EXHIBIT 2.1
AGREEMENT AND PLAN OF
MERGER
BY AND AMONG
XXX RESEARCH CORPORATION,
OMEGA ACQUISITION CORPORATION
AND
ONTRAK SYSTEMS, INC.
Dated as of March 24, 1997
TABLE OF CONTENTS
PAGE(S)
ARTICLE 1
THE MERGER
1.1 The Merger................................... 2
1.2 Closing; Effective Time...................... 2
1.3 Effects of the Merger........................ 2
1.4 Certificate of Incorporation; Bylaws......... 2
1.5 Directors and Officers of the Surviving
Corporation.................................. 3
1.6 Effects on Capital Stock..................... 3
1.7 Exchange of Certificates..................... 6
1.8 No Further Ownership Rights in OSI Common
Stock........................................ 8
1.9 Lost, Stolen or Destroyed OSI Certificates... 8
1.10 Tax and Accounting Consequences.............. 8
1.11 Taking of Necessary Action; Further Action... 8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF OSI
2.1 Organization; Subsidiaries................... 9
2.2 Capital Structure............................ 9
2.3 Authority; Absence of Conflicts; Consents.... 10
2.4 SEC Documents; Financial Statements;
Undisclosed Liabilities...................... 12
2.5 Absence of Changes........................... 13
2.6 Litigation................................... 14
2.7 Restrictions on Business Activities.......... 15
2.8 Compliance With Laws......................... 15
2.9 Governmental Authorization................... 15
2.11 Environmental Matters........................ 19
2.12 Taxes........................................ 20
2.13 Employee Benefit Plans....................... 21
2.14 Employee Matters............................. 24
2.15 Interested Party Transactions................ 25
2.16 Insurance.................................... 25
2.17 Pooling of Interests......................... 25
2.18 Brokers' and Finders' Fees................... 25
2.19 Registration Statement; Joint Proxy
Statement/Prospectus......................... 25
2.20 Opinion of Financial Advisor................. 26
2.21 Title to Property............................ 26
2.22 Section 203 of the Delaware Law Not
Applicable................................... 27
2.23 Lack of Ownership of LRC Common Stock........ 27
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PAGE(S)
2.24 Agreements, Contracts and Commitments........ 27
2.25 Representations Complete..................... 28
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LRC AND MERGER SUB
3.1 Organization; Subsidiaries................... 29
3.2 Capital Structure............................ 29
3.3 Authority; Absence of Conflicts; Consents.... 30
3.4 SEC Documents; Financial Statements;
Undisclosed Liabilities...................... 32
3.5 Absence of Changes........................... 33
3.6 Litigation................................... 34
3.7 Restrictions on Business Activities.......... 35
3.8 Compliance With Laws......................... 35
3.9 Governmental Authorization................... 35
3.10 Intellectual Property........................ 35
3.11 Environmental Matters........................ 36
3.12 Employee Benefit Plans....................... 37
3.13 Employee Matters............................. 37
3.14 Pooling of Interests......................... 37
3.15 Brokers' and Finders' Fees................... 37
3.16 Registration Statement; Joint Proxy
Statement/Prospectus......................... 37
3.17 Opinion of Financial Advisor................. 38
3.18 Interim Operations of Merger Sub............. 38
3.19 Agreements, Contracts and Commitments........ 38
3.20 Lack of Ownership of OSI Common Stock........ 38
3.21 Interested Party Transactions................ 39
3.22 Representations Complete..................... 39
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of OSI and LRC........... 39
4.2 Conduct of Business of OSI................... 40
4.3 Acquisition Proposals........................ 43
4.4 Organization of Merger Sub; Authorization of
Shares, the Merger and this Agreement........ 44
ARTICLE 5
ADDITIONAL AGREEMENTS
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PAGE(S)
5.1 Stockholder Approvals........................ 45
5.2 Board of Directors and Officers of LRC....... 45
5.3 Cooperation.................................. 45
5.4 Access to Information........................ 47
5.5 Public Disclosure............................ 47
5.6 Consents..................................... 48
5.7 Pooling Accounting........................... 48
5.8 Affiliate Agreements......................... 48
5.9 Voting Agreement............................. 49
5.10 Employee Benefit Plans....................... 49
5.11 Consents of LRC's and OSI's Accountants...... 51
5.12 Form S-8..................................... 51
5.13 Indemnification.............................. 51
5.14 Employment Agreements........................ 52
5.15 Pooling Letters.............................. 53
5.16 Reasonable Best Efforts and Further
Assurances................................... 53
5.17 Additional Reports........................... 53
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to
Effect the Merger............................ 54
6.2 Additional Conditions to Obligations of OSI.. 55
6.3 Additional Conditions to the Obligations of
LRC and Merger
Sub............................................. 55
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.................................. 56
7.2 Expenses and Termination Fees................ 58
7.3 Amendment.................................... 59
7.4 Extension; Waiver............................ 60
ARTICLE 8
GENERAL PROVISIONS
8.1 No Survival of Representations and Warranties 60
8.2 Expenses..................................... 60
8.3 Notices...................................... 60
8.4 Interpretation............................... 62
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PAGE(S)
8.5 Counterparts................................. 62
8.6 Entire Agreement; Nonassignability; Parties
in Interest.................................. 62
8.7 Severability................................. 63
8.8 Enforcement.................................. 63
8.9 Remedies Cumulative.......................... 63
8.10 Governing Law................................ 63
8.11 Rules of Construction........................ 63
EXHIBITS
A -- Certificate of Merger
B -- Form of Stockholders Agreement
C-1 -- Representation Letter of LRC
C-2 -- Representation Letter of OSI
D -- Form of Representation Letter
E-1 -- Form of OSI Affiliate Agreement
E-2 -- Form of LRC Affiliate Agreement
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DEFINITIONS PAGE(S)
----------- -------
1997 Equity Incentive Plan........................ 40
Acquisition Proposal.............................. 43
Agreement......................................... 1
Alternative Transaction........................... 59
Base Prices....................................... 4
Certificate of Merger............................. 2
Charter Amendments................................ 40
Claim............................................. 52
Closing........................................... 2
Closing Calculation Period........................ 3
Closing Date...................................... 2
COBRA............................................. 22
Code.............................................. 1
Confidentiality Agreement......................... 47
Delaware Law...................................... 2
Delinquent Party.................................. 59
Effective Time.................................... 2
Environmental Laws................................ 19
ERISA............................................. 21
ERISA Affiliate................................... 21
Exchange Act...................................... 12
Exchange Agent.................................... 6
Exchange Ratio.................................... 3
GAAP.............................................. 12
Government Claims................................. 35
Governmental Entity............................... 11
HSR Act........................................... 12
Indemnified Parties............................... 51
Intellectual Property............................. 15
IPO Date.......................................... 12
Joint Proxy Statement............................. 26
Licenses.......................................... 16
Litigation........................................ 34
LRC............................................... 1
LRC Adjustment Option............................. 3
LRC Authorizations................................ 35
LRC Balance Sheet................................. 32
LRC Certificates.................................. 5
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PAGE(S)
-------
LRC Closing Value................................. 3
LRC Common Stock.................................. 1
LRC Disclosure Letter............................. 29
LRC Employee Plans................................ 37
LRC Financial Statements.......................... 32
LRC Intellectual Property Rights Agreements....... 36
LRC Material Contracts............................ 38
LRC Preferred Stock............................... 00
XXX Xxxxxxxx Plan................................. 29
LRC Reference Price............................... 3
LRC Restricted Stock Plan......................... 00
XXX XXX Documents................................. 32
LRC Stock Option Plans............................ 29
LRC Stock Plans................................... 29
LRC Stockholders Meeting.......................... 26
Material Adverse Effect........................... 9
Merger............................................ 1
Merger Sub........................................ 1
Merger Sub Common Stock........................... 5
Multiemployer plan................................ 23
OSI............................................... 1
OSI Authorizations................................ 15
OSI Balance Sheet................................. 12
OSI Certificates.................................. 5
OSI Common Stock.................................. 1
OSI Contract...................................... 28
OSI Disclosure Letter............................. 8
OSI Employee Plans................................ 22
OSI Financial Statements.......................... 12
OSI Preferred Stock............................... 9
OSI Purchase Plan................................. 5
OSI SEC Documents................................. 12
OSI Stock Option Plans............................ 5
OSI Stock Options................................. 49
OSI Stock Plans................................... 5
OSI Stockholders Meeting.......................... 26
Person............................................ 43
Proxy Statement................................... 26
Registration Statement............................ 25
SEC............................................... 11
Securities Act.................................... 12
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PAGE(S)
-------
Semiconductor Equipment Group Closing Index....... 4
Share Issuance.................................... 45
Superior Proposal................................. 43
Surviving Corporation............................. 2
Target............................................ 59
Tax............................................... 21
Tax authority..................................... 21
Tax Return........................................ 21
Taxable........................................... 21
Taxes............................................. 21
Third Party....................................... 59
Used in the Business.............................. 15
Voting Agreements................................. 1
vii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of March 24, 1997 by and among Xxx Research Corporation, a Delaware
corporation ("LRC"), Omega Acquisition Corporation, a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of LRC, and OnTrak Systems, Inc., a
Delaware corporation ("OSI").
RECITALS
WHEREAS, the respective Boards of Directors of LRC, Merger Sub and OSI have
approved and declared advisable the merger of Merger Sub with and into OSI (the
"Merger"), upon the terms and subject to the conditions set forth herein, and
have determined that the Merger and the other transactions contemplated hereby
are consistent with, and in furtherance of, their respective long-term business
strategies and goals;
WHEREAS, pursuant to the Merger, among other things, the outstanding shares
of OSI Common Stock, $.0001 par value ("OSI Common Stock"), shall be converted
into shares of LRC Common Stock, $.001 par value ("LRC Common Stock"), at the
rate set forth herein;
WHEREAS, OSI, LRC and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction; and
WHEREAS, concurrent with the execution of this Agreement and as an
inducement to LRC and Merger Sub to enter into this Agreement, certain
stockholders, officers or directors of OSI have on the date hereof entered into
agreements in substantially the form of Exhibit B hereto (the "Voting
Agreements") to vote the shares of OSI Common Stock owned by such persons to
approve the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
1
ARTICLE 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, the
provisions of the Certificate of Merger attached hereto as Exhibit A (the
"Certificate of Merger") and the applicable provisions of the Delaware General
Corporation Law ("Delaware Law"), Merger Sub shall be merged with and into OSI,
the separate corporate existence of Merger Sub shall cease and OSI shall
continue as the surviving corporation. OSI as the surviving corporation after
the Merger is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the Merger and the other
-----------------------
transactions contemplated hereby (the "Closing") will take place at 10:00 a.m.,
local time, on a date to be specified by the parties (the "Closing Date"), which
shall be no later than the third business day after satisfaction or waiver of
the conditions set forth in Article 6, unless another time or date is agreed to
by the parties hereto. The Closing shall take place at the offices of Shartsis,
Xxxxxx & Xxxxxxxx LLP, One Maritime Plaza, 18th Floor, San Francisco,
California, or at such other location as the parties hereto mutually agree. As
soon as practical on or after the Closing Date, the parties hereto shall cause
the Merger to be consummated by filing 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, or such later time as may
be agreed in writing by the parties and specified in the Certificate of Merger,
being the "Effective Time").
