the
Company Schedules or in the Exhibits to the Company SEC Reports filed prior to
the date of this Agreement, neither the Company nor any of its subsidiaries is a
party to nor is it or its assets bound by any Material Contract. For purposes of
this Agreement, "Material Contract" means:
(a) any collective bargaining agreements;
(b) any employment or consulting agreement, contract or
binding commitment (including royalty agreements with employees)
providing for compensation or payments in excess of $50,000 in any year
not terminable by the Company or its subsidiary on thirty days notice
without liability, except to the extent general principles of wrongful
termination or other employment law may limit the Company's or its
subsidiary's ability to terminate employees at will;
(c) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan, or stock purchase
plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated or the right to benefits will be
created, by the occurrence of any of the transactions contemplated by
this Agreement;
(d) any agreement of indemnification or guaranty not entered
into in the ordinary course of business with any party in excess of
$100,000 individually or in the
15
aggregate, and any agreement of indemnification or guarantee between
the Company or any of its subsidiaries and any of its officers or
directors, irrespective of the amount of such agreement or guarantee;
(e) Any agreement, contract or binding commitment containing
any covenant directly or indirectly limiting the freedom of the Company
or any of its subsidiaries to engage in any line of business, compete
with any person, or sell any product, or following the consummation of
the Merger would so limit Parent, the Company or any of Company's
subsidiaries;
(f) any agreement, contract or binding commitment relating to
capital expenditures and involving future obligations in excess of
$250,000;
(g) any agreement, contract or binding commitment relating to
the disposition or acquisition of assets not in the ordinary course of
business (since March 1, 1996) or any ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(h) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit (other than extensions of
credit in the ordinary course of business from vendors);
(i) any joint marketing or development agreement (including
any agreements with independent contractors);
(j) any distribution, sales representative, reseller, or
value-added reseller agreement, including in such Company Schedules an
indication of those distributors, sales representatives, resellers or
value-added resellers who have not met the quotas established in
accordance with those agreements or whose agreements are otherwise
currently terminable;
(k) other than in connection with the transactions
contemplated by this Agreement, any other agreement, contract or
binding commitment (excluding real and personal property leases) which
involves payment by the Company or any of its subsidiaries of $100,000
or more in any twelve (12) month period or $250,000 in the aggregate
and is not cancelable without penalty within thirty (30) days;
(l) any escrow agreements involving Company Intellectual
Property Rights (including source codes);
(m) any agreements to register its securities; or
(n) any other material agreements, contracts or binding
commitments.
The numerical thresholds set forth in this Section 2.12 shall not be deemed in
any respects to define materiality for other purposes of this Agreement.
16
2.13 NO DEFAULT. Neither the Company nor any of its subsidiaries has
breached, or received in writing any claim or threat that it has breached, in
any material respect, any Material Contract. Each Material Contract that has not
expired or been terminated in accordance with its terms is in full force and
effect, except for such Material Contracts for which the failure to be in full
force and effect could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
2.14 GOVERNMENTAL AUTHORIZATION. Each of the Company and its
subsidiaries holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to the operation of
its business as currently conducted (the "Company Permits"). Neither the Company
nor any of its subsidiaries is in violation of the terms of the Company Permits,
except for violations which could not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
business of the Company and its subsidiaries is not being, and the business of
the Company and its subsidiaries (and any prior subsidiaries (but only with
respect to the period prior to the disposition of such subsidiary)) currently or
previously conducted has not been, conducted in violation of any law, ordinance
or regulation of any Governmental Entity, except for violations which could not
be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. No material investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened.
2.15 LITIGATION. Except as disclosed in the Company Schedules or in the
Company SEC Reports filed prior to the date of this Agreement, there is no suit,
action, arbitration, demand, claim or proceeding pending, or, to the knowledge
of the Company, threatened against the Company or any of its subsidiaries,
except for suits, actions, arbitrations, demands, claims and proceedings which
could not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company; nor is there any material judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries. The Company has made
available to Parent or its counsel correct and complete copies of all
correspondence prepared by its counsel for the Company's auditors in connection
with the last two completed audits of the Company's financial statements and any
such correspondence since the date of the last such audit.
2.16 INSURANCE. Other than with respect to directors and officers
insurance and errors and omissions insurance, the Company and each of its
subsidiaries maintains in full force and effect insurance on its assets and its
business and operations against loss or damage, risks, hazards, and liabilities
of any kinds on and in the amounts customarily insured against by corporations
engaged in the same or similar businesses.
2.17 LABOR MATTERS. Each of the Company and its subsidiaries has
complied with all applicable laws, and there is no allegation, charge or
complaint or proceeding pending or, to the Company's knowledge, threatened
against the Company, its subsidiaries or any of their officers, directors or
employees, relating to the employment of labor, including with respect to
employment, equal employment opportunity, discrimination, harassment,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and other taxes, workers compensation or long term disability,
except, in each case, for any such non-compliance,
17
allegations, charges, complaints or proceedings which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. Except as disclosed in the Company Schedules, there has never been,
there is not presently pending or existing, and to the Company's knowledge there
is not threatened, any labor arbitration, or proceeding in respect of the
grievance of any employee, or other labor dispute against or affecting the
Company or any of its subsidiaries, except, in each case, for any of the
foregoing which could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, or, to the knowledge of the
Company, any strike, slowdown, picketing, work stoppage, organizational activity
or application or complaint filed by an employee or union with the National
Labor Relations Board or any comparable governmental authority. No application
for certification of a collective bargaining agent is pending or, to the
Company's knowledge, threatened. There is no lockout of any employees by the
Company or any of its subsidiaries, and no such action is contemplated by the
Company or any of its subsidiaries. As of the date hereof, neither the Company
nor any of its subsidiaries has given to or received from any current officer or
director of the Company or any of its subsidiaries or any current instructor for
the Company's or any of its subsidiaries' instructor-led training seminars,
written notice of termination of employment or has the knowledge that any such
officer, director or instructor intends to terminate such employment.
2.18 EMPLOYEE BENEFITS.
(a) The Company Schedules contain a list of each Company Plan
(as hereinafter defined) maintained by the Company or any of its
subsidiaries. With respect to each Company Plan, the Company has
delivered to Parent prior to the date hereof, to the extent applicable,
a true and correct copy of (i) such Company Plan and all amendments
thereto, (ii) each trust agreement, insurance contract or
administration agreement relating to such Company Plan, (iii) the most
recent summary plan description for each Company Plan for which a
summary plan description is required, (iv) the most recent annual
report (Form 5500) filed with the IRS, (v) the most recent actuarial
report or valuation relating to a Company Plan subject to Title IV of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (vi) the most recent determination letter, if any, issued by
the IRS with respect to any Company Plan intended to be qualified under
section 401(a) of the Code, (vii) any request for a determination
currently pending before the IRS and (viii) all correspondence with the
IRS, the Department of Labor or the Pension Benefit Guaranty
Corporation relating to any outstanding controversy. Except as set
forth on the Company Schedules and except as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company, (i) each Company Plan complies with ERISA, the
Code and all other applicable statutes and governmental rules and
regulations, (ii) no "reportable event" (within the meaning of Section
4043 of ERISA) has occurred within the past three years with respect to
any Company Plan which is likely to result in liability to the Company
and (iii) no action has been taken, or is currently being considered,
to terminate any Company Plan subject to Title IV of ERISA. At no time
has the Company or any of its ERISA Affiliates (as hereinafter defined)
been required to contribute to, or otherwise had any liability with
respect to, a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
18
(b) There has been no failure to make any contribution or pay
any amount due to any Company Plan as required by Section 412 of the
Code, Section 302 of ERISA, or the terms of any such Plan, and no
Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived.
(c) To the knowledge of the Company, there are no actions,
suits or claims pending or threatened (other than routine claims for
benefits) with respect to any Company Plan which could reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its ERISA
Affiliates has incurred or would reasonably be expected to incur any
material liability under or pursuant to Title IV of ERISA, including,
without limitation, any material liability in the event of the
involuntary termination of any Company Plan subject to Title IV of
ERISA. No prohibited transactions described in Section 406 of ERISA or
Section 4975 of the Code have occurred which would reasonably be
expected to result in material liability to the Company or its
subsidiaries. All Company Plans that are intended to be qualified under
Section 401(a) of the Code have been determined by the IRS to be so
qualified, and there is no reason why any Company Plan is not so
qualified in operation. Neither the Company nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan to
provide life insurance or medical benefits after termination of
employment to any employee or dependent other than as required by Part
6 of Title I of ERISA or as disclosed in the Company Schedules.
(d) As used herein, (i) "Company Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, vacation, severance, death benefit,
insurance or other plan, arrangement or understanding, in each case
established, maintained or contributed to by the Company or any of its
ERISA Affiliates or as to which the Company or any of its ERISA
Affiliates or otherwise may have any liability and (ii) with respect to
any person, "ERISA Affiliate" means any trade or business (whether or
not incorporated) which is under common control or would be considered
a single employer with such person pursuant to Section 414(b), (c), (m)
or (o) of the Code and the regulations promulgated under those sections
or pursuant to Section 4001(b) of ERISA and the regulations promulgated
thereunder.