1.3 Effects of the Merger. The effects of the Merger shall be as
---------------------
provided in this Agreement and the applicable provisions of Delaware Law.
Without limiting the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of OSI and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of OSI and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law; provided, however,
that Article 1 of the Certificate of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is OnTrak
Systems, Inc."
2
(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation immediately
after the Effective Time until thereafter amended.
1.5 Directors and Officers of the Surviving Corporation. The
---------------------------------------------------
directors of Merger Sub at the Effective Time (and such other persons as shall
be mutually agreed) shall be the initial directors of the Surviving Corporation,
until their respective successors are duly elected or appointed and qualified.
The officers of OSI immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, until their respective successors are
duly elected or appointed.
1.6 Effects on Capital Stock. As of the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of Merger Sub, OSI or the holders
of any of the securities of Merger Sub or OSI:
(a) Conversion of OSI Common Stock. Subject to Section 1.6(e),
------------------------------
each share of OSI Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of OSI Common Stock to be canceled
pursuant to Section 1.6(b)) shall be converted into .83 (the "Exchange Ratio")
of a fully paid and nonassessable share of LRC Common Stock, together with the
associated rights under LRC's Rights Agreement dated as of January 23, 1997
between LRC and Xxxxx Xxxxxx Shareholder Services, L.L.C. Notwithstanding the
foregoing, if the average of the daily closing sale prices per share of LRC
Common Stock reported on the Nasdaq National Market (the "LRC Closing Value") on
the ten trading days ending with the eighth trading day preceding the OSI
Stockholders Meeting (the "Closing Calculation Period") is less than $30.00 per
share, and if the LRC Closing Value is less than the OSI Walk Away Threshold (as
---
hereinafter defined), LRC shall have the option (but not the obligation),
exercisable by notice to OSI prior to the close of business on the fifth trading
day prior to the OSI Stockholders Meeting, to adjust the Exchange Ratio (the
"LRC Adjustment Option") so that it equals $24.90 divided by the LRC Closing
Value. The OSI Walk Away Threshold shall be computed as the product of (i) 0.85
multiplied by (ii) the product of the "LRC Reference Price" (defined below)
multiplied by a fraction, the numerator of which is the Semiconductor Equipment
Group Closing Index (as defined below), and the denominator of which is 100,
illustrated as follows:
Semiconductor Equipment
0.85 x LRC Reference Price x Group Closing Index
------------------------
100
where:
3
(1) the "Semiconductor Equipment Group Closing Index" shall be
determined as follows:
(x) The average of the daily closing sale prices per share (the
"Base Prices") on the ten trading days ended with the trading day preceding the
date of this Agreement, as reported on the national securities exchange set
forth below next to its name, for the common stock of each of the following
semiconductor equipment companies is agreed to be as follows:
Applied Materials, Inc. Nasdaq National Market $49.631
Novellus Systems, Inc. Nasdaq National Market $76.356
KLA Instruments Corporation Nasdaq National Market $38.825
Silicon Valley Group, Inc. Nasdaq National Market $20.194
Ultratech Stepper, Inc. Nasdaq National Market $23.269
(y) The average of the daily closing sale prices per share on the
respective securities exchange set forth above for the common stock of each such
company shall be calculated for the Closing Calculation Period and the
percentage change (positive or negative) for each such company's common stock
from its respective Base Price shall be determined.
(z) The arithmetic sum (positive or negative) of such percentage
changes shall be divided by five (or such other number of companies as may then
be included in the index), and that quotient (positive or negative) shall be
increased by 100, and as so increased, shall be the Semiconductor Equipment
Group Closing Index.
For purposes of calculating the OSI Walk Away Threshold only, if from
the date of this Agreement through the end of the Closing Calculation Period
there occurs any change in the LRC Common Stock (not including the Merger) or
the common stock of any company in the Semiconductor Equipment Group Closing
Index by reason of stock dividends, stock splits, stock combinations,
reorganization or recapitalization or other like change, the prices per share
used in calculating the LRC Closing Value or the Semiconductor Equipment Group
Closing Index, as the case may be, shall be adjusted appropriately to fully
reflect such event. Furthermore, if at the time of the Closing Calculation
Period an Alternative Transaction (defined in Article 7) involving any of the
semiconductor equipment companies listed in clause (1)(x) above shall have been
announced which shall not have been absolutely and unconditionally withdrawn and
abandoned, then such company and its stock price shall be removed from the
calculation of the Semiconductor Equipment Group Closing Index for all purposes.
(2) The LRC Reference Price is $35.464, which is the average of the
daily closing sale price per share of LRC Common Stock on the Nasdaq National
Market on the ten trading days ended with the trading day preceding the date of
this Agreement.
4
As of the Effective Time, all such shares of OSI Common Stock shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of OSI
Common Stock (the "OSI Certificates") shall cease to have any rights with
respect thereto, except the right to receive (i) the number of whole shares of
LRC Common Stock into which such shares have been converted (the "LRC
Certificates"), and (ii) cash in lieu of fractional shares of LRC Common Stock
in accordance with Section 1.6(e), without interest.
(b) Cancellation of OSI Common Stock Owned by LRC or OSI.
----------------------------------------------------
All shares of OSI Common Stock that are owned by OSI as treasury stock and each
share of OSI Common Stock owned by LRC or any direct or indirect wholly owned
subsidiary of LRC or of OSI immediately prior to the Effective Time shall be
automatically canceled and extinguished, and no consideration shall be delivered
in exchange therefor.
(c) Capital Stock of Merger Sub. Each share of Common Stock,
---------------------------
$.01 par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any such shares
shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
(d) OSI Stock Option and Employee Stock Purchase Plans. At the
--------------------------------------------------
Effective Time, all options to purchase OSI Common Stock issued under the OSI
1992 Stock Option Plan, the OSI 1995 Director Stock Option Plan, or the OSI 1996
Equity Incentive Plan (collectively, the "OSI Stock Option Plans") outstanding
immediately prior to the Effective Time shall be assumed by LRC in accordance
with Section 5.10, and all rights to purchase OSI Common Stock issued under the
OSI 1995 Employee Stock Purchase Plan (the "OSI Purchase Plan," and, together
with the OSI Stock Option Plans, the "OSI Stock Plans") for the "offering
period" beginning February 1, 1997, shall be assumed by LRC, as provided in
Section 5.10 and to the extent permitted under the OSI Purchase Plan and the LRC
Purchase Plan (as defined in Section 3.2(a)).
(e) Fractional Shares. No fraction of a share of LRC Common
-----------------
Stock will be issued in exchange for OSI Certificates, no dividend or
distribution of LRC shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of LRC. In lieu of fractional shares of LRC Common
Stock, each holder of shares of OSI Common Stock who would otherwise be entitled
to a fraction of a share of LRC Common Stock (after aggregating all fractional
shares of LRC Common Stock to be received by such holder) shall receive from LRC
an amount of cash (rounded to the nearest whole cent) equal to the product of
(i) such fraction, multiplied by (ii) the average of the closing price of a
share of LRC Common Stock for the ten most recent days that LRC Common Stock has
traded ending on the trading day immediately prior to the Effective Time, as
reported on the Nasdaq National Market; provided that in no case shall the
amounts paid in exchange for all such fractional shares exceed 10% of the value
of the total
5
LRC shares issued to the stockholders of OSI in connection with the Merger,
determined using the average of the closing price of a share of LRC Common Stock
for the ten most recent days that LRC Common Stock has traded ending on the
trading day immediately prior to the Effective Time, as reported on the Nasdaq
National Market.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
LRC Common Stock or OSI Common Stock), reorganization, recapitalization or other
like change with respect to LRC Common Stock or OSI Common Stock occurring after
the date hereof and prior to the Effective Time.
1.7 Exchange of Certificates.
------------------------
(a) Exchange Agent. As of the Effective Time, LRC shall enter
--------------
into an agreement with a bank or trust company to act as exchange agent for the
Merger (the "Exchange Agent") as may be designated by LRC and approved by OSI,
such approval not to be unreasonably withheld.
(b) LRC to Provide Common Stock and Cash. Promptly after the
------------------------------------
Effective Time, LRC shall make available to the Exchange Agent for the benefit
of the holders of OSI Common Stock: (i) LRC Certificates representing the
number of whole shares of LRC Common Stock issuable pursuant to Section 1.6(a)
in exchange for shares of OSI Common Stock outstanding immediately prior to the
Effective Time; and (ii) sufficient funds to permit payment in lieu of
fractional shares pursuant to Section 1.6(e).
(c) Exchange Procedures. The Exchange Agent shall mail to each
-------------------
holder of record of an OSI Certificate or Certificates, whose shares were
converted into the right to receive shares of LRC Common Stock (and cash in lieu
of fractional shares) pursuant to Section 1.6 promptly after the Effective Time
(and in any event no later than three business days after the later to occur of
the Effective Time and receipt by LRC of a complete list from OSI of the names
and addresses of its holders of record): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
OSI Certificates shall pass, only upon receipt of the OSI Certificates by the
Exchange Agent, and shall be in such form and have such other provisions as LRC
may reasonably specify); and (ii) instructions for use in effecting the
surrender of the OSI Certificates in exchange for LRC Certificates (and cash in
lieu of fractional shares). Upon surrender of an OSI Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by LRC, together with such letter of transmittal, duly completed and
validly executed, and such other documents as may be reasonably required by the
Exchange Agent, the holder of such OSI Certificate shall be entitled to receive
in exchange therefor a LRC Certificate representing the number of whole shares
of LRC Common Stock and payment of cash in lieu of fractional shares which such
holder has the right to receive pursuant to Section 1.6, and the OSI Certificate
so surrendered shall forthwith be canceled. Until so surrendered, each
outstanding OSI Certificate that, prior to the Effective Time, represented
shares of OSI Common Stock will be deemed from and after the Effective
6
Time, for all corporate purposes other than the payment of dividends and
distributions, to evidence the ownership of the number of full shares of LRC
Common Stock into which such shares of OSI Common 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. Notwithstanding any other
provision of this Agreement, no interest will be paid or will accrue on any cash
payable to holders of OSI Certificates pursuant to the provisions of this
Article 1.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions with respect to LRC Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered OSI
Certificate with respect to the shares of LRC Common Stock represented thereby
until the holder of record of such OSI Certificate shall surrender such OSI
Certificate. Subject to the effect of applicable escheat or similar laws,
following surrender of any such OSI Certificate, there shall be paid to the
record holder of the LRC Certificates issued in exchange therefor, without
interest, at the time of such surrender, the amount of any such dividends or
other distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 1.7(d)) with respect to such
shares of LRC Common Stock.