(e) The Company Schedules contain a list of each Company
Ex-U.S. Pension Plan and the Company has made available to Parent prior
to the date hereof a copy of any written plan document with respect
thereto. Except for non-compliance that could not reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect on the Company, each such plan has been maintained in compliance
with all applicable laws, orders and regulations, and the fair market
value of the assets of each such plan which is intended to be a funded
plan or arrangement equals or exceeds the value of the accrued
benefits. "Company Ex-U.S. Pension Plan" shall mean any arrangement
providing retirement pension benefits that is established or maintained
by the Company or
19
any of its subsidiaries exclusively for the benefit of employees who
are or were employed outside the United States.
(f) The Company Schedules contain a list, as of the date of
this Agreement, of all (i) severance and employment agreements with
officers and employees of the Company and each ERISA Affiliate, (ii)
severance plans, programs and policies of the Company with or relating
to its employees and (iii) plans, programs, agreements and other
arrangements of the Company with or relating to its employees which
contain change of control or similar provisions. The Company has
provided to Parent a true and complete copy of each of the foregoing.
2.19 RELATIONSHIPS WITH RELATED PERSONS. Except as disclosed in the
Company SEC Reports filed prior to the date hereof and except as set forth on
the Company Schedules, there are no, and since January 1, 1997 have not been
any, undischarged contracts or agreements or other material transactions between
the Company or any of its subsidiaries, on the one hand, and any director or
executive officer of the Company or any of their respective Related Persons (as
defined below), on the other hand, and no director or executive officer of the
Company or any of their respective Related Persons have any interest in any of
the assets of the Company or any of its subsidiaries. For purposes hereof, the
term "Related Persons" shall mean: (a) each other member of such individual's
Family and (b) any person or entity that is directly or indirectly controlled by
any one or more members of such individual's Family. For purposes of this
definition, the "Family" of an individual includes (i) such individual, (ii) the
individual's spouse, (iii) any lineal descendant of such individual, or (iv) a
trust for the benefit of the foregoing.
2.20 STATE "ANTI-TAKEOVER" STATUTES. Neither Section 203 of Delaware
law nor any other "fair price" or "control share acquisition" statute or other
similar statute or regulation will apply to the Merger or this Agreement or the
transactions contemplated hereby.
2.21 POOLING OF INTERESTS. To the knowledge of the Company, based on
consultation with its independent accountants, neither the Company nor its
directors, officers or stockholders has taken any action which would preclude
(i) Parent's ability to account for the Merger as a pooling of interests or (ii)
Parent's, Surviving Corporation's or the Company's ability to continue to
account for as a pooling of interests any past acquisition by the Company
currently accounted for as a pooling of interests.
2.22 CHANGE OF CONTROL PAYMENTS. Except as set forth on the Company
Schedules, except for the acceleration of vesting of outstanding stock options
in accordance with the terms of the Company Stock Option Plans, except for
employment agreements with directors and officers entered into before the date
of this Agreement and filed with the SEC and except as contemplated by this
Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or employee
of the Company or any of its subsidiaries from the Company or any of its
subsidiaries, under any Company Employee Benefit Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any Company Employee
Benefit Plan,
20
(iii) result in the acceleration of the time of payment or vesting of any such
benefits or (iv) create a right to receive payments upon a subsequent
termination of employment.
2.23 REGISTRATION STATEMENTS; PROXY STATEMENTS/PROSPECTUS. The
information supplied by the Company for inclusion in the Registration Statement
(as defined in Section 3.7) shall not at the time the Registration Statement is
filed with the SEC and 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 not misleading. The information supplied by or concerning the
Company for inclusion in the proxy statement/prospectus to be sent to the
stockholders of the Company in connection with the meeting of the Company's
stockholders to consider the Merger (the "Company Stockholders' Meeting") (such
proxy statement/prospectus as amended or supplemented is referred to herein as
the "Proxy Statement") shall not, on the date the Proxy Statement is first
mailed to the Company's stockholders, at the time of the Company Stockholders'
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading. The Proxy Statement will
comply (with respect to the Company) as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder. If
at any time prior to the Effective Time any event relating to the Company or any
of its affiliates, officers or directors should be discovered by the Company
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform Parent.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by or concerning Parent or Merger Sub
which is contained in any of the foregoing documents.
2.24 BOARD APPROVAL. The Board of Directors of the Company, has, on or
prior to the date hereof, approved this Agreement and the Merger.
2.25 FAIRNESS OPINION. The Company has received a written opinion from
Xxxxx Xxxxxxx Inc. dated as of the date hereof, that the Exchange Ratio
contemplated by this Agreement is fair to the Company's stockholders from a
financial point of view and has delivered to Parent a copy of such opinion.
2.26 BROKERS' AND FINDERS' FEES. Neither the Company nor any of its
subsidiaries has incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby, except for a fee due to Xxxxx Xxxxxxx Inc. at the Effective Time
pursuant to an agreement, a copy of which has been provided to Parent (the
"Piper Engagement Letter").
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions specifically disclosed in the disclosure letter supplied by
Parent to the Company (the "Parent Schedules") and dated as of the date hereof
as follows:
21
3.1 ORGANIZATION OF PARENT. Each of Parent and its material
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, lease and operate its property and to carry on its
business as now being conducted, and is duly qualified to do business and in
good standing as a foreign corporation in each jurisdiction in which such
qualification is required by virtue of the nature of activities conducted by it,
except to the extent that the failure to be so qualified and in good standing
could not reasonably be expected to have, individual or in the aggregate, a
Material Adverse Effect on Parent. Parent has delivered or made available a true
and correct copy of the Certificate of Incorporation and Bylaws or other charter
documents of Parent, each as amended to date, to counsel for the Company.
3.2 ABSENCE OF CERTAIN CHANGES OF EVENTS. Except as described in the
Parent SEC Reports (as hereinafter defined) filed prior to the date hereof,
since the date of the Parent Balance Sheet (as hereinafter defined), except with
respect to the actions contemplated by this Agreement, the Parent has conducted
its business only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any Material Adverse
Effect on the Parent or any development that could reasonably be expected to
have a Material Adverse Effect on the Parent; (ii) any damage, destruction or
loss (whether or not covered by insurance) on the Parent or any of its material
subsidiaries that has had or could reasonably be expected to have a Material
Adverse Effect on the Parent; (iii) any material change by the Parent or any of
its material subsidiaries in its accounting methods, principles or practices;
(iv) any material revaluation by the Parent or any of its material subsidiaries
of any of its assets, including, without limitation, writing down the value of
capitalized software or inventory or deferred tax assets or writing off notes or
accounts receivable other than in the ordinary course of business; (v) any labor
dispute or charge of unfair labor practice which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent, any activity or proceeding by a labor union or representative thereof to
organize any employee of the Parent or any of its material subsidiaries or any
campaign being conducted to solicit authorization from employees to be
represented by such labor union; or (vi) any waiver by the Parent of any rights
of material value. In this Agreement, the term "Material Adverse Effect" used in
reference to the Parent and its subsidiaries means any event, change or effect
materially adverse to the financial condition, assets, liabilities, results of
operations or business of the Parent and its subsidiaries, taken as a whole,
other than changes resulting solely from changes in general economic or computer
industry conditions.
3.3 CAPITAL STRUCTURE.
(a) The authorized capital stock of Parent consists of
180,000,000 shares of Common Stock, $.001 par value, as of the date
hereof, of which 64,009,818 shares were issued and outstanding as of
February 13, 1998 plus any shares issued on such date upon exercise of
options outstanding on such date and 10,000,000 shares of Class II
Preferred Stock, $.01 par value, 1,000,000 shares of which (subject to
adjustment upward or downward by the Parent's Board of Directors) have
been designated Series A Junior Participating Preferred Stock and
1,775,000 of which (subject to adjustment upward or downward in
accordance with the Parent's Certificate of Incorporation, as amended)
have been designated as Class II Series B Preferred Stock. No shares of
the Series A Junior
22
Participating Preferred Stock are issued or outstanding as of the date
hereof. The shares of Parent Common Stock to be issued pursuant to the
Merger and upon the exercise of Substitute Options will include a
corresponding number of rights (such rights being hereinafter referred
to collectively as "Parent Rights") to purchase shares of Series A
Junior Participating Stock pursuant to the Rights Agreement dated as of
December 21, 1995 (the "Parent Rights Agreement") between Parent and
Xxxxxx Trust and Savings Bank, as Rights Agent. The authorized capital
stock of Merger Sub consists of 1,000 shares of Common Stock, $.01 par
value, 1,000 shares of which are issued and outstanding and held by
Parent. A total of 1,768,421 shares of Class II Series B Preferred
Stock are issued and outstanding as of the date hereof. All of the
foregoing shares have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof.
The registered holders of Parent Common Stock have Parent Rights,
pursuant to the Parent Rights Agreement. The description and terms of
the Parent Rights are set forth in the Parent Rights Agreement. As of
the date hereof, Parent has also reserved (i) 864,850 shares of Common
Stock for issuance to the Parent's officers, directors, employees or
independent contractors or affiliates thereof under the Parent's 1989
Stock Option Plan, (ii) 115,000 shares of Common Stock for issuance to
the Chief Executive Officer of the Parent under the Parent's Chief
Executive Officer Stock Option Plan, (iii) 2,475,706 shares of Common
Stock for issuance to the Parent's officers, directors, employees or
independent contractors or affiliates thereof under the Parent's 1991
Stock Option Plan, (iv) 498,000 shares of its Common Stock for issuance
to non-employee directors of the Parent under the Parent's Directors'
Stock Option Plan, (v) 1,000,000 shares of its Common Stock for
issuance to officers, directors, employees, independent contractors or
other service providers of the Parent under the 1994 Stock Incentive
Plan, (vi) 8,030,251 shares of its Common Stock for issuance to
officers, directors, employees, independent contractors or other
service providers of the Parent under the Parent's 1995 Employee
Incentive Compensation Plan, (vii) 1,768,421 shares (subject to
adjustment upward or downward) of its Common Stock for issuance upon
conversion of outstanding shares of Class II Series B Preferred Stock,
(viii) 8,243,010 shares of Common Stock for issuance upon the election
by the holders of 6.75% Convertible Subordinated Notes to convert such
notes into shares of Common Stock as provided therein and (ix)
4,160,600 shares of Common Stock for issuance upon the election by the
holders of 6.25% Convertible Subordinated Notes to convert such notes
into shares of Common Stock as provided therein. As of December 31,
1997, of the 13,474,659 shares of Parent Common Stock reserved for
issuance upon exercise of options therefor, 11,861,865 shares remained
subject to outstanding options and 1,612,794 shares were reserved for
future grant. In addition, pursuant to Parent's Employee Stock Purchase
Plan, 300,000 shares of Parent's Common Stock will be issuable to the
participants therein for the offering period ending February 28, 1998,
provided that all participants continue to contribute at current levels
(assuming the purchase price of such shares to be 85% of the fair
market value of Parent's Common Stock on the first day of the current
offering period). In addition, as of the date hereof, there are
outstanding (A) $115,000,000 (aggregate principal amount) of 6 3/4%
Convertible Subordinated Notes Due 2001 (the "Notes"), which Notes are
(i) convertible at the option of the holder into shares of Parent
Common Stock at any time prior to maturity at a conversion price of
$13.95 per share
23
(equivalent to a conversion rate of 71.685 shares per $1,000 principal
amount of Notes), (ii) redeemable at the option of Parent at any time
after November 15, 1999 and (iii) mature on November 15, 2001, and (B)
$150,000,000 (aggregate principal amount) of 6.25% Convertible
Subordinated Notes Due 2002, which (i) are redeemable at the option of
the Purchaser at any time after December 15, 2000 and (ii) mature on
December 15, 2002. Except as set forth in the Parent Schedules and for
shares of Parent Capital Stock issuable in connection with business
combinations or acquisitions of technology pursuant to agreements
entered into after the date hereof, there are no other equity
securities, options, warrants, calls, rights, commitments or agreements
of any character to which Parent is a party or by which it is bound
obligating Parent to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of Parent or obligating Parent to grant,
extend or enter into any such equity security, option, warrant, call,
right, commitment or agreement.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger and upon exercise of Substitute Options will, upon issuance,
be duly authorized, validly issued, fully paid and non-assessable.
3.4 AUTHORITY; NO CONFLICT.
(a) Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and
binding obligations of Parent and Merger Sub, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity.
(b) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of
a benefit under (i) any provision of the Certificate of Incorporation
or Bylaws of Parent or Merger Sub or (ii) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent, any of its subsidiaries or
their respective properties or assets other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations
which could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or materially impair the
ability of Parent to consummate the transactions contemplated hereby.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Parent and Merger Sub and their
respective subsidiaries in connection with the execution and delivery
of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger
24
Sub of the transactions contemplated hereby, except for (i) the filing
of a pre-merger notification report under the HSR Act, (ii) the filing
of the Form S-4 Registration Statement with the SEC, (iii) the filing
of the Certificate of Merger with the Delaware Secretary of State, (iv)
the filing of a Form 8-K with the SEC, (v) listing of the shares on the
Nasdaq National Market, and (vi) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or materially impair the
ability of Parent to consummate the transactions contemplated hereby.
3.5 SEC FILINGS; PARENT FINANCIAL STATEMENTS
(a) Parent has filed all forms, reports and documents required
to be filed with the SEC since January 1, 1996. All such required
forms, reports and documents are referred to herein as the "Parent SEC
Reports." As of their respective dates, the Parent SEC Reports (i)
complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Parent SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of
Parent's subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the Parent SEC
Reports (the "Parent Financials"), including any Parent SEC Reports
filed after the date hereof until the Closing and the consolidated
unaudited balance sheet of the Parent and its subsidiaries as of
December 31, 1997 and the consolidated unaudited statement of
operations and cash flow for the twelve month period then ended, true
and correct copies of which were delivered to the Company (the "Parent
December 31st Financials"), (i) complies, or complied, as the case may
be, as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, (ii) was prepared (or will
be prepared) in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and (iii)
fairly presented (or will fairly present) in all material respects the
consolidated financial position of Parent and its subsidiaries as at
the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements do not include footnote
disclosure of the type associated with audited financial statements and
(other than the Parent December 31st Financials) were or are subject to
normal and recurring year-end adjustments and to any other adjustments
described therein. The consolidated unaudited balance sheet of Parent
and its subsidiaries included in the Parent December 31st Financials is
hereinafter referred to as the "Parent Balance Sheet."
(c) Except as set forth on the Parent Schedules, there are no
material amendments or modifications to agreements, documents or other
instruments which previously had been
25
filed by Parent with the SEC pursuant to the Securities Act or the
Exchange Act, which have not yet been filed with the SEC but which are
required to be filed.
3.6 POOLING OF INTERESTS. To the Parent's knowledge, based on
consultation with its independent accountants, neither the Parent nor its
directors, officers or stockholders nor any of its subsidiaries has taken any
action which would preclude (i) the Parent's ability to account for the Merger
as a pooling of interests or (ii) the Parent's or the Surviving Corporation's
ability to continue to account for as a pooling of interests any past
acquisitions by Parent or the Company currently accounted for as a pooling of
interests.
3.7 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Other than with
respect to the information supplied by the Company, the registration statement
on Form S-4 (or such other or successor form as shall be appropriate) (including
any amendments or supplements thereto, the "Registration Statement"), pursuant
to which the shares of Parent Common Stock to be issued in the Merger will be
registered with the SEC shall not, at the time the Registration Statement is
filed with the SEC and 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 necessary in order to make the statements included therein not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to
stockholders, at the time of the Company Stockholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not false or misleading. The Proxy Statement will comply (with respect to
information relating to Parent or Merger Sub) as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any event relating to
Parent, Merger Sub or any of their respective affiliates, officers or directors
should be discovered by Parent or Merger Sub which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Parent or Merger Sub will promptly inform the Company. Notwithstanding the
foregoing, Parent and Merger Sub make no representation or warranty with respect
to any information supplied by the Company which is contained in any of the
foregoing documents.
3.8 BOARD APPROVAL. The Board of Directors of Parent has, as of the
date hereof, approved this Agreement and the Merger.
3.9 FAIRNESS OPINION. Parent has received a written opinion from
Xxxxxxxxx Xxxxxx & Xxxxxxxx Securities Corporation, dated as of the date hereof,
that the Exchange Ratio is fair to Parent from a financial point of view, and
has delivered to the Company a copy of such opinion.
3.10 BROKERS' AND FINDERS' FEES. Parent has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Merger or any transaction contemplated hereby, except for a fee due to
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation at the Effective Time.
3.11 OPERATIONS OF MERGER SUB. Merger Sub is a direct, wholly-owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby,
26
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
3.12 EMPLOYEE BENEFITS.
(a) Except as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent,
(i) each Parent Plan complies with ERISA, the Code and all other
applicable statutes and governmental rules and regulations and (ii)
there has been no failure to make any contribution or pay any amount
due to any Parent Plan as required by Section 412 of the Code or
Section 302 of ERISA and no Parent Plan, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived.
(b) To the knowledge of Parent, there are no actions, suits or
claims pending or threatened (other than routine claims for benefits)
with respect to any Parent Plan which would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
Parent. Neither Parent nor any of its ERISA Affiliates has incurred or
would reasonably be expected to incur any material liability under or
pursuant to Title IV of ERISA. No prohibited transactions described in
Section 406 of ERISA or Section 4975 of the Code have occurred which
could reasonably be expected to result in material liability to Parent
or its subsidiaries.
(c) As used herein, "Parent Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any bonus, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, vacation, severance, death benefit,
insurance or other plan, arrangement or understanding, in each case
established, maintained or contributed to by Parent or any of its ERISA
Affiliates or as to which Parent or any of its ERISA Affiliates or
otherwise may have any material liability.
3.13 LIABILITIES. Except (a) for liabilities incurred in the ordinary
course of business consistent with past practice, (b) for liabilities set forth
on the balance sheet included in the Parent December 31st Financials, (c) as set
forth in Parent and Merger Sub Schedules or (d) other liabilities that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent, since December 31, 1997, none of Parent, Merger Sub or
any of Parent's subsidiaries has incurred any liabilities that would be required
to be reflected or reserved against in a consolidated balance sheet of Parent
and its subsidiaries prepared in accordance with generally accepted accounting
principles as applied in preparing the consolidated balance sheet of Parent and
its subsidiaries as of December 31, 1997 contained in the Parent December 31st
Financials.