(e) Transfers of Ownership. If any LRC Certificate is to be issued in
----------------------
a name other than that in which the OSI Certificate surrendered in exchange
therefor is registered, it will be a condition of the issuance thereof that the
OSI Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will have paid to
LRC or any agent designated by it any transfer or other taxes required by reason
of the issuance of a LRC Certificate for shares of LRC Common Stock in any name
other than that of the registered holder of the OSI Certificate surrendered, or
established to the satisfaction of LRC or any agent designated by it that such
tax has been paid or is not payable.
(f) Termination of Exchange Agent Funding. Any portion of funds
-------------------------------------
(including any interest earned thereon) or LRC Certificates held by the Exchange
Agent which have not been delivered to holders of OSI Certificates pursuant to
this Article 1 within six months after the Effective Time shall promptly be paid
or delivered, as appropriate, to LRC, and thereafter holders of OSI Certificates
who have not theretofore complied with the exchange procedures outlined in this
Section 1.7 shall thereafter look only to LRC for their claim for shares of LRC
Stock, any cash in lieu of fractional shares of LRC Common Stock and any
dividends or distributions (with a record date after the Effective Time) with
respect to LRC Common Stock.
(g) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person in respect of any shares of LRC Common
Stock or cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
7
1.8 No Further Ownership Rights in OSI Common Stock. All shares of
-----------------------------------------------
LRC Common Stock issued upon the surrender for exchange of OSI Certificates in
accordance with the terms hereof (including any cash paid in lieu of fractional
shares) shall be deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to the shares of OSI Common Stock theretofore represented
by such OSI Certificate, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of OSI Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, OSI Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article 1.
1.9 Lost, Stolen or Destroyed OSI Certificates. In the event any OSI
------------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed OSI Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of LRC
Common Stock (and cash in lieu of fractional shares) as may be required pursuant
to Section 1.6; provided, however, that LRC or the Surviving Corporation may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed OSI Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against LRC, the Surviving Corporation or the Exchange Agent with respect
to the OSI Certificates alleged to have been lost, stolen or destroyed.
1.10 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(a) of the Code and (ii) qualify for accounting treatment as a
pooling of interests, and that this Agreement constitutes a plan of
reorganization as defined in the Treasury Regulations under Section 368 of the
Code.
1.11 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 OSI and Merger Sub, the officers and directors of the
Surviving Corporation shall be fully authorized in the name of either or both of
OSI or Merger Sub or otherwise to take, and LRC and OSI shall cause such
officers and directors to take, all such lawful and necessary action, so long as
such action is not inconsistent with this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF OSI
OSI represents and warrants to LRC and Merger Sub that the statements
contained in this Article 2 are true and correct, except as disclosed in writing
in the disclosure letter supplied by OSI to LRC and Merger Sub as of the date
hereof and certified by a duly authorized officer of OSI (the "OSI Disclosure
Letter"). The OSI Disclosure Letter shall be arranged in
8
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article 2, and the disclosure in any paragraph shall qualify only the
corresponding paragraph in this Article 2.
2.1 Organization; Subsidiaries. Each of OSI and its subsidiaries is
--------------------------
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of OSI and its subsidiaries has
the corporate power to own its properties and to carry on its business as now
being conducted and as proposed to be conducted, and is duly qualified to do
business and in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on OSI. As
used in this Agreement, a "Material Adverse Effect" on an entity means any state
of facts, event, change or effect that is materially adverse to the business,
financial condition, properties, assets (including intangible assets),
liabilities (contingent or otherwise), operations or results of operations of
such entity and its subsidiaries, taken as a whole. OSI has made available to
LRC true and complete copies of OSI's Certificate of Incorporation and Bylaws
and similar governing instruments of its subsidiaries, each as amended to date.
Neither OSI nor any of its subsidiaries is in violation of any of the provisions
of its Certificate of Incorporation or Bylaws or equivalent organizational
documents, and each such document is in full force and effect on the date
hereof. OSI does not own, directly or indirectly, any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, limited liability
company, joint venture or other business association or entity. OSI does not
conduct any part of its business operations through any subsidiaries or through
any other entity in which OSI has an equity investment.
2.2 Capital Structure.
-----------------
(a) The authorized capital stock of OSI consists of 30,000,000
shares of OSI Common Stock, $.0001 par value, and 3,000,000 shares of Preferred
Xxxxx, x.0000 par value ("OSI Preferred Stock"). As of March 14, 1997, (i)
7,647,962 shares of OSI Common Stock were issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable; (ii) no
shares of OSI Preferred Stock were issued and outstanding; (iii) no shares of
OSI Common Stock or OSI Preferred Stock were held in the treasury of OSI or by
subsidiaries of OSI; and (iv) 3,500,599 shares of OSI Common Stock were reserved
for future issuance pursuant to the OSI Stock Plans, including (A) 1,234,431
shares reserved for issuance under the 1992 Stock Option Plan, 1,148,421 of
which were subject to or reserved for outstanding options and 86,010 of which
were reserved for future option grants; (B) 125,000 shares reserved for issuance
under the 1995 Director Stock Option Plan, 55,000 of which were subject to or
reserved for outstanding options and 70,000 of which were reserved for future
option grants; (C) 2,000,000 shares reserved for issuance under the 1996 Equity
Incentive Plan, 800,000 of which were subject to or reserved for outstanding
options and 1,200,000 of which were reserved for future issuance; (D) 141,168
shares reserved for future issuance under the OSI Purchase Plan; and (E) 98,000
shares reserved for issuance pursuant to exercise of warrants, the material
terms of which warrants are described in the OSI Disclosure Letter. No change in
such capitalization has occurred since such date other than the exercise and
termination of outstanding
9
stock options and the accrual of rights under the OSI Purchase Plan, all in the
ordinary course. All shares of OSI Common Stock subject to issuance as
specified above, 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 terms of the OSI Stock Option
Plans permit the assumption or substitution of options to purchase LRC Common
Stock as provided in this Agreement, without the consent or approval of the
holders of such securities, the OSI stockholders, or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for those
options. The terms of the OSI Purchase Plan permit the conversion of
participants' rights thereunder to purchase OSI Common Stock into rights to
purchase LRC Common Stock, as described in Section 5.10(b), without the consent
or approval of such participants or the OSI stockholders, or otherwise and
without any acceleration of the exercise schedule in effect for such rights.
The current two-year "offering period" under the OSI Purchase Plan commenced on
February 1, 1997 and, except for the purchase rights granted on such
commencement date to participants in the current offering period, there are no
other purchase rights or options outstanding under the OSI Purchase Plan. True
and complete copies of all agreements and instruments relating to or issued
under the OSI Stock Option Plans or OSI Purchase Plan have been made available
to LRC and such agreements and instruments have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the form made available to LRC.
(b) OSI owns beneficially and of record, directly or through a
subsidiary, all outstanding shares of capital stock of each of its subsidiaries
free and clear of any security interest, claim, lien, pledge, right, voting
trust or proxy or other encumbrance or restriction whatsoever. There are no
obligations, contingent or otherwise, of OSI or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of OSI Common Stock or the
capital stock of any OSI subsidiary or make any investment (in the form of a
loan, capital contribution or otherwise), in any such subsidiary or any other
entity other than guarantees of bank obligations of such subsidiaries entered
into in the ordinary course of business.
(c) Except as set forth in Section 2.2(a) or (b), there are no
equity securities of any class of OSI or its subsidiaries, 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(a) or (b), there
are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which OSI or any of its subsidiaries is a party
or by which any of them is bound obligating OSI or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of OSI or any of its subsidiaries or obligating OSI 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, and to the knowledge of OSI, except for the Voting Agreements and
related proxies contemplated by this Agreement, there are no voting trusts,
proxies or other agreements or understandings with respect to the capital shares
of OSI or its subsidiaries.
2.3 Authority; Absence of Conflicts; Consents. (a) OSI has all
-----------------------------------------
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions
10
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of OSI, subject only to
the approval of the Merger by OSI's stockholders. A vote of the holders of a
majority of the outstanding shares of the OSI Common Stock is the only approval
required for the OSI stockholders to adopt this Agreement and the transactions
contemplated hereby. The Board of Directors of OSI has, prior to the date
hereof, unanimously (x) approved this Agreement and the Merger, (y) determined
that the Merger is in the best interests of the stockholders of OSI and is on
terms that are fair to such stockholders and (z) determined to recommend that
the stockholders of OSI approve this Agreement and consummation of the Merger.
This Agreement has been duly and validly executed and delivered by OSI and,
assuming this Agreement constitutes a valid and binding agreement of the other
parties hereto, constitutes a valid and binding obligation of OSI enforceable
against OSI in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies). The execution and delivery of this
Agreement by OSI does not, and the performance of this Agreement by OSI will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
OSI or the equivalent organizational documents of any of its subsidiaries, (ii)
subject to obtaining the adoption by OSI's stockholders of this Agreement as
contemplated in Section 6.1(a) and compliance with the requirements set forth in
Section 2.3(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to OSI or any of its subsidiaries or by which its
or any of their respective properties is bound, or (iii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the rights of OSI or its subsidiaries
or alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the properties or assets of
OSI or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which OSI or any of its subsidiaries is a party or by which OSI or
any of its subsidiaries or its or any of their respective properties are bound
or affected, except, with respect to clauses (ii) and (iii) above, for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on OSI. The OSI Disclosure Letter lists all material
consents, waivers and approvals under any of OSI's or its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby, except for those
the absence of which in aggregate would not have a Material Adverse Effect on
OSI.
(b) No consent, approval, order or authorization of, or registration
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to OSI or its
subsidiaries in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (ii) the filing of the Joint Proxy Statement (as defined in Section
2.19) with the Securities and Exchange Commission (the "SEC") in accordance with
the Securities Exchange Act of 1934, as amended (xxx
00
"Xxxxxxxx Xxx"), (xxx) the filing of a Current Report on Form 8-K with the SEC,
(iv) the filing with the United States Department of Justice and the Federal
Trade Commission of such forms as may be required by the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), (x) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and the laws
of any foreign country, and (vi) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on OSI or LRC or have a material adverse effect on the
ability of the parties to consummate the transactions contemplated by this
Agreement.
2.4 SEC Documents; Financial Statements; Undisclosed Liabilities.
------------------------------------------------------------
(a) OSI has filed all forms, reports and documents required to be
filed with the SEC since effectiveness of the registration statement filed in
connection with its initial public offering (the "IPO Date"), and has made
available to LRC such forms, reports and documents in the form filed with the
SEC. All such required forms, reports and documents (including those that OSI
may file subsequent to the date hereof until the Closing) are referred to herein
as the "OSI SEC Documents." As of their respective dates, the OSI SEC Documents
(i) were prepared in accordance with the requirements of the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such OSI SEC
Documents, and (ii) did not at the time they were filed (and 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 OSI'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 OSI SEC Documents (the "OSI
Financial Statements"), including any OSI SEC Documents filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (y) was prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (z) fairly presented the consolidated
financial position of OSI and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, consistent with the books and records of OSI, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of OSI contained in OSI's Form 10-Q for
the quarter ended December 31, 1996 is hereinafter referred to as the "OSI
Balance Sheet." Neither OSI nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise), whether or not of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements
12
prepared in accordance with GAAP, which individually or in the aggregate are or
would be reasonably likely to have a Material Adverse Effect on OSI other than
(i) liabilities reflected in the OSI Balance Sheet, and (ii) normal or recurring
liabilities incurred since December 31, 1996 in the ordinary course of business
consistent with past practice. The inventories shown on the OSI Balance Sheet
are (and on OSI balance sheets included in future OSI SEC Documents except as
disclosed therein will be) of a quantity and quality useable and saleable in
accordance with good business practices and represent a distribution of the
types of inventories utilized in the business of OSI in accordance with good
business practices. The amounts shown for inventories on the OSI Balance Sheet
have been (and on OSI balance sheets included in future OSI SEC Documents except
as disclosed therein will be) determined in accordance with generally accepted
accounting principles on a first-in, first-out basis and are stated at lower of
cost or market.