3.14 TAXES. Except as set forth in Parent and Merger Sub Schedules:
(a) Parent and each of its subsidiaries has timely filed all
Returns required by applicable Tax law to be filed by Parent and each
of its subsidiaries, except where any such failure to file that could
not reasonably be expected to have, individually or in the
27
aggregate, a Material Adverse Effect on Parent. All Taxes imposed on
Parent or any of its subsidiaries by a taxing authority or for which
Parent or any of its subsidiaries is or could be liable, whether to a
taxing authority or to other persons or entities, to the extent
required to be paid by Parent or any of its subsidiaries have been
paid, except for any such failure to pay that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
(b) Except to the extent that any such failure to withhold
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent, as of the Effective
Time, Parent and each of its subsidiaries, will have withheld with
respect to its employees all federal and state taxes, FICA, FUTA and
other Taxes required to be withheld.
(c) There is no Tax deficiency outstanding, proposed or
assessed against Parent or any of its subsidiaries, except any
deficiency that, if paid, could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.
3.15 INTELLECTUAL PROPERTY. Parent and its subsidiaries have all
patents, trademarks, trade names, service marks, trade secrets, copyrights and
other proprietary Parent intellectual property rights (collectively, "Parent
Intellectual Property Rights") as are necessary in connection with the business
of Parent and its subsidiaries, taken as a whole, except where the failure to
have such Intellectual Property Rights could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. Neither
Parent nor any of its subsidiaries has infringed any Intellectual Property
Rights of any third party, other than any infringements that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
3.16 GOVERNMENTAL AUTHORIZATION. Parent and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of their businesses as
currently conducted (the "Parent Permits") except where the failure to hold such
Permits could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent. Neither Parent nor any of its
subsidiaries is in violation of the terms of the Parent Permits, except for
violations which could not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent. The business of Parent and
its subsidiaries is not being and the business of Parent and its subsidiaries
(and any prior subsidiaries (but only with resect to the period prior to the
disposition of such subsidiary)) currently or previously conducted has not been,
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for violations which could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. No
material investigation or review by any Governmental Entity with respect to
Parent or any of its subsidiaries is pending or threatened.
3.17 LITIGATION. Except as disclosed in Parent Schedules or in Parent
SEC Reports filed prior to the date of this Agreement, there is no suit, action,
arbitration, demand, claim or proceeding pending or, to the knowledge of Parent,
threatened against Parent or any of its
28
subsidiaries, except for suits, actions, arbitrations, demands, claims and
proceedings which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent; nor is there any material
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any of its subsidiaries.
4. CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the Effective Time, the Company (which for
the purposes of this Section 4.1 shall include the Company and each of its
subsidiaries) agrees, except to the extent that Parent shall otherwise consent
in writing (which consent shall not be unreasonably withheld or delayed), to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, to timely pay its debts and Taxes,
subject to good faith disputes over such debts or taxes, and on the same payment
terms such debts and taxes have historically been paid, to collect its
receivables in the same manner and on the same terms such receivables have
historically been collected, to timely pay or perform other material obligations
when due, and to use all commercially reasonable efforts consistent with past
practices and policies to preserve intact the Company's present business
organizations, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with the Company, to
the end that the Company's goodwill and ongoing businesses be unimpaired at the
Effective Time. The Company shall promptly notify Parent of any event or
occurrence not in the ordinary course of business of the Company. Except as
expressly provided for by this Agreement or as set forth on the Company
Schedules, the Company shall not, prior to the Effective Time or earlier
termination of this Agreement pursuant to its terms, without the prior written
consent of Parent (which consent shall not be unreasonably withheld or delayed):
(a) Except as required by the Company's benefit plans and
agreements, accelerate, amend or change the period of exercisability of
options or restricted stock, or reprice options granted under the
Company Stock Option Plans or authorize cash payments in exchange for
any options granted under any of such plans;
(b) Enter into any partnership agreements, joint development
agreements or strategic alliance agreements;
(c) Except as required by the Company Plans, grant any
severance or termination pay (i) to any executive officer or (ii) to
any other employee except payments made in connection with the
termination of employees who are not executive officers in amounts
consistent with Parent's policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to Parent or pursuant to
written agreements consistent with the Company's past agreements under
similar circumstances;
29
(d) Other than in the ordinary course of business, transfer or
license to any person or entity or otherwise extend, amend or modify
any rights to the Company Intellectual Property Rights (including
rights to resell or relicense the Company Intellectual Property Rights)
or enter into grants to future patent rights, other than the Company's
standard forms of End-User Licenses entered into in the ordinary course
of business consistent with past practices;
(e) Commence any litigation other than (i) for the routine
collection of bills, (ii) for software piracy, or (iii) in such cases
where the Company in good faith determines that failure to commence
suit would result in the material impairment of a valuable aspect of
the Company's business, provided that Parent consults with the Company
prior to the filing of such a suit (except that the Company shall not
require the approval of, and shall not be required to consult with,
Parent with respect to any claim, suit or proceeding by the Company
against Parent or any of its affiliates);
(f) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of
its capital stock, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock
of the Company;
(g) Repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock;
(h) Issue, deliver or sell or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any
class or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
other convertible securities, other than (i) the issuance of shares of
Company Capital Stock pursuant to the exercise of Company stock options
or warrants therefor outstanding as of the date of this Agreement, (ii)
up to 11,000 shares of Company Capital Stock issuable to participants
in the Stock Purchase Plan consistent with the terms of that Plan,
(iii) shares of Company Capital Stock issuable pursuant to the Company
Rights Agreement, and (iv) options to purchase up to 100,000 shares of
Company Capital Stock granted to non-executive officers of the Company
in the ordinary course of business, provided such options vest
proportionately over a four year period, do not vest upon the
consummation of the Merger or any of the transactions contemplated
hereby and have an exercise price equal to the market value of the
Company Common Stock on the date of grant;
(i) Cause, permit or propose any amendments to the Company's
Certificate of Incorporation or Bylaws, or amend any Material Contract;
(j) Sell, lease, license, encumber or otherwise dispose of any
of the Company's properties or assets which are material, individually
or in the aggregate, to the business of the Company, except in the
ordinary course of business consistent with past practice;
30
(k) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit
facilities in the ordinary course of business) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights
to acquire debt securities of the Company or guarantee any debt
securities of others;
(l) Except as required by law, adopt or amend any Company Plan
or increase the salaries or wage rates of any of its employees (except
for wage increases in the ordinary course of business and consistent
with past practices), including but not limited to (but without
limiting the generality of the foregoing), the adoption or amendment of
any stock purchase or option plan, the entering into of any employment
contract or the payment of any special bonus or special remuneration to
any director or employee, other than bonuses reflected on the balance
sheet included in the December 31st Financials and bonuses payable in
the ordinary course of business pursuant to the provisions contained in
the Company Schedules;
(m) Revalue any of the Company's assets, including without
limitation writing down the value of inventory, writing off notes or
accounts receivable other than in the ordinary course of business
consistent with past practice or waive any right of material value;
(n) Pay, discharge or satisfy in an amount in excess of
$100,000 (in any one case) or $250,000 (in the aggregate), any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), including, without limitation, under any
employment contract or with respect to any bonus or special
remuneration, other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities of the type reflected or
reserved against in the Company Financials (or the notes thereto);
(o) Except as required by applicable Tax law, make or change
any material election in respect of Taxes, adopt or change in any
material respect any accounting method in respect of Taxes, file any
material Return or any amendment to a material Return, enter into any
closing agreement, settle any claim or assessment in respect of Taxes
(except settlements effected solely through payment of immaterial sums
of money), or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes;
(p) Intentionally take any action, including the acceleration
of vesting (except as contemplated under the Company Stock Option
Plans) of any options, warrants, restricted stock or other rights to
acquire shares of the Company's Capital Stock, which would be
reasonably likely to interfere with Parent's ability to account for the
Merger as a pooling of interests; or
(q) Take, or agree in writing or otherwise to take, any of the
actions described in Section 4.1(a) through (p) above, or any action
which would cause or would be reasonably likely to cause any of the
conditions to the Merger set forth in Sections 6.1 or 6.3, not to be
satisfied.
31
4.2 CONDUCT BY PARENT. Except as expressly provided for by this
Agreement, Parent shall not, prior to the Effective Time or earlier termination
of this Agreement pursuant to its terms, without the prior written consent of
the Company (which consent shall not be unreasonably withheld or delayed), adopt
any amendments to its Certificate of Incorporation, or take any other action
requiring a vote of the holders of Parent Common Stock, which would materially
adversely affect the terms and provisions of the Parent Common Stock or take, or
agree in writing or otherwise to take, any of the foregoing actions.
5. ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, Parent and the Company shall
prepare, and file with the SEC, the Proxy Statement and Parent shall prepare and
file with the SEC the Registration Statement in which the Proxy Statement will
be included as a prospectus. Each of the Parent and Company shall use its
reasonable best efforts to have the Registration Statement declared effective as
soon thereafter as practicable; provided, however, that Parent shall have no
obligation to agree to account for the Merger as a "purchase" in order to cause
the Registration Statement to become effective. The Proxy Statement shall
include the fairness opinion of Xxxxx Xxxxxxx Inc. referred to in Section 2.25.
The Proxy Statement shall also include the recommendation of the Board of
Directors of the Company in favor of the Merger which shall not be withdrawn,
modified or withheld except in compliance with the fiduciary duties of the
Company's Board under applicable law, subject to Section 5.4(c).
5.2 MEETING OF STOCKHOLDERS. Promptly after the date hereof, and
subject to the fiduciary duties of the Board of Directors of the Company under
applicable law and also subject to Section 5.4(c), the Company shall take all
action necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders' Meeting to be held
as promptly as practicable for the purpose of voting upon this Agreement and the
Merger.
5.3 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Each party shall afford the other party and its
accountants, counsel and other representatives reasonable access during
normal business hours during the period prior to the Effective Time to
all information concerning the business, including the status of
product development efforts, properties and personnel of such party as
the other party may reasonably request. No information or knowledge
obtained in any investigation pursuant to this Section 5.3 shall affect
or be deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to consummate the
Merger.
(b) The parties acknowledge that Parent and the Company have
previously executed Confidentiality Agreements (the "Confidentiality
Agreements"), which Confidentiality Agreements shall continue in full
force and effect in accordance with their respective terms and which
Confidentiality Agreements shall be applicable to any
information obtained pursuant to Section 5.3(a).
32
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the
Effective Time or the earlier termination of this Agreement in
accordance with its terms, the Company and its subsidiaries will not,
and will not permit their respective directors, officers, investment
bankers and affiliates to, and will use their best efforts to cause
their respective employees, representatives and other agents not to,
directly or indirectly, (i) solicit or knowingly encourage submission
of any inquiries, proposals or offers by, (ii) participate in any
negotiations with, (iii) afford any access to the properties, books or
records of the Company or any of its subsidiaries to, or (iv) otherwise
knowingly assist, facilitate or encourage, or enter into any agreement
or understanding with, any person, entity or group (other than Parent,
Merger Sub and their affiliates, agents and representatives), in
connection with any Acquisition Proposal. For the purposes of this
Agreement, an "Acquisition Proposal" shall mean any proposal relating
to the possible acquisition of the Company, whether by way of merger,
purchase of capital stock of the Company representing 25% or more of
the voting power or equity of the Company, purchase of all or
substantially all of the assets of the Company and its subsidiaries,
taken as a whole, or otherwise. In addition, subject to the Company's
rights under paragraph (c) hereof, from and after the date of this
Agreement until the Effective Time or the earlier termination of this
Agreement in accordance with its terms, the Company and its
subsidiaries will not, and will not permit their respective directors,
officers, investment bankers and affiliates to, and will use their best
efforts to cause their respective employees, representatives and other
agents not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition
Proposal made by any person, entity or group (other than Parent and/or
Merger Sub). The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Notwithstanding the provisions of paragraph (a) above,
prior to the approval of this Agreement and the Merger by the
stockholders of the Company at the Company Stockholders' Meeting,
nothing contained in this Agreement shall prevent the Company from
furnishing information concerning the Company and its business,
properties and assets (but not encouraging the request for such
information) to, and participating in any negotiations or discussions
with, any third party, provided that (i) such third party has made an
Acquisition Proposal, or indicated an interest in making an Acquisition
Proposal, and the Board of Directors of the Company determines, in its
good faith reasonable judgment, that such Acquisition Proposal, if
consummated, is reasonably likely to constitute a Superior Proposal (as
hereinafter defined), (ii) the Company notifies Parent within 24 hours
of any disclosure of non-public information to any such third party,
with a description of the information to be disclosed, and (iii) the
Company provides such non-public information pursuant to a
confidentiality agreement at least as restrictive as the
Confidentiality Agreement. Notwithstanding the foregoing, the Company
may not provide any non-public information to any third party if it has
not provided such information to Parent or Parent's representatives.
"Superior Proposal" shall mean a bona fide Acquisition Proposal which
the Board of Directors of the Company in its good faith reasonable
judgment determines, after consultation with its independent financial
advisor, to be more favorable to the stockholders of the Company from a
financial point of view than the Merger and for which financing, to
33
the extent required, is then committed or which, in the good faith
reasonable judgment of the Board of Directors of the Company (based
upon the advice of its independent financial advisor), is reasonably
capable of being financed by such person, entity or group and which is
likely to be consummated.
(c) In the event the Company receives a Superior Proposal,
nothing contained in this Agreement shall prevent the Board of
Directors of the Company from accepting or approving such Superior
Proposal and nothing contained in this Agreement shall prevent the
Board of Directors of the Company and its directors, officers,
employees, representatives, investment bankers, agents or affiliates
from recommending such Superior Proposal to the Company's stockholders;
in such case, the Board may amend, withhold or withdraw its
recommendation of the Merger, decline to hold the Company Stockholders'
Meeting or exercise its termination rights hereunder. Subject to the
right of termination set forth in Section 7.1(f), except to the extent
expressly set forth in this Section 5.4, nothing shall relieve the
Company from complying with all other terms of this Agreement. Nothing
contained in this paragraph (c) shall affect Parent's right to
terminate this Agreement pursuant to Section 7.1 or the Company's
obligations under Sections 5.5(c) and 5.6.
(d) The Company will (i) notify Parent within 24 hours if any
proposal is made or any information or access is requested in
connection with an Acquisition Proposal and (ii) within 24 hours
communicate to Parent the principal terms and conditions of any such
Acquisition Proposal or potential Acquisition Proposal or inquiry (but
not the identity of the offeror or potential offeror) and a list and
description of any information provided to the offeror or potential
offeror.
(e) Nothing contained in this Section 5.4 shall prevent the
Company or its Board of Directors from complying with the provisions of
Rule 14e-2 and 14d-9 promulgated under the Exchange Act.
5.5 EXPENSES.
(a) Except as set forth in this Section 5.5, all fees and
expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated.
(b) In connection with any claim, dispute, disagreement or
other conflict involving the enforcement of this Article V, the parties
agree that the prevailing party shall be reimbursed by the other party
for all reasonable attorneys' fees and costs and expenses associated
with such conflict.
(c) If this Agreement is terminated pursuant to Section 7.1(e)
because the Merger has not been consummated as a result of the failure
to satisfy the condition set forth in Section 6.3(k), then the Company
shall pay, or reimburse Parent, for all Expenses (as hereinafter
defined), provided that Parent is not then in material breach of the
terms of this Agreement.
34
5.6 BREAK-UP FEE.
(a) If this Agreement is terminated pursuant to Section
7.1(b)(ii), 7.1(b)(iii), or 7.1(c)(iii), then, provided that Parent is
not then in material breach of the terms of this Agreement, the Company
shall pay to Parent, within five (5) business days following Parent's
written request, therefor the aggregate sum of $1,000,000 plus Expenses
(as hereinafter defined) by wire transfer of immediately available
funds to an account designated by Parent. In addition, if (i) within
nine months after such termination, the Company or any of its
subsidiaries enters into a definitive agreement for the consummation of
an Acquisition Proposal with a person or entity who had made an
Acquisition Proposal or indicated an interest in making an Acquisition
Proposal after the date of this Agreement but prior to the termination
of this Agreement or (ii) within six months after such termination, the
Company or any of its subsidiaries enters into an definitive agreement
for the consummation of an Acquisition Proposal with any person or
entity, then the Company shall pay to Parent, within five (5)
businesses days following Parent's written request therefor, $3,000,000
by wire transfer of immediately available funds to an account
designated by Parent, provided that Parent is not then in material
breach of the terms of this Agreement. "Expenses" shall mean all of the
reasonable out- of-pocket expenses of Parent, including but not limited
to attorneys' fees, accounting fees, financial printer fees, filing
fees and fees and expenses of financial advisors, in each case incurred
in connection with this Agreement and the Merger, provided, however,
that Parent shall have provided reasonable supporting documentation
(such as invoices and receipts) to the Company for such Expenses; and
provided further, that in no event shall the aggregate amount of
Expenses payable by the Company pursuant to this Section 5.6 or Section
5.5(c) exceed $1,500,000.
(b) If this Agreement is terminated pursuant to Section 7.1(f)
hereto, then, provided that Parent is not then in material breach of
the terms of this Agreement, the Company shall pay to Parent, prior to
the termination of this Agreement pursuant to Section 7.1(f), the
aggregate sum of $4,000,000 plus Expenses by wire transfer of
immediately available funds to an account designated by Parent. Under
no circumstances shall the Company be required to pay to Parent more
than the aggregate of $4,000,000 plus Expenses pursuant to this Section
5.6. The foregoing sentence shall not limit in any manner Parent's
remedies for a breach by the Company of this Agreement.
5.7 PUBLIC DISCLOSURE. Parent and the Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange or the Nasdaq National Market.