(c) OSI has heretofore made available to LRC a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by OSI with the SEC pursuant
to the Securities Act or the Exchange Act.
2.5 Absence of Changes. Since December 31, 1996, the business of OSI
------------------
and its subsidiaries has been operated in the ordinary course consistent with
past practices, and:
(a) there has not been any material adverse change in the
business, condition, assets, liabilities, operations or financial performance of
OSI and its subsidiaries taken as a whole, and no event has occurred (whether or
not covered by insurance) that would reasonably be expected to have a Material
Adverse Effect on OSI;
(b) none of OSI or its subsidiaries has (i) declared, accrued,
set aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities;
(c) there has been no amendment to the Certificate of
Incorporation, Bylaws or other charter or organizational documents of OSI or its
subsidiaries, and none of OSI or its subsidiaries has effected or been a party
to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(d) none of OSI or its subsidiaries has made any capital
expenditure in any calendar month which, when added to all other capital
expenditures made on behalf of OSI or its subsidiaries in such calendar month
results in such capital expenditures exceeding $250,000 in the aggregate;
(e) none of OSI or its subsidiaries has entered any material
agreement other than in the ordinary course of business and as made available to
LRC, nor has there occurred any amendment or termination of, or default under,
any material agreement to which
13
OSI or any of its subsidiaries is a party or by which it is bound which would
result in a Material Adverse Effect on OSI;
(f) none of OSI or its subsidiaries has written off as
uncollectible, or established any extraordinary reserve with respect to, any
material amount of accounts receivable or other indebtedness;
(g) none of OSI or its subsidiaries has incurred or guaranteed
any indebtedness for borrowed money, or made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any lien, claim or
encumbrance except for encumbrances of assets made in the ordinary course of
business and consistent with past practices;
(h) none of OSI or its subsidiaries has (i) established or
adopted any employee benefit plan, (ii) caused or permitted any employee benefit
plan or rights or agreements granted thereunder to be amended in any material
respect, or (iii) except for bonus, profit-sharing and similar payments made in
the ordinary course of business and consistent with past practices, paid any
bonus or made any profit-sharing or similar payment to, materially increased the
amount of commissions payable to, or materially increased the amount of the
wages, salary, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees;
(i) none of OSI or its subsidiaries has changed any of its
methods of accounting or accounting practices in any material respect;
(j) none of OSI or its subsidiaries has made any material Tax (as
defined in Section 2.12) election;
(k) none of OSI or its subsidiaries has commenced, settled or
received a notice or threat of any lawsuit or proceeding (including without
limitation any claim involving Intellectual Property) or governmental
investigation of OSI or its subsidiaries;
(l) none of OSI or its subsidiaries has agreed or committed to
take any of the actions referred to in clauses (a) through (k) above.
2.6 Litigation. There is no private or governmental action, suit,
----------
claim or proceeding of any nature pending or to OSI's knowledge threatened
against OSI or its subsidiaries, their properties or any of their officers or
directors, in their respective capacities as such (i) involving OSI Intellectual
Property rights or in which injunctive or other equitable relief or damages in
excess of $250,000 are requested against OSI or its subsidiaries or which could
otherwise result in a Material Adverse Effect on OSI or (ii) which in any manner
challenges or seeks to (or is reasonably likely to) prevent, enjoin, alter or
delay any of the transactions contemplated by this Agreement. To OSI's
knowledge, there is no investigation or review pending or threatened against OSI
or its subsidiaries, their properties or any of their
14
officers or directors (in their capacities as such) by or before any
Governmental Entity. Section 2.6 of the OSI Disclosure Letter sets forth, with
respect to any pending or threatened action, suit, claim, proceeding,
investigation or review, the forum, the parties thereto, the subject matter
thereof and the amount of damages claimed or other remedy requested.
2.7 Restrictions on Business Activities. There is no material
-----------------------------------
agreement, judgment, injunction, order or decree binding upon OSI or any of its
subsidiaries which has the effect of prohibiting or impairing any current or
future business practice of OSI or any of its subsidiaries, any acquisition of
property (tangible or intangible) by OSI or any of its subsidiaries or the
conduct of business by OSI or any of its subsidiaries as currently conducted or
as proposed to be conducted by OSI and its subsidiaries.
2.8 Compliance With Laws. Each of OSI and its subsidiaries has
--------------------
complied with, is not in violation of, has not received any notices of violation
with respect to, and holds all licenses, permits and authorizations required by,
any federal, state, local or foreign statute, law, regulation, decree, judgment
or order with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures as would not
have, individually or in the aggregate, a Material Adverse Effect on OSI.
2.9 Governmental Authorization. OSI and each of its subsidiaries
--------------------------
has obtained and is in compliance with each federal, state, county, local or
foreign governmental consent, license, permit, grant, or other authorization of
a Governmental Entity (i) pursuant to which OSI or any of its subsidiaries
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of OSI's or any of its subsidiaries' business or
the holding of any such interest ((i) and (ii) herein collectively called "OSI
Authorizations"), and all of such OSI Authorizations are in full force and
effect, except where the failure to obtain or have any of such OSI
Authorizations would not, individually or in the aggregate, have a Material
Adverse Effect on OSI.
2.10 Intellectual Property.
---------------------
(a) "Intellectual Property" means all patents, patent
applications, copyrights, trademarks, service marks, tradenames, maskworks,
trade secrets, know-how, technologies, ideas, algorithms, processes, computer
software programs, and all other tangible or intangible proprietary information
and materials used in the business of OSI and its subsidiaries as currently
conducted or as proposed to be conducted or relating to products under
development by OSI or any of its subsidiaries ("Used in the Business"), as well
as all registrations and pending applications for registration of any of the
foregoing in any jurisdiction, and including each license, sublicenses or other
contract relating thereto. References herein to the Intellectual Property of LRC
or any other person or entity shall refer to the same items with respect to that
other party. OSI and its subsidiaries own all of the Intellectual Property Used
in the Business of OSI and its subsidiaries free and clear of any and all liens,
collateral assignments, security interests and encumbrances, except to the
extent that the failure to own
15
such Intellectual Property has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on OSI.
(b) Section 2.10 of the OSI Disclosure Letter sets forth a complete
and correct list of the following items owned or Used in the Business of OSI or
any of its subsidiaries, and a corresponding list of each jurisdiction in which
a patent or registration for such item has been issued or in which an
application has been filed in the name of OSI or any of its subsidiaries: (i)
all patents and patent applications, (ii) all registered and unregistered
trademarks, service marks and tradenames, (iii) all registered and unregistered
copyrights and maskworks, (iv) the expiration or renewal date for each patent or
registration listed, and (v) the owner of each item of Intellectual Property
listed thereon. Each item set forth in Section 2.10 of the OSI Disclosure
Letter is owned by the party shown on such schedule as the owner thereof, and,
if registered, is registered in the name of such owner.
(c) Section 2.10 of the OSI Disclosure Letter sets forth a complete
and correct list of (i) all licenses, sublicenses and other agreements other
than end user licenses of commercially available products of third parties
entered into in the ordinary course of business ("Licenses") as to which OSI or
any of its subsidiaries is a party and pursuant to which any person is
authorized to use any Intellectual Property of OSI, (ii) all Licenses as to
which OSI or any of its subsidiaries is a party and pursuant to which OSI or any
of its subsidiaries is authorized to use any Intellectual Property of a third
party, and (iii) for each such License, the name of the licensor and licensee
thereof, the nature of the Intellectual Property covered by the License and the
termination date thereof. With respect to each License pursuant to which OSI or
any of its subsidiaries is authorized to use any Intellectual Property of a
third party, Section 2.10 of the OSI Disclosure Letter sets forth the products
of OSI and its subsidiaries in which such third party's Intellectual Property is
used.
(d) OSI or its subsidiaries have sole and exclusive rights to, and no
other person or entity has any claim of ownership, whether joint or individual,
with respect to, each of the patents, patent applications, trademarks, service
marks, tradenames, copyrights and maskworks set forth in Section 2.10 of the OSI
Disclosure Letter. Each patent and each registration listed in Section 2.10 of
the OSI Disclosure Letter is valid, enforceable and subsisting and in full force
and effect and has been duly prosecuted, registered and maintained by OSI and
its subsidiaries in each jurisdiction listed. No pending application for a
patent or for a registration of any Intellectual Property has been rejected,
suspended, made the subject of an office action or other challenge by the agency
with which such application has been filed or by any third party. No patent has
been claimed or adjudicated to be invalid or unenforceable in whole or in part,
no trademark or service xxxx has been the subject of any claim of abandonment or
otherwise challenged as invalid, and no copyright has been invalidated or
alleged to be in the public domain. Neither OSI nor any of its subsidiaries
owns any trademark or service xxxx applications pending in any jurisdiction that
have been filed on an "intent-to-use" basis. No patent or registration is
subject to any current tax, maintenance fee or renewal fee which has not been
paid. All trademarks, service marks and tradenames set forth in Section
16
2.10 of the OSI Disclosure Letter have been used continuously since adoption by
the owner listed thereon.
(e) All trade secrets and confidential information of OSI and its
subsidiaries are valid and protectable, are not publicly known, and have not
been disclosed or otherwise made available to any person except pursuant to a
written confidentiality agreement that restricts the further disclosure and use
of such trade secret or confidential information, and each such confidentiality
agreement is valid and enforceable and in full force and effect. All trade
secrets and confidential information of OSI and its subsidiaries have been
documented in writing completely and accurately in all material respects, and
such documentation contains sufficient detail and disclosure regarding such
trade secrets and confidential information so as to permit the continued use of
such trade secrets and confidential information as Used in the Business of OSI
and its subsidiaries without the need to obtain any further documentation or to
depend on the skills or knowledge of any current or former employee or
consultant of OSI or its subsidiaries. OSI and its subsidiaries have taken all
reasonable and appropriate steps to protect and preserve all trade secrets and
confidential information of OSI and its subsidiaries and all other Intellectual
Property of OSI that is not otherwise protected by patents, or copyright or
maskwork registrations. Each item of Intellectual Property disclosed or
identified to LRC as a trade secret of OSI or its subsidiaries qualifies as such
under the Uniform Trade Secrets Act as embodied in Section 3426.1 of the
California Civil Code. The use, possession or disclosure by OSI or any of its
subsidiaries of any confidential information or trade secrets Used in the
Business but which are not owned by OSI or its subsidiaries has been used,
obtained or disclosed in compliance with the terms and conditions of a valid and
enforceable agreement between OSI or its subsidiaries and the owner of such
trade secret or confidential information, or such use, possession or disclosure
is otherwise lawful under the circumstances. To OSI's best knowledge after
reasonable diligence, there have been no unauthorized disclosures of any trade
secret or confidential information of OSI, no unauthorized disclosures of any
trade secret or confidential information of any third party by OSI or any of its
subsidiaries or any of their respective employees or consultants, and there has
been no breach of any confidentiality or nondisclosure agreements to which OSI
or any of its subsidiaries is a party.