5.8 POOLING ACCOUNTING. Parent and the Company shall each use its
reasonable commercial efforts to cause the business combination to be effected
by the Merger to be accounted for as a pooling of interests. Each of Parent and
the Company shall use its reasonable commercial efforts to cause its Affiliates
(as defined in Section 5.10) not to take any action that would
35
adversely affect the ability of Parent to account for the business combination
to be effected by the Merger as a pooling of interests.
5.9 AUDITORS' LETTERS. The Company shall use its reasonable commercial
efforts to cause to be delivered to the Company (with a copy to Parent) a letter
of Xxxxxx Xxxxxxxx LLP, independent auditors to the Company, dated a date within
two business days before the date on which the Registration Statement becomes
effective, in form and substance reasonably satisfactory to Parent and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement. The Parent shall use its reasonable commercial efforts to cause to be
delivered to Parent (with a copy to the Company) a letter of KPMG Peat Marwick
LLP, independent auditors to the Parent, dated a date within two business days
before the date on which the Registration Statement becomes effective, in form
and substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
5.10 AFFILIATE AGREEMENTS. Set forth respectively in Parent's Schedules
and the Company's Schedules is a list of those persons who are, in Parent's or
the Company's reasonable judgment, as the case may be, "Affiliates" of Parent or
the Company, as the case may be, within the meaning of Rule 145 (each such
person who is an "affiliate" of Parent or the Company within the meaning of Rule
145 is referred to as an "Affiliate") promulgated under the Securities Act
("Rule 145"). Each of Parent and the Company shall provide the other such
information and documents as the other shall reasonably request for purposes of
reviewing such list. The Company shall use its reasonable commercial efforts to
deliver or cause to be delivered to Parent, within thirty (30) days after the
date hereof, from each of the Affiliates of the Company, an executed Affiliate
Agreement in the form attached hereto as Exhibit B (each, a "Company Affiliate
Agreement" and, collectively, the "Company Affiliate Agreements"). Parent shall
use its reasonable best efforts to deliver or cause to be delivered to the
Company, within thirty (30) days after the date hereof, an Affiliate Agreement,
executed by each of the Affiliates of Parent, in the form attached hereto as
Exhibit C (the "Parent Affiliate Agreement"). Parent shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock to be
received by such Affiliates of the Company pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, consistent with the terms of the Company
Affiliate Agreements.
5.11 LEGAL REQUIREMENTS. Each of Parent, Merger Sub and the Company
will take all reasonable actions necessary or desirable to comply promptly with
all legal requirements which may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement (including
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any Governmental Entity, and prompt resolution of
any litigation prompted hereby) and will promptly cooperate with and furnish
information to any party hereto necessary in connection with any such
requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement, and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other public or private third
36
party required to be obtained or made in connection with the Merger or taking of
any action contemplated by this Agreement.
5.12 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Parent Common Stock pursuant hereto. The Company
shall use its reasonable commercial efforts to assist Parent as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
5.13 REASONABLE COMMERCIAL EFFORTS AND FURTHER ASSURANCES.
(a) Subject to the exercise of the Company's rights under
Section 5.4 hereof, each of the parties to this Agreement shall each
use its reasonable commercial efforts to effectuate the transactions
contemplated hereby as expeditiously as reasonably practicable and to
fulfill and cause to be fulfilled the conditions to closing under this
Agreement (including resolution of any litigation prompted hereby).
Subject to the exercise of the Company's rights under Section 5.4
hereof, each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of the transactions contemplated
hereby.
(b) If requested by Parent to deliver the Clarification
Agreements (as hereinafter defined) contemplated by Section 6.3(k), the
Company shall consult with Parent and shall use its best efforts to
negotiate agreements for delivery of the Clarification Agreements that
are on terms most favorable to Parent and the Company after the Merger.
If the Company negotiates any agreements that require it to waive or
modify its existing rights to future contingent payments (provided such
agreement does not require the Company or any subsidiary to pay any
other amounts) in order to obtain any Clarification Agreement
contemplated by Section 6.3(k), Parent will either (a) consent to such
agreement and waive the requirement of Section 6.3(k)(ii) or (b) waive
the condition in Sections 6.3(k)(i) and (ii).
5.14 CERTAIN BENEFIT PLANS.
(a) Parent agrees that it will cause the Surviving Corporation
from and after the Effective Time to honor all Company Plans and all
employment agreements entered into by the Company prior to the date
hereof; provided, however, that nothing in this Agreement shall be
interpreted as limiting the power of Parent or the Surviving
Corporation to amend or terminate any Company Plan or any other
individual employee benefit plan, program, agreement or policy or as
requiring Parent or the Surviving Corporation to offer to continue
(other than as required by its terms) any written employment contract.
As soon as administratively practicable following the Effective Time,
Parent shall cause all employees of the Company and its subsidiaries
then actually at work ("Company Employees") to be covered under
employee benefit and fringe benefit plans, programs, policies and
arrangements that are substantially the same as the employee
37
benefit plans, programs, policies and arrangements that Parent
maintains for similarly situated employees of Parent ("Parent-Provided
Plans").
(b) All service of a Company Employee taken into account prior
to the Effective Time under any Company Plan shall, on and after the
Effective Time, be taken into account as service with the Parent or any
of its subsidiaries (as applicable) for purposes of eligibility to
participate and vesting and accrual of benefits under any similar
Parent-Provided Plan; provided, however, that a Company Employee's
service prior to the Effective Time shall not be taken into account as
service for purposes of the accrual of benefits under any defined
benefit pension plan maintained by Parent or any of its subsidiaries on
or after the Effective Time. Parent shall cause all Parent-Provided
Plans to (i) waive any pre-existing condition limitations otherwise
applicable on and after the Effective Time to the extent that such
conditions are covered under Company Plans immediately prior to the
Effective Time and (ii) provide that any expenses incurred by Company
Employees (and their dependents) during the plan year within which the
Effective Time occurs shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions (and like adjustments or limitations on coverage) under the
Parent-Provided Plans. Any salary reduction elections of Company
Employees under a flexible spending plan maintained by the Company
pursuant to section 125 of the Code prior to the Effective Time shall
continue in effect under any similar Parent-Provided Plan on and after
the Effective Time, and any amounts credited and debited to accounts of
such employees under such Company Plan as of the Effective Time shall
be credited and debited to such employees' accounts under such
Parent-Provided Plan.
5.15 TAX-FREE REORGANIZATION. Parent and the Company shall each use
reasonable commercial efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code.
5.16 NASDAQ LISTING. Parent agrees to authorize for listing on the
Nasdaq National Market the shares of Parent Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger, upon
official notice of issuance.
5.17 INDEMNIFICATION. From and after the Effective Time, Parent shall,
and shall cause the Surviving Corporation to, indemnify, defend and hold
harmless (and advance expenses to) all past and present officers, directors and
employees of the Company and of its subsidiaries to the same extent such persons
are indemnified as of the date of this Agreement by the Company pursuant to any
agreements between the Company and any such person and the Company's Restated
Certificate of Incorporation and By-Laws, for acts or omissions occurring at or
prior to the Effective Time. In the event of any dispute regarding whether a
director, officer or employee has met the standards of conduct set forth
therein, such question shall be conclusively determined by the written opinion
of reputable disinterested legal counsel selected by the Company's Board of
Directors. Any heirs or legal representatives entitled to the benefits of such
indemnification shall be deemed express third party beneficiaries of this
Section 5.17.
38
5.18 NOTIFICATION. Between the date of this Agreement and the Effective
Time, each party will promptly notify the other party in writing if such party
becomes aware of any fact or condition that causes or constitutes a breach of
any of such party's representations and warranties as of the date of this
Agreement, or if such party becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would cause or constitute a breach
of any such representation or warranty had such representation or warranty been
made as of the time of occurrence or discovery of such fact or condition.
5.19 COMPANY STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN.
(a) Not later than the Effective Time, each option to purchase
Company Capital Stock ("Company Stock Option") which is outstanding
immediately prior to the Effective Time pursuant to the Company's stock
option plans (other than any "stock purchase plan" within the meaning
of Section 423 of the Code) in effect on the date hereof (the "Company
Stock Option Plans") shall become and represent an option to purchase
the number of shares of Parent Common Stock (a "Substitute Option")
(decreased to the nearest full share) determined by multiplying (i) the
number of shares of Company Capital Stock subject to such Company Stock
Option immediately prior to the Effective Time by (ii) the Exchange
Ratio, at an exercise price per share of Parent Common Stock (rounded
up to the nearest tenth of a cent) equal to the exercise price per
share of Company Capital Stock immediately prior to the Effective Time
divided by the Exchange Ratio. Parent shall pay cash to holders of
Company Stock Options in lieu of issuing fractional shares of Parent
Common Stock upon the exercise of Substitute Options for shares of
Parent Common Stock, unless in the judgment of Parent such payment
would adversely affect the ability to account for the Merger under the
pooling of interests method. After the Effective Time, except as
provided above in this Section 5.19, each Substitute Option shall be
exercisable upon the same terms and conditions as were applicable under
the related Company Stock Option immediately prior to the Effective
Time (including that all such Substitute Options shall be immediately
exercisable pursuant to the terms of such Stock Option Plan). The
Company agrees that it will not grant any stock appreciation rights or
limited stock appreciation rights and will not permit cash payments to
holders of Company Stock Options in lieu of the substitution therefor
of Substitute Options, as described in this Section 5.19.
(b) The Company shall not commence any "offering periods"
under its Amended and Restated Employee Stock Purchase Plan (the "Stock
Purchase Plan") after March 31, 1998, shall apply all amounts deducted
and withheld thereunder to purchase shares of the Company Capital Stock
in accordance with the provisions thereof, and shall terminate the
Stock Purchase Plan as of the Effective Time. Parent shall have no
obligation or duty in respect of the Stock Purchase Plan or the rights
granted thereunder.
6. CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
39
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote under applicable
law of the stockholders of the Company.
(b) Registration Statement Effective. The SEC shall have
declared the Registration Statement effective. No stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Proxy Statement, shall have been
initiated or threatened in writing by the SEC; and all requests for
additional information on the part of the SEC shall have been complied
with to the reasonable satisfaction of the parties hereto.
(c) No Injunctions. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in
effect.
(d) HSR Act. Any applicable waiting period under the HSR Act
shall have expired or been terminated.
(e) Opinion of Accountants. (i) Xxxxxx Xxxxxxxx LLP shall have
delivered a letter to the Company, in form and substance reasonably
satisfactory to the Company and Parent, that the Company is an entity
that can participate in a merger that qualifies for pooling of interest
accounting treatment under Accounting Principles Board Opinion No. 16,
and (ii) KPMG Peat Marwick LLP shall have delivered a letter to Parent,
in form and substance reasonably satisfactory to Parent, that the
Merger will qualify for pooling of interests accounting treatment under
Accounting Principles Board Opinion No. 16 if consummated in accordance
with this Agreement.
(f) Nasdaq Listing. The shares of Parent Common Stock issuable
to stockholders of the Company pursuant to this Agreement and such
other shares required to be reserved for issuance in connection with
the Merger (including the Substitute Options) shall have been
authorized for listing on the Nasdaq National Market upon official
notice of issuance.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
40
(a) Representations and Warranties.
(i) The representations and warranties of Parent and
Merger Sub contained in this Agreement that are qualified by
materiality shall be true and correct as of the Effective
Time, as if made on and as of the Effective Time, and the
representations and warranties of Parent and Merger Sub
contained in this Agreement that are not so qualified shall be
true and correct in all material respects as of the Effective
Time, as if made on and as of the Effective Time, except in
each case for those representations and warranties which
address matters only as of a particular date (which shall
remain true and correct as of such date).
(ii) All representations and warranties of Parent and
Merger Sub (without taking into account any qualifications for
materiality or Material Adverse Effect on Parent) shall be
true and correct in all respects as if made on and as of the
Effective Time, except for (A) those representations and
warranties which address matters only as of a particular date
(which shall remain true and correct as of such date) and (B)
such exceptions that in the aggregate do not have a Material
Adverse Effect on Parent or a material adverse effect on the
Parent's or Merger Sub's ability to consummate the Merger.
(iii)The Company shall have received a certificate to
the foregoing effect signed on behalf of Parent by the
President and Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all materials respect with all agreements and
covenants required by this Agreement to be performed or complied with
by them on or prior to the Effective Time, and the Company shall have
received a certificate to the foregoing effect signed by the President
and Chief Financial Officer of Parent.
(c) Tax Opinion. The Company shall have received a tax opinion
from Sidley & Austin, legal counsel to the Company, in form and
substance reasonably satisfactory to the Company, dated the Effective
Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are
consistent with the state of facts existing as of the Effective Time,
for federal income tax purposes:
(i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Merger Sub and Parent will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Parent,
Merger Sub or the Company as a result of the Merger;
(iii)no gain or loss will be recognized by the
stockholders of the Company upon the exchange of their Company
Capital Stock solely for shares of Parent Common Stock
pursuant to the Merger, except with respect to cash, if any,
received in lieu of fractional shares of Parent Common Stock;
41
(iv) the aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for Company Capital
Stock pursuant to the Merger (including fractional shares of
Parent Common Stock for which cash is received) will be the
same as the aggregate tax basis of the Company Capital Stock
exchanged therefor;
(v) the holding period for shares of Parent Common
Stock received solely in exchange for Company Capital Stock
pursuant to the Merger will include the holding period of the
Company Capital Stock exchanged therefor, provided such
Company Capital Stock was held as a capital asset by the
stockholder at the Effective Time; and
(vi) a stockholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will
recognize gain or loss equal to the difference, if any,
between such stockholder's tax basis in such fractional share
(as described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, Sidley & Austin may receive and rely upon
representations contained in a certificate of the Company substantially
in the form of the Company Tax Certificate attached to the Company
Schedules, a certificate of Parent substantially in the form of the
Parent Tax Certificate attached to the Parent Schedules and
representations contained in other appropriate certificates of the
Company, Parent and others.
(d) Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect on Parent.
(e) Affiliate Agreements. Each of the parties identified by
Parent pursuant to Section 5.10 hereof as being an Affiliate of Parent
shall have executed, and Parent shall have delivered to the Company,
the Parent Affiliate Agreement which shall be in full force and effect.
(f) Governmental Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with any
Governmental Entity required by or with respect to the Company, Parent
or any of their respective subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby shall have been obtained or made,
except for such consents, approvals, orders, authorizations,
registrations, declarations or filings the failure to obtain or make
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or Material Adverse
Effect on the Parent or materially impair the Company's ability to
consummate the Merger.
(g) Fairness Opinion. If between the date of this Agreement
and the Effective Time, Parent or any of its subsidiaries shall enter
into a definitive agreement relating to a possible acquisition by it of
another business entity (whether by way of merger, purchase of capital
stock or assets or otherwise) for an equity value at the date of
execution in excess of $200 Million (a "Qualifying Subsequent Parent
Acquisition"), then the obligations of
42
the Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Effective Time (or such earlier date selected by the
Company subsequent to its being informed of the Qualifying Subsequent
Parent Acquisition) of the following additional condition, which may be
waived, in writing, exclusively by the Company. The Company shall have
received a written opinion from Xxxxx Xxxxxxx Inc. dated as of the
Effective Time (or such earlier date selected by the Company subsequent
to its being informed of the Qualifying Subsequent Parent Acquisition)
that, after taking into account the Qualifying Subsequent Parent
Acquisition, the Exchange Ratio contemplated by this Agreement is fair
to the Company's stockholders from a financial point of view.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties.
(i) The representations and warranties of the Company
contained in this Agreement that are qualified by materiality
shall be true and correct as of the Effective Time, as if made
on and as of the Effective Time, and the representations and
warranties of the Company contained in this Agreement that are
not so qualified shall be true and correct in all material
respects as of the Effective Time, as if made on and as of the
Effective Time, except in each case for those representations
and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date).
(ii) All representations and warranties of the
Company (without taking into account any qualifications for
materiality or Material Adverse Effect on the Company) shall
be true and correct in all respects as if made on and as of
the Effective Time, except for (A) those representations and
warranties which address matters only as of a particular date
(which shall remain true and correct as of such date) and (B)
such exceptions that in the aggregate do not have a Material
Adverse Effect on the Company or a material adverse effect on
the Company's ability to consummate the Merger.
(iii)Parent and Merger Sub shall have received a
certificate to the foregoing effect signed on behalf of the
Company by the President and Chief Financial Officer of the
Company.
(b) Agreement and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and the Parent and Merger Sub shall have
received a certificate to the foregoing effect signed by the President
and Chief Financial Officer of the Company.
43
(c) Third Party Consents. Parent shall have received all
written consents, assignments, waivers, authorizations or other
certificates necessary to provide for the continuation in full force
and effect of any and all material contracts and leases of the Company
and for the Company to consummate the transactions contemplated hereby,
except where the failure to receive such consents, assignments,
waivers, authorizations or certificates could not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(d) Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect on the
Company.
(e) Affiliate Agreements. Each of the parties identified by
the Company pursuant to Section 5.10 hereof as being an Affiliate of
the Company shall have delivered to Parent an executed Company
Affiliate Agreement which shall be in full force and effect.
(f) Non-Competition/Non-Solicitation Agreement. Each of
Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxx Xxxxxx and Xxxx Xxxxxxxx
shall have executed, and the Company shall have delivered to the
Parent, a Non-Competition/Non-Solicitation Agreement in substantially
the form attached hereto as Exhibit D.
(g) Rights Plan. The Company Rights Agreement shall have been
amended to provide for the expiration of all outstanding Company Rights
prior to the Effective Time, all outstanding Company Rights under the
Company Rights Agreement shall expire in accordance with the provisions
of the Company Rights Agreement, as so amended, no Company Rights shall
have been triggered prior to such expiration and no shares of Company
Capital Stock or Preferred Stock shall have been issued or issuable
with respect to Company Rights.