(f) No License, consent or other authorization is required from any
third party with respect to any Intellectual Property Used in the Business of
OSI and its subsidiaries.
(g) Each License to which OSI or any of its subsidiaries is a party
with respect to Intellectual Property of OSI or its subsidiaries, or with
respect to Intellectual Property of any third party, is valid and enforceable in
accordance with its terms, is in full force and effect, and is not the subject
of any notice of termination or nonrenewal, and there is no default or alleged
or threatened default with respect to any such License. OSI and its
subsidiaries have performed all of their respective obligations under any such
License and no event has occurred that with the passage of time or the delivery
of notice or both would constitute a default under any such License. All
consents or approvals with respect to the transfer of any License or any other
agreement involving any Intellectual Property have been obtained by OSI, and
complete and correct copies of all Licenses, together with all amendments,
modifications, supplements or
17
side letters affecting the obligation of any party thereunder have been made
available to LRC. Neither the execution and performance of this Agreement nor
the consummation of the transactions contemplated hereunder will cause any
License to be subject to termination or material modification, or cause OSI or
any of its subsidiaries to be in breach of any License or other agreement
relating to the Intellectual Property, if such breach would have, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on OSI.
(h) The possession and use of the Intellectual Property Used in the
Business of OSI and its subsidiaries does not (to the knowledge of OSI as to
patents) in any material respect conflict with, infringe upon, violate or
interfere with or constitute a misappropriation of any right, title, interest or
goodwill of any other person in any Intellectual Property, including but not
limited to any "moral rights" of any such person. Neither OSI nor any of its
subsidiaries (i) is a party to any suit, action or proceeding which involves a
claim of infringement, misappropriation or misuse of any Intellectual Property
or has received notice of or otherwise become aware of any such suit, action or
proceeding, (ii) has brought any action, suit or proceeding against any third
party for infringement, misappropriation or misuse of any Intellectual Property
or breach of any License involving any Intellectual Property, and (iii) neither
OSI nor any of its subsidiaries possesses any information or otherwise is aware
of any basis upon which any material claim can successfully be asserted against
OSI or any of its subsidiaries with respect to any infringement,
misappropriation or other misuse of any Intellectual Property. Neither OSI nor
any of its subsidiaries have received any notice or otherwise knows that any
legal proceeding has been initiated or threatened with respect to any
Intellectual Property or with respect to any claim that any License regarding
any Intellectual Property is the subject of any breach or default.
(i) The items set forth in Section 2.10 of the OSI Disclosure Letter
and the trade secrets, technologies, know-how and other items of Intellectual
Property lawfully possessed by OSI and its subsidiaries are all that are
necessary for the conduct of its business as now conducted or contemplated to be
conducted or relating to products or processes under development by OSI and its
subsidiaries.
(j) Neither OSI nor any of its subsidiaries is aware or has reason to
believe that any of its employees or consultants is obligated under any
contract, covenant or other agreement or commitment of any nature, or subject to
any judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's or consultant's best efforts to
promote the interests of OSI and its subsidiaries or that would conflict with
the business of OSI and its subsidiaries as presently conducted or proposed to
be conducted. Neither OSI nor any of its subsidiaries has entered into any
agreement to indemnify any other person, including but not limited to any
employee or consultant of OSI, against any charge of infringement,
misappropriation or misuse of any Intellectual Property, other than
indemnification provisions contained in purchase orders or customer agreements
arising in the ordinary course of business. To the extent that OSI does not
already own all such rights by operation of law, all current and former
employees and consultants of OSI and its subsidiaries have signed valid
18
and enforceable written assignments to OSI or its subsidiaries of any and all
rights or claims in any Intellectual Property that any such employee or
consultant has or may have by reason of any contribution, participation or other
role in the development, conception, creation, reduction to practice or
authorship of any invention, innovation, development or work of authorship or
any other Intellectual Property that is Used in the Business of OSI and its
subsidiaries, and OSI and its subsidiaries possess signed copies of all such
written assignments by such employees and consultants.
2.11 Environmental Matters. Except for such cases that, individually
---------------------
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on OSI, OSI and each of its subsidiaries (i) has
obtained all applicable permits, licenses and other authorizations that are
required under Federal, state or local laws relating to pollution or protection
of human health or the environment, including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material (as defined below) by OSI or such subsidiary or
any of their respective agents (collectively, "Environmental Laws"); (ii) is in
compliance with all terms and conditions of such required permits, licenses and
authorizations, and also is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws or in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) is not aware of and has not
received notice of any (A) claim, act, suit, proceeding or investigation, or (B)
event, condition, circumstance, activity, practice, incident, action or plan
that is reasonably likely to interfere with or prevent continued compliance or
that would give rise to any common law or statutory liability, or otherwise form
the basis of any claim, action, suit or proceeding, based on or resulting from
OSI's or any of its subsidiaries' (or any of their respective agents')
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge or release into the
environment of any Hazardous Material or other non-compliance with any
applicable Environmental Law; (iv) has not disposed of any Hazardous Material
into the soil or groundwater at any properties owned, leased or used by OSI,
either now or in the past, or at any other property that might reasonably be
expected to result in any assessment or remedial action by any Governmental
Entity; and (v) has taken all actions necessary under applicable requirements of
Federal, state, local and foreign laws, rules or regulations to register any
products or materials required to be registered by OSI or any of its
subsidiaries (or any of their respective agents) thereunder.
For the purposes of this Agreement, the term "Hazardous Material"
means any pollutant or contaminant or hazardous or toxic substance, material or
waste, the storage, use, treatment, handling, transport or disposition of which
is or becomes regulated or subject to regulation or cause of action by any local
governmental authority, the State of California, the United States government,
or any other person, entity or citizen's group. The term "Hazardous Material"
includes, without limitation, any material or substance which is (i) defined as
or included within the definition of "hazardous waste," "extremely hazardous
waste" or "restricted
19
hazardous waste" under Section 255115, 25117 or 25122.7, or listed pursuant to
Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5
(Hazardous Waste Control Law), (ii) defined as or included within the definition
of a "hazardous substance" under Section 25136 of the California Health and
Safety Code, Division 20, Chapter 6.8 (Xxxxxxxxx-Xxxxxxx-Xxxxxx Hazardous
Substance Account Act), (iii) defined as or included within the definition of a
"hazardous material," "hazardous substance," or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter 6.95
(Hazardous Materials Release Response Plans and Inventory), (iv) defined as or
included within the definition of a "hazardous substance" under Section 25281 of
the California Health and Safety Code, Division 20, Chapter 6.7 (Underground
Storage of Hazardous Substances), (v) petroleum or petroleum products or waste,
(vi) asbestos or asbestos-containing materials, lead or lead-based materials or
polychlorinated biphenyls, (vii) listed Under Article 9 or defined as or
included within the definition of hazardous or extremely hazardous pursuant to
Article 11 of Title 22 of the California Administrative Code, Division 4,
Chapter 20, (viii) defined as or included within the definition of a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1317), (ix) defined as or included within the definition of a
"hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation
and Recovery Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601), (x)
defined as or included within the definition of a "hazardous substance" pursuant
to Section 101 of the Comprehensive Environmental Response Compensation and
Liability, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601), or (xi)
listed or defined as or included within the definition of "hazardous waste",
"hazardous substance," or other similar designation by any regulatory scheme of
any local governmental authority, the State of California or the United States
Government, or any other governmental or quasi-governmental entity.
2.12 Taxes. Except to the extent the failure to do so would not,
-----
individually or in the aggregate, have a Material Adverse Effect on OSI, OSI and
each of its subsidiaries, and any consolidated, combined, unitary or aggregate
group for Tax purposes of which OSI or any of its subsidiaries is or has been a
member have timely filed all Tax Returns required to be filed by it, have paid
all Taxes due and have provided adequate accruals in accordance with generally
accepted accounting principles in their financial statements for any Taxes that
have not been paid, whether or not shown as being due on any Tax Returns. All
Tax Returns filed are complete and accurate, except to the extent that any
inaccuracies in filed Tax Returns would not, individually or in the aggregate,
have a Material Adverse Effect on OSI. Except as disclosed in the OSI
Disclosure Letter, (i) no claim for Taxes has become a lien against the property
of OSI or any of its subsidiaries or is being asserted against OSI or any of its
subsidiaries other than liens for Taxes not yet due and payable, (ii) no audit
of any Tax Return of OSI or any of its subsidiaries is being conducted by a Tax
authority (defined below), and there is no deficiency, refund litigation,
proposed adjustment or matter in controversy with respect to any Taxes due,
(iii) no extension of the statute of limitations on the assessment of any Taxes
has been granted by OSI or any of its subsidiaries and is currently in effect,
and (iv) there is no agreement, contract or arrangement to which OSI or any of
its subsidiaries is a party that may result in the payment of any amount that
would not be deductible by reason of Sections 280G or 404 of the Code. All
assessments for Taxes due and owing by OSI or any of its subsidiaries
20
with respect to completed examinations or concluded litigation have been paid.
Neither OSI nor any of its subsidiaries has been or will be required to include
in income any material amounts for any Tax period (or portion thereof) pursuant
to Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Merger. Neither OSI nor any of its subsidiaries is a
party to any tax sharing or tax allocation agreement with any party other than
OSI or its existing subsidiaries nor does OSI or any of its subsidiaries owe any
amount under any such agreement. OSI and each of its subsidiaries have complied
in all material respects with all rules and regulations relating to the
withholding of Taxes. For purposes of this Agreement, the following terms have
the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, social security, workers'
compensation, unemployment compensation, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied obligation to
indemnify any other person. As used herein, "Tax Return" shall mean any return,
statement, report or form (including, without limitation, estimated Tax returns
and reports, withholding Tax returns and reports and information reports and
returns) required to be filed with respect to Taxes. OSI and each of its
subsidiaries are in full compliance with all terms and conditions of any Tax
exemptions or other Tax-sharing agreement or order of a foreign government, and
the consummation of the Merger shall not have any adverse effect on the
continued validity and effectiveness of any such Tax exemptions or other Tax-
sharing agreement or order.