(h) Transaction Expenses. The Company shall have delivered to
Parent evidence reasonably acceptable to Parent that the Company and
its subsidiaries have not incurred costs and expenses in excess of
$800,000 in the aggregate (or $2,000,000, in the aggregate, in the
event that (i) a third party commences a hostile tender or exchange
offer for the Company that the board of directors of the Company
determines to contest, (ii) a third party commences litigation
challenging the Merger or (iii) there shall have occurred an unexpected
development (other than the analysis, negotiation or pursuit of an
Acquisition Proposal from a third party (except for the defense of an
offer as set forth in (i) above)) which has prevented the parties from
consummating the Merger at the time that similar transactions would
customarily be expected to close) for the costs and expenses of
lawyers, accountants, investment bankers, other consultants and
representatives and the costs and expenses of the printing and mailing
of the finished Proxy Statement to the Company's stockholders, in
connection with the preparation, negotiation and execution of this
Agreement and the completion of the transactions contemplated hereby,
but excluding the fees and expenses of Xxxxx Xxxxxxx Inc. pursuant to
the Piper Engagement Letter.
(i) Severance Agreements. Each of Xxxxxxx X. Xxxxxxx, Xxxxxx
X. Xxxxxxx and Xxxx Xxxxx shall have delivered to Parent evidence that
all severance, change-of-
44
control or similar arrangements or agreements pursuant to which the
Company or any of its subsidiaries is obligated to make payments to
Xxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx or Xxxx Xxxxx, respectively, upon
a change-of-control or termination of employment following a
change-of-control or otherwise shall have been terminated as of the
Effective Time.
(j) Governmental Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with any
Governmental Entity required by or with respect to the Company, Parent
or any of their respective subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby shall have been obtained or made,
except for such consents, approvals, orders, authorizations,
registrations, declarations or filings the failure to obtain or make
could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or Material Adverse
Effect on the Parent or materially impair the Parent's or Merger Sub's
ability to consummate the Merger.
(k) Existing Non-Competition Agreements. If requested by
Parent, (i) the Company shall have delivered to Parent agreements in
form and substance reasonably acceptable to the Company and Parent and
duly executed by the parties to such agreements, clarifying certain
non-competition covenants or agreements to which the Company or one of
its subsidiaries is a party or by which it is bound ("Clarification
Agreements") and (ii) neither the Company nor any of its subsidiaries
shall have paid, or agreed to pay, any amounts to obtain any such
Clarification Agreements.
(l) First Quarter Results. The Company's consolidated revenue
for the three- month period ending March 31, 1998 (as set forth in its
earnings release for such period) shall equal or exceed $10,640,000 (as
determined in accordance with generally accepted accounting principles
(including principles of materiality) applied on a basis consistent
with the principles applied in preparing the Company December 31st
Financials)
(m) Tax Opinion. Parent shall have received a tax opinion from
Xxxxxx Xxxxxx & Zavis, legal counsel to Parent, in form and substance
reasonably satisfactory to Parent, dated the Effective Time,
substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that are
consistent with the state of facts existing as of the Effective Time,
for federal income tax purposes:
(i) the Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Merger Sub and Parent will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Parent,
Merger Sub or the Company as a result of the Merger;
(iii)no gain or loss will be recognized by the
stockholders of the Company upon the exchange of their Company
Capital Stock solely for shares of Parent Common Stock
pursuant to the
45
Merger, except with respect to cash, if any, received in lieu
of fractional shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for Company Capital
Stock pursuant to the Merger (including fractional shares of
Parent Common Stock for which cash is received) will be the
same as the aggregate tax basis of the Company Capital Stock
exchanged therefor;
(v) the holding period for shares of Parent Common
Stock received solely in exchange for Company Capital Stock
pursuant to the Merger will include the holding period of the
Company Capital Stock exchanged therefor, provided such
Company Capital Stock was held as a capital asset by the
stockholder at the Effective Time; and
(vi) a stockholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will
recognize gain or loss equal to the difference, if any,
between such stockholder's tax basis in such fractional share
(as described in clause (iv) above) and the amount of cash
received.
In rendering such opinion, Xxxxxx Xxxxxx & Xxxxx may receive and rely
upon representations contained in a certificate of the Company
substantially in the form of the Company Tax Certificate attached to
the Company Schedules, a certificate of Parent substantially in the
form of the Parent Tax Certificate attached to the Parent Schedules and
representations contained in other appropriate certificates of the
Company, Parent and others.
(n) Assumption of Chicago Lease. Xxxxxxx X. Xxxxxxx shall have
subleased from the Company all real property leased by the Company at
000 X. Xxxxxxxx xx Xxxxxxx, Xxxxxxxx and assumed all obligations of the
Company to be performed after the Effective Time under such lease,
which sublease and assumption shall be in form and substance reasonably
acceptable to Parent.
7. TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent if:
(i) there has been a material breach of any
representation, warranty, covenant or agreement contained in
this Agreement on the part of the Company and such breach has
not been cured within ten (10) business days after written
notice to the Company (provided, that Parent is not in
material breach of the terms of this
46
Agreement; and provided further, that no cure period shall be
required for a breach which by its nature cannot be cured)
such that the conditions set forth in Section 6.3(a) or
Section 6.3(b), as the case may be, will not be satisfied,
(ii) the Board of Directors of the Company adversely
amends, withholds or withdraws its recommendation of the
Merger or the Merger is not submitted to the Company's
stockholders as contemplated by this Agreement (provided that
Parent is not in material breach of the terms of this
Agreement and this Agreement has not otherwise been terminated
pursuant to this Section 7.1), or
(iii) the Company's stockholders do not approve the
Merger at the Company Stockholders' Meeting;
(c) by the Company if:
(i) there has been a material breach of any
representation, warranty, covenant or agreement contained in
this Agreement on the part of the Parent or Merger Sub and
such breach has not been cured within ten (10) business days
after written notice to the Parent (provided, that the Company
is not in material breach of the terms of this Agreement; and
provided further, that no cure period shall be required for a
breach which by its nature cannot be cured) such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as
the case may be, will not be satisfied,
(ii) the Share Value at any time from and after the
date on which the Registration Statement is declared effective
and prior to the date of the Company Stockholder's Meeting is
less than $22.50,
(iii) the Company's stockholders do not approve the
Merger at the Company Stockholders' Meeting, or
(iv) Parent adopts a plan of complete or partial
liquidation or dissolution or a plan of merger or
consolidation in which Parent would become a subsidiary of any
other person;
(d) by any party hereto if: (i) there shall be a final,
non-appealable order of a Federal or state court in effect preventing
consummation of the Merger; or (ii) there shall be any final action
taken, or any statute, rule, regulation or order enacted, promulgated
or issued and deemed applicable to the Merger by any Governmental
Entity which would make consummation of the Merger illegal or which
would prohibit Parent's ownership or operation of all or a material
portion of the business of the Company, or compel Parent to dispose of
or hold separate all or a material portion of the business or assets of
the Company or Parent as a result of the Merger;
(e) by any party hereto if the Merger shall not have been
consummated by July 31, 1998 (provided that if the Merger shall not
have been consummated solely due to
47
the waiting period, or any extension thereof, under the HSR Act not
having expired or been terminated, then such date shall be extended to
August 31, 1998); provided, further, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available to any party
whose willful failure to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date.
(f) by any party if the Board of Directors of the Company
accepts or approves a Superior Proposal, or recommends a Superior
Proposal to the stockholders of the Company; provided that the Company
shall provide to Parent three (3) business days' prior written notice
that the Company may accept or approve a Superior Proposal.
7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided
in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub,
the Company or their respective officers, directors, stockholders or
affiliates, except to the extent that such termination results from the
breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement, and, provided that
the provisions of Sections 5.3(b), 5.5, and 5.6 and Article VIII of
this Agreement shall remain in full force and effect and survive any
termination of this Agreement. The exercise by either party of a
termination right pursuant to Section 7.1 shall not be deemed a breach
of any provision of this Agreement.
(b) Any termination of this Agreement by the Company pursuant
to Section 7.1(f) hereof shall be of no force or effect unless prior to
such termination the Company shall have paid to Parent the sum as
prescribed by Section 5.6.
7.3 NOTICE OF TERMINATION. Subject to Section 7.2(b), any termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
7.4 AMENDMENT. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
48
8. GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Effective Time other than
the Parent Tax Certificates and the Company Tax Certificates referred to herein.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
PLATINUM technology, inc.
0000 Xxxxx Xxxxxx Xxxx
Xxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx,
Xxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to the Company, to:
Mastering, Inc.
0000 Xxxx Xxxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxx
Xxxx Xxxxx
Telecopy No.: (000) 000-0000
49
with a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Xxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
8.3 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include", "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity. References in this Agreement to "knowledge" shall mean the
knowledge of the officers and directors of the Company or Parent, as the case
may be.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein, including the Company Schedules and the Parent Schedules (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, it being understood
that the Confidentiality Agreement shall continue in full force and effect until
the Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except with respect to Sections 5.14 and 5.17.
8.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other
50
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the State of Delaware, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the State of Delaware for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the parties.
51
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
PLATINUM technology, inc. MASTERING, INC.
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxx Xxxxx
----------------------------- ------------------------------
Name: Xxxxx X. Xxxxxxxx Name: Xxxx Xxxxx
--------------------------- ---------------------------
Title: Senior Vice President and Title: Executive Vice President
-------------------------- --------------------------
General Counsel and Chief Financial Officer
-------------------------- --------------------------
PT ACQUISITION CORPORATION I
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxx
---------------------------
Title: Senior Vice President and
--------------------------
General Counsel
-------------------------- 52