2.13 Employee Benefit Plans.
----------------------
(a) Section 2.13(a) of the OSI Disclosure Letter lists, with
respect to OSI, each subsidiary of OSI, and any trade or business (whether or
not incorporated) which is treated as a single employer with OSI (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and subject to
ERISA, sponsored, maintained, contributed to or required to be contributed to by
OSI or any ERISA Affiliate, (ii) each loan to a non-officer employee in excess
of $50,000, all loans to officers and directors and any stock option, stock
purchase, phantom stock, stock appreciation right or other stock-based incentive
plans, programs, arrangements, or agreements, (iii) all supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance, bonus, pension, profit sharing,
savings, deferred compensation or other welfare, retirement or incentive plans,
programs, policies or contracts or arrangements
21
which are not employee benefit plans as otherwise covered under clause (i) or
(ii) above, (iv) other material fringe or employee benefit plans, programs,
policies or contracts or arrangements that apply to senior management of OSI and
that do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance or consulting agreements,
written or otherwise, as to which unsatisfied obligations of OSI of greater than
$50,000 remain for the benefit of, or relating to, any present or former
employee, consultant, agent, officer or director of OSI (together, the "OSI
Employee Plans").
(b) OSI has made available to LRC a copy of each of the OSI Employee
Plans and related plan documents (including trust documents, insurance policies
or contracts, employee booklets, summary plan descriptions and other authorizing
documents, and, to the extent still in its possession, any material employee or
other communications relating thereto) and has, with respect to each OSI
Employee Plan which is subject to ERISA reporting requirements, provided copies
of the Form 5500 reports filed for the last three plan years. Any OSI Employee
Plan intended to be qualified under Section 401(a) of the Code has either
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or has
applied to the Internal Revenue Service for such a determination letter prior to
the expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination.
OSI has also furnished LRC with the most recent Internal Revenue Service
determination letter issued with respect to each such OSI Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any OSI
Employee Plan subject to Code Section 401(a).
(c) (i) Other than continued health care coverage required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
none of the OSI Employee Plans promises or provides retiree medical or other
retiree welfare benefits to any person; (ii) there has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA and Section 4975
of the Code, with respect to any OSI Employee Plan, which could reasonably be
expected to have, in the aggregate, a Material Adverse Effect on OSI; (iii) each
OSI Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have, in the
aggregate, a Material Adverse Effect, and OSI and each of its subsidiaries and
each ERISA Affiliate have performed all obligations required to be performed by
them under, are not in any respect in default under or violation of, and have no
knowledge of any default or violation by any other party with respect to, any of
the OSI Employee Plans, which default or violation could reasonably be expected
to have a Material Adverse Effect on OSI; (iv) neither OSI nor any ERISA
Affiliate nor any of the Employee Plans nor any trust created thereunder nor any
trustee or administrator thereof has engaged in a transaction or has taken or
failed to take any action in connection with which OSI, any ERISA Affiliate, any
of the OSI Employee Plans, any such trust, any trustee or administrator thereof,
or any party dealing with the OSI Employee Plans or any such trust could be
subject to any
22
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA with respect to any of the OSI Employee Plans and that individually or in
the aggregate could reasonably be expected to have a Material Adverse Effect on
OSI; (v) neither OSI nor any subsidiary of OSI has any liabilities or
obligations with respect to any OSI Employee Plan, whether or not accrued,
contingent or otherwise, except as described in any of the OSI SEC Documents;
(vi) with respect to each OSI Employee Plan that is subject to Title IV of
ERISA, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA (except any failure
to meet the minimum funding standard of Section 412 of the Code and Section 302
of ERISA, which failure shall be deemed a "reportable event" for purposes
hereof) nor any event described in Section 4062, 4063 or 4041 of ERISA has
occurred; and (vii) no OSI Employee Plan is or at any time has been subject to,
and neither OSI nor any subsidiary or ERISA Affiliate has at any time incurred
or reasonably expects to incur any liability under Title IV of ERISA or Section
412 of the Code. To the extent the representation in clause (vii) of the
immediately preceding sentence applies to Sections 4064, 4069 or 4204 of Title
IV of ERISA, it is made not only with respect to the OSI Employee Plans but also
with respect to any employee benefit plan, program, agreement or arrangement
subject to Title IV of ERISA to which OSI or any ERISA Affiliate made, or was
required to make, contributions within the last six (6) years. With respect to
each OSI Employee Plan subject to ERISA that is either an employee pension
benefit plan within the meaning of Section 3(2) of ERISA or an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA, OSI has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct in all material respects as of the date filed) and, to OSI's
knowledge, OSI has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such OSI Employee Plan except where the failure to do so
would not have a Material Adverse Effect. No suit, administrative proceeding,
action or other litigation has been brought, or to the best knowledge of OSI is
threatened, against or with respect to any such OSI Employee Plan, including any
audit or inquiry by the IRS or United States Department of Labor. Neither OSI
nor any subsidiary or ERISA Affiliate is a party to, or has at any time made any
contribution to or otherwise incurred any obligation under, any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(d) With respect to each OSI Employee Plan, OSI and each of its ERISA
Affiliates has complied, except to the extent that failure to so comply would
not, individually or in the aggregate, have a Material Adverse Effect on OSI,
with (i) the applicable health care continuation and notice provisions of COBRA
and the proposed regulations thereunder and (ii) the applicable requirements of
the Family Leave Act of 1993 and the regulations thereunder.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former officer, director, agent
employee or other service provider of OSI or any subsidiary or other ERISA
Affiliate to severance benefits or any other payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise), or (ii) accelerate the time of payment or vesting, or increase the
23
amount of compensation otherwise due any such officer, director, agent employee
or service provider under any OSI Employee Plan or otherwise.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by OSI, any OSI subsidiary or other ERISA
Affiliate relating to, or change in participation or coverage under, any OSI
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal year included in OSI's financial statements.
(g) No amounts payable under any of the OSI Employee Plans or any
other agreement arrangements with respect to which OSI may have any liability
could give rise to the payment of any amount that would fail to be deductible
for Federal income tax purposes by virtue of Section 162(m) or Section 280G of
the Code.
(h) With respect to each OSI Employee Plan that is funded wholly
or partially through an insurance policy, there will be no liability of OSI or
any ERISA Affiliate, as of the Closing Date, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing Date.
2.14 Employee Matters.
----------------
(a) OSI and each of its subsidiaries has good labor relations,
are in compliance in all respects with all currently applicable laws,
regulations and agreements respecting employment, discrimination in employment,
terms and conditions of employment, wages, hours and occupational safety and
health and employment practices, and are not engaged in any unfair labor
practice, except where the failure to be in compliance or the engagement in such
unfair labor practices would not, individually or in the aggregate, have a
Material Adverse Effect on OSI. There are no pending claims against OSI or any
of its subsidiaries under any workers compensation plan or policy or for long
term disability which would have, individually or in the aggregate, a Material
Adverse Effect on OSI. Neither OSI nor any of its subsidiaries has any
obligations under COBRA with respect to any former employees or qualifying
beneficiaries thereunder, except for obligations that would not have,
individually or in the aggregate, a Material Adverse Effect on OSI. There are no
controversies pending or, to the knowledge of OSI or any of its subsidiaries,
threatened, between OSI or any of its subsidiaries and any of their respective
employees, which controversies would have, individually or in the aggregate, a
Material Adverse Effect on OSI. Neither OSI nor any of its subsidiaries is (or
has in the past been) a party to any collective bargaining agreement or other
labor union contract, nor does OSI nor any of its subsidiaries know of any
activities or proceedings of any labor union to organize any of its employees.
(b) To OSI's knowledge, no employee of OSI or its subsidiaries
(i) is in violation of any term of any employment contract, nondisclosure
agreement, noncompetition
24
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee to be employed by LRC, OSI or their subsidiaries
because of the nature of the business conducted or presently proposed to be
conducted by LRC, OSI or their subsidiaries or to the use of trade secrets or
proprietary information of others or (ii) has given notice to OSI, nor is OSI
aware that any member of senior management, any key employee or any other person
listed as a "key person" on Section 2.14 of the OSI Disclosure Letter intends to
terminate his or her employment with OSI or its subsidiaries.
2.15 Interested Party Transactions. Neither OSI nor any of its
-----------------------------
subsidiaries is indebted to any director, officer, employee or agent of OSI or
any of its subsidiaries (except for amounts due as normal salaries and bonuses
and in reimbursement of ordinary expenses), and no such person is indebted to
OSI or any of its subsidiaries, and there have been no other transactions of the
type required to be disclosed pursuant to Items 402 and 404 of Regulation S-K
under the Securities Act and the Exchange Act since the IPO Date. To the
knowledge of OSI, no director, officer, employee or agent of OSI or any of its
subsidiaries has any equity interest or other arrangement with any entity
described in the second to last sentence of Section 2.1 or with any competitor,
supplier or customer of OSI or any of its subsidiaries, other than less than 1%
equity interests in publicly traded companies.
2.16 Insurance. OSI and each of its subsidiaries have policies of
---------
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of OSI and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and OSI and its subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. OSI has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.17 Pooling of Interests. To the knowledge of OSI, after
--------------------
consultation with its independent auditors, neither OSI nor any of its
subsidiaries, nor any of their respective directors, officers or stockholders
has taken any action or failed to take any action, which action or failure would
prevent LRC from accounting for the Merger as a pooling of interests.
2.18 Brokers' and Finders' Fees. Except for payment obligations to
--------------------------
Deutsche Xxxxxx Xxxxxxxx disclosed to LRC, neither OSI nor its subsidiaries have
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment bankers' fees or
any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.19 Registration Statement; Joint Proxy Statement/Prospectus. The
--------------------------------------------------------
information supplied by OSI for inclusion in the Registration Statement on Form
S-4 (the "Registration Statement") pursuant to which the shares of LRC Common
Stock issuable in the Merger will be registered with the SEC shall not at the
time the Registration Statement (including any
25
amendments or supplements thereto) is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
information supplied by OSI for inclusion in the joint proxy
statement/prospectus (the "Proxy Statement") to be sent to the stockholders of
OSI and LRC in connection with the meeting of OSI's stockholders to consider the
Merger (the "OSI Stockholders Meeting") and the meeting of LRC's stockholders to
consider the Merger (the "LRC Stockholders Meeting") (such Proxy Statement as
amended or supplemented, together with the letters to stockholders, notices of
meeting, forms of proxies to be distributed to stockholders in connection with
the Merger and any schedules required to be filed with the SEC in connection
therewith are collectively referred to herein as the "Joint Proxy Statement")
shall not, on the date the Joint Proxy Statement is first mailed to stockholders
of OSI or LRC, at the time of the OSI Stockholders Meeting or the LRC
Stockholders Meeting, or at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the OSI Stockholders Meeting or the LRC Stockholder Meeting which
has become false or misleading. The Joint Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder. If at any time prior to the
Effective Time any event or information should be discovered by OSI which should
be set forth in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement, OSI shall promptly inform LRC and Merger Sub.
Notwithstanding the foregoing, OSI makes no representation, warranty or covenant
with respect to any information supplied by LRC or Merger Sub which is contained
in any of the foregoing documents.
2.20 Opinion of Financial Advisor. The financial advisor of OSI,
----------------------------
Deutsche Xxxxxx Xxxxxxxx, has delivered to OSI a written opinion dated the date
of this Agreement to the effect that the Exchange Ratio is fair from a financial
point of view to the stockholders of OSI as of the date hereof. A copy of the
written opinion of Deutsche Xxxxxx Xxxxxxxx will be delivered to LRC as soon as
practicable after the date of this Agreement.
2.21 Title to Property. OSI and its subsidiaries have good and valid
-----------------
title to all of their respective properties, interests in properties and assets,
real and personal, reflected in the OSI Balance Sheet or acquired after December
31, 1996 (except properties, interests in properties and assets sold or
otherwise disposed of since December 31, 1996 in the ordinary course of
business), or in the case of leased properties and assets, valid leasehold
interests in, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) any lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties, (iii) liens securing debt
reflected on the OSI Balance Sheet or (iv) those liens which would not,
individually or in the aggregate, have a Material Adverse
26
Effect on OSI. The plants, property and equipment of OSI and its subsidiaries
that are used in the operations of their businesses are in good operating
condition and repair. All properties used in the operations of OSI and its
subsidiaries are reflected in the OSI Balance Sheet to the extent generally
accepted accounting principles require the same to be reflected. Schedule 2.10
identifies each parcel of real property owned or leased by OSI or any of its
subsidiaries.
2.22 Section 203 of the Delaware Law Not Applicable. Assuming LRC
----------------------------------------------
and its subsidiaries have not owned at any time, and will not acquire prior to
the Effective Time, shares of (or shares convertible into) OSI equity, the Board
of Directors of OSI has taken all actions necessary so that the restrictions
contained in Section 203 of the Delaware Law applicable to a "business
combination" (as defined in Section 203) will not apply to the execution,
delivery or performance of this Agreement or the consummation of the Merger or
the other transactions contemplated by this Agreement.
2.23 Lack of Ownership of LRC Common Stock. Neither OSI nor any of
-------------------------------------
its subsidiaries owns any shares of LRC Common Stock or other securities
convertible into LRC Common Stock.
2.24 Agreements, Contracts and Commitments. Except as set forth in
-------------------------------------
the OSI Disclosure Letter, neither OSI nor any of its subsidiaries is a party to
or is bound by:
(a) any collective bargaining agreements;
(b) any agreements or arrangements that contain any severance pay
or postemployment liabilities or obligations other than OSI Employee Plans;
(c) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements other than OSI Employee Plans;
(d) any employment or consulting agreement, contract or binding
commitment with any employee, not terminable by OSI or any of its subsidiaries
on thirty days notice without liability;
(e) 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, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(f) any agreement of indemnification or guaranty not entered into
in the ordinary course of business other than indemnification agreements between
OSI or any of its subsidiaries and any of its officers or directors;
27
(g) any agreement, contract or commitment containing any covenant
limiting the freedom of OSI or any of its subsidiaries to engage in any line of
business or compete with any person;
(h) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $250,000 and not
cancelable at will without penalty;
(i) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(j) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit;
(k) any joint marketing or development agreement, distribution
agreement or royalty agreement; or
(l) any other agreement, contract or commitment (excluding real
and personal property leases) which require payment by OSI or any of its
subsidiaries under any such agreement, contract or commitment of $250,000 or
more in the aggregate and is not cancelable without penalty within thirty (30)
days other than purchase order commitments for inventory in the ordinary course
of business and consistent with past practices.
Neither OSI nor any of its subsidiaries, nor to OSI's knowledge any
other party to an OSI Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which OSI is a party or by which it is bound of the
type described in clauses (a) through (l) above (any such agreement, contract or
commitment, an "OSI Contract") in such a manner as would permit any other party
to cancel or terminate any such OSI Contract, or would permit any other party to
seek damages, which would have a Material Adverse Effect on OSI.
2.25 Representations Complete. None of the representations or
------------------------
warranties made by OSI herein or in any Schedule or Exhibit hereto, including
the OSI Disclosure Letter, or certificate furnished by OSI pursuant to this
Agreement, contains or will contain at the Effective Time any untrue statement
of a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LRC AND MERGER SUB
28
LRC and Merger Sub represent and warrant to OSI that the statements
contained in this Article 3 are true and correct, except as disclosed in writing
in the disclosure letter supplied by LRC and Merger Sub as of the date hereof
and certified by a duly authorized officer of LRC (the "LRC Disclosure Letter").
The LRC Disclosure Letter shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article 3, and the disclosure
in any paragraph shall qualify only the corresponding paragraph in this Article
3.
3.1 Organization; Subsidiaries. Each of LRC and its subsidiaries,
--------------------------
including Merger Sub, is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization. Each of LRC
and its subsidiaries has the corporate power to own its properties and to carry
on its business as now being conducted and as proposed to be conducted, and is
duly qualified to do business and in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on LRC. LRC has made available to OSI true and complete copies
of LRC's Certificate of Incorporation and Bylaws and similar governing
instruments of its subsidiaries, each as amended to date. Neither LRC nor any
of its subsidiaries is in violation of any of the provisions of its Certificate
of Incorporation or Bylaws or equivalent organizational documents, and each such
document is in full force and effect on the date hereof. LRC does not own,
directly or indirectly, any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for any equity or similar interest
in, any corporation, partnership, limited liability company, joint venture or
other business association or entity. LRC does not conduct any part of its
business operations through any subsidiaries or through any other entity in
which LRC has an equity investment.
3.2 Capital Structure.
-----------------
(a) The authorized capital stock of LRC consists of 90,000,000
shares of LRC Common Stock, $.001 par value, and 5,000,000 shares of Preferred
Stock, $.001 par value ("LRC Preferred Stock"). As of March 14, 1997, (i)
30,666,060 shares of LRC Common Stock were issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable; (ii) no
shares of LRC Preferred Stock were issued and outstanding; (iii) 0 shares of LRC
Common Stock or LRC Preferred Stock were held in the treasury of LRC or by
subsidiaries of LRC; and (iv) 4,145,420 shares of LRC Common Stock were reserved
for future issuance pursuant to LRC's Amended 1981 Incentive Stock Option Plan,
Amended 1984 Incentive Stock Plan, and Amended 1991 Stock Option Plan (the "LRC
Stock Option Plans"), LRC's 1996 Performance - Based Restricted Stock Plan (the
"LRC Restricted Stock Plan") and LRC's Amended 1984 Employee Stock Purchase Plan
(the "LRC Purchase Plan" and, together with the LRC Stock Option Plans and the
LRC Restricted Stock Plan, the "LRC Stock Plans"). The shares reserved under the
LRC Stock Plans include: (A) 0 shares reserved for issuance under the Amended
1981 Stock Option Plan; (B) 111,198 shares reserved for issuance under the
Amended 1984 Stock Option Plan, 111,198 of which were subject to or reserved for
outstanding options and 0 of which were reserved for future option grants; (C)
3,378,927 shares reserved for issuance under the Amended 1991 Stock Option Plan,
3,076,148 of which were subject to
29
or reserved for outstanding options and 302,779 of which were reserved for
future option grants; (D) 120,117 shares reserved for issuance under the LRC
Restricted Stock Plan, 0 of which were subject to outstanding awards and 120,117
of which were reserved for future issuance; and (E) 535,178 shares reserved for
future issuance under the LRC Purchase Plan. No change in such capitalization
has occurred since such date other than the exercise and termination of
outstanding stock options and restricted stock awards and the accrual of rights
under the LRC Purchase Plan, all in the ordinary course. All shares of LRC
Common Stock subject to issuance as specified above, 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
shares of LRC Common Stock to be issued in the Merger will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully paid and
nonassessable.
(b) LRC owns beneficially and of record, directly or through a
subsidiary, all outstanding shares of capital stock of each of its subsidiaries
(including 100% of the outstanding shares of Merger Sub Common Stock) free and
clear of any security interest, claim, lien, pledge, right, voting trust or
proxy or other encumbrance or restriction whatsoever. There are no obligations,
contingent or otherwise, of LRC or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of LRC Common Stock or the capital stock of any
LRC subsidiary or make any investment (in the form of a loan, capital
contribution or otherwise), in any such subsidiary or any other entity other
than guarantees of bank obligations of such subsidiaries entered into in the
ordinary course of business.
(c) Except as set forth in Section 3.2(a) or (b), there are no
equity securities of any class of LRC or its subsidiaries, or any securities
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 3.2(a) or (b), there
are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which LRC or any of its subsidiaries is a party
or by which any of them is bound obligating LRC or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of LRC or any of its subsidiaries or obligating LRC 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, and, to the knowledge of LRC, there are no voting trusts, proxies or
other agreements or understandings with respect to the capital shares of LRC or
its subsidiaries.
3.3 Authority; Absence of Conflicts; Consents. (a) LRC has 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 and validly authorized by all necessary corporate action on the part
of LRC, subject only to the approval of the Merger by LRC's stockholders. A
vote of the holders of a majority of the outstanding shares of the LRC Common
Stock is the only approval required for the LRC stockholders to adopt this
Agreement and the transactions contemplated hereby. The Board of Directors of
LRC has, prior to the date hereof, unanimously (x) approved this Agreement and
the Merger, (y) determined that the Merger is in
30
the best interests of the stockholders of LRC and is on terms that are fair to
such stockholders and (z) determined to recommend that the stockholders of LRC
approve the Share Issuance. This Agreement has been duly and validly executed
and delivered by LRC and, assuming this Agreement constitutes a valid and
binding agreement of the other parties hereto, constitutes a valid and binding
obligation of LRC enforceable against LRC in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
The execution and delivery of this Agreement by LRC does not, and the
performance of this Agreement by LRC will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of LRC or the equivalent organizational
documents of any of its subsidiaries, (ii) subject to obtaining the adoption by
LRC's stockholders of this Agreement as contemplated in Section 6.1 and
compliance with the requirements set forth in Section 3.3(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to LRC or any of its subsidiaries or by which its or any of their respective
properties is bound, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair the rights of LRC or its subsidiaries or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of LRC or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which LRC or any of its subsidiaries is a party or by which LRC or
any of its subsidiaries or its or any of their respective properties are bound
or affected, except, with respect to clauses (ii) and (iii) above, for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on LRC. The LRC Disclosure Letter lists all material
consents, waivers and approvals under any of LRC's or its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby, except for those
the absence of which in aggregate would not have a Material Adverse Effect on
LRC.
(b) No consent, approval, order or authorization of, or registration
declaration or filing with any Governmental Entity is required by or with
respect to LRC or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Registration Statement with the SEC in
accordance with the Securities Act, (ii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (iii) the filing of the
Joint Proxy Statement with the SEC in accordance with the Exchange Act, (iv) the
filing of a Current Report on Form 8-K with the SEC, (v) the filing with the
United States Department of Justice and the Federal Trade Commission of such
forms as may be required by the HSR Act, (vi) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign
country, (vii) the filing with the Nasdaq National Market of a Notification Form
for Listing of Additional Shares with respect to the shares of LRC Common Stock
issuable in the Merger and upon assumption by LRC of the OSI Stock Plans, (viii)
the filing of a Form S-8 Registration Statement with the SEC relating to the LRC
1997 Equity Incentive Plan and the assumption by
31
LRC of the OSI Stock Plans, and (ix) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on LRC or OSI or have a material adverse effect
on the ability of the parties to consummate the transactions contemplated by
this Agreement.
3.4 SEC Documents; Financial Statements; Undisclosed Liabilities.
------------------------------------------------------------
(a) LRC has filed all forms, reports and documents required to be
filed with the SEC since June 30, 1995, and has made available to OSI such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that LRC may file subsequent to
the date hereof until the Closing) are referred to herein as the "LRC SEC
Documents." As of their respective dates, the LRC SEC Documents (i) were
prepared in accordance 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 LRC SEC Documents, and (ii) did not at the time
they were filed (and 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 LRC'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 LRC SEC Documents (the "LRC
Financial Statements"), including any LRC SEC Documents filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (y) was prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (z) fairly presented the consolidated financial position of LRC and its
subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, consistent with the
books and records of LRC, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not,
or are not expected to be, material in amount. The balance sheet of LRC
contained in LRC's Form 10-Q for the quarter ended December 31, 1996 is
hereinafter referred to as the "LRC Balance Sheet." Neither LRC nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
whether or not of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP, which individually or in the aggregate are or would be reasonably
likely to have a Material Adverse Effect on LRC other than (i) liabilities
reflected in the LRC Balance Sheet, and (ii) normal or recurring liabilities
incurred since December 31, 1996 in the ordinary course of business consistent
with past practice. The inventories shown on the LRC Balance Sheet are (and on
LRC balance sheets included in future LRC SEC Documents except as disclosed
therein will be) of a quantity and quality useable and saleable in accordance
with good business practices and
32
represent a distribution of the types of inventories utilized in the business of
LRC in accordance with good business practices. Additions and deletions from
the inventories since the date thereof have been in the ordinary course of
business. The amounts shown for inventories on the LRC Balance Sheet have been
(and on LRC balance sheets included in future LRC SEC Documents except as
disclosed therein will be) determined in accordance with generally accepted
accounting principles on a first-in, first-out basis and are stated at lower of
cost or market.
(c) LRC has heretofore made available to OSI a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by LRC with the SEC pursuant
to the Securities Act or the Exchange Act.
3.5 Absence of Changes. (a) Since December 31, 1996, except as
------------------
expressly contemplated by this Agreement or in Section 4 of the LRC Disclosure
Letter, the business of LRC and its subsidiaries has been operated in the
ordinary course consistent with past practices, and:
(i) there has not been any material adverse change in the
business, condition, assets, liabilities, operations or financial performance of
LRC and its subsidiaries taken as a whole, and no event has occurred (whether or
not covered by insurance) that would reasonably be expected to have a Material
Adverse Effect on LRC;
(ii) none of LRC or its subsidiaries has (x) declared,
accrued, set aside or paid any dividend or made any other distribution in
respect of any shares of capital stock, or (y) repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities; and
(iii) there has been no amendment to the Certificate of
Incorporation (other than the Charter Amendments described in Section 4.1),
Bylaws or other charter or organizational documents of LRC or its subsidiaries,
and none of LRC or its subsidiaries has effected or been a party to any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction.
(b) Since December 31, 1996 through the date of this Agreement:
(i) none of LRC or its subsidiaries has effected or been a
party to any merger, consolidation, share exchange, business combination or
similar transaction, or has made any capital expenditure in any calendar month
which, when added to all other capital expenditures made on behalf of LRC or its
subsidiaries in such calendar month results in such capital expenditures
exceeding $5,000,000 in the aggregate;
(ii) none of LRC or its subsidiaries has entered any material
agreement other than in the ordinary course of business and as made available to
OSI, nor has there occurred any amendment or termination of, or default under,
any material agreement to
33
which LRC or any of its subsidiaries is a party or by which it is bound which
would result in a Material Adverse Effect on LRC;
(iii) none of LRC or its subsidiaries has written off as
uncollectible, or established any extraordinary reserve with respect to, any
material amount of accounts receivable or other indebtedness;
(iv) none of LRC or its subsidiaries has incurred or
guaranteed any indebtedness for borrowed money, or made any pledge of any of its
assets or otherwise permitted any of its assets to become subject to any lien,
claim or encumbrance except for encumbrances of assets made in the ordinary
course of business and consistent with past practices;
(v) none of LRC or its subsidiaries has (x) established or
adopted any employee benefit plan, (y) caused or permitted any employee benefit
plan or rights or agreements granted thereunder to be amended in any material
respect, or (z) except for bonus, profit-sharing and similar payments made in
the ordinary course of business and consistent with past practices, paid any
bonus or made any profit-sharing or similar payment to, materially increased the
amount of commissions payable to, or materially increased the amount of the
wages, salary, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees;
(vi) none of LRC or its subsidiaries has changed any of its
methods of accounting or accounting practices in any material respect;
(vii) none of LRC or its subsidiaries has made any material
Tax election;
(viii) none of LRC or its subsidiaries has commenced, settled
or received a notice or threat of any lawsuit or proceeding (including without
limitation any claim involving Intellectual Property) or governmental
investigation of LRC or its subsidiaries; and
(ix) none of LRC or its subsidiaries has agreed or committed
to take any of the actions referred to in clauses (i) through (viii) above.
3.6 Litigation. There is no private or governmental action, suit,
----------
claim or proceeding (collectively, "Litigation") of any nature pending or to
LRC's knowledge threatened against LRC or its subsidiaries, their properties or
any of their officers or directors, in their respective capacities as such
involving Intellectual Property rights of LRC or in which injunctive or other
equitable relief or damages in excess of $1,000,000 are requested against LRC or
its subsidiaries or which could otherwise result in a Material Adverse Effect on
LRC. As of the date hereof, there is no Litigation of any nature pending or to
LRC's knowledge threatened against LRC or its subsidiaries, their properties or
any of their officers or directors, in their respective capacities as such which
in any manner challenges or seeks to (or is reasonably likely
34
to) prevent, enjoin, alter or delay any of the transactions contemplated by this
Agreement. Except as set forth in Section 3.6 of the LRC Disclosure Letter, to
LRC's knowledge, there is no investigation or review pending or threatened
against LRC or its subsidiaries, their properties or any of their officers or
directors (in their capacities as such) by or before any Governmental Entity
(collectively, "Government Claims"). With respect to any Litigation or
Government Claims listed in Section 3.6 of the LRC Disclosure Letter in response
to the preceding three sentences, such Disclosure Letter also sets forth the
forum, the parties thereto, the subject matter thereof and the amount of damages
or other remedy requested.
3.7 Restrictions on Business Activities. There is no material
-----------------------------------
agreement, judgment, injunction, order or decree binding upon LRC or any of its
subsidiaries which has the effect of prohibiting or impairing any current or
future business practice of LRC or any of its subsidiaries, any acquisition of
property (tangible or intangible) by LRC or any of its subsidiaries or the
conduct of business by LRC or any of its subsidiaries as currently conducted or
as proposed to be conducted by LRC and its subsidiaries.
3.8 Compliance With Laws. Each of LRC and its subsidiaries has
--------------------
complied with, is not in violation of, has not received any notices of violation
with respect to, and holds all licenses, permits and authorizations required by
any federal, state, local or foreign statute, law, regulation, decree, judgment
or order with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures as would not
have, individually or in the aggregate, a Material Adverse Effect on LRC.
3.9 Governmental Authorization. LRC and each of its subsidiaries
--------------------------
has obtained and is in compliance with each federal, state, county, local or
foreign governmental consent, license, permit, grant, or other authorization of
a Governmental Entity (i) pursuant to which LRC or any of its subsidiaries
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of LRC's or any of its subsidiaries' business or
the holding of any such interest ((i) and (ii) herein collectively called "LRC
Authorizations"), and all of such LRC Authorizations are in full force and
effect, except where the failure to obtain or have any of such LRC
Authorizations would not, individually or in the aggregate, have a Material
Adverse Effect on LRC.
3.10 Intellectual Property.
---------------------
(a) LRC and its subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use Intellectual Property that is used or
proposed to be used in the business of LRC and its subsidiaries as currently
conducted or as proposed to be conducted by LRC and its subsidiaries, except to
the extent that the failure to have such rights have not had and would not
reasonably be expected to have a Material Adverse Effect on LRC. Each License
to which LRC or any of its subsidiaries is a party with respect to Intellectual
Property of LRC or its subsidiaries, or with respect to Intellectual Property of
third parties, is valid and enforceable in accordance with its terms and is not
the subject of any notice of termination or nonrenewal, except where such lack
of validity or enforceability or notice of termination or
35
nonrenewal has not had and would not reasonably be expected to have a Material
Adverse Effect on LRC.
(b) The execution, delivery and performance of this Agreement and
the summation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any LRC Intellectual Property
rights (the "LRC Intellectual Property Rights Agreements"), will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any LRC Intellectual Property rights or impair the right of LRC and its
subsidiaries to use, sell or license any LRC Intellectual Property Rights or
portion thereof, except for the occurrence of any such breach, forfeiture,
termination or impairment that would not individually or in the aggregate,
result in a Material Adverse Effect on LRC.
(c) (i) Neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by LRC or any of its subsidiaries violates any license or agreement
between LRC or any of its subsidiaries and any third party or infringes any
Intellectual Property right of any other party; and (ii) there is no pending or,
to the knowledge of LRC, threatened claim or litigation contesting the validity,
ownership or right to use, sell, license or dispose of any LRC Intellectual
Property rights or the proposed use, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party, except, with
respect to clauses (i) and (ii), for any violations, infringements, claims or
litigation that would not have a Material Adverse Effect on LRC.
(d) LRC has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all LRC Intellectual Property rights.
3.11 Environmental Matters. Except for such cases that,
---------------------
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on LRC, LRC and each of its
subsidiaries (i) has obtained all applicable permits, licenses and other
authorizations that are required by LRC or such subsidiary or any of their
respective agents under applicable Environmental Laws; (ii) is in compliance
with all terms and conditions of such required permits, licenses and
authorizations, and also is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws or in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder; (iii) is not aware of and has not
received notice of any (A) claim, act, suit, proceeding or investigation, or (B)
event, condition, circumstance, activity, practice, incident, action or plan
that is reasonably likely to interfere with or prevent continued compliance or
that would give rise to any common law or statutory liability, or otherwise form
the basis of any claim, action, suit or proceeding, based on or resulting from
LRC's or any of its subsidiaries' (or any of their respective agents')
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge or release into the
environment of any Hazardous Material or other non-compliance with any
applicable Environmental Law; (iv) has not disposed of any Hazardous Material
into the soil or groundwater at any properties
36
owned, leased or used by LRC, either now or in the past, or at any other
property that might reasonably be expected to result in any assessment or
remedial action by any Governmental Entity; and (v) has taken all actions
necessary under applicable requirements of Federal, state, local and foreign
laws, rules or regulations to register any products or materials required to be
registered by LRC or any of its subsidiaries (or any of their respective agents)
thereunder.
3.12 Employee Benefit Plans. Each material employee benefit plan,
----------------------
program, arrangement and contract (including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA) maintained or contributed to
by LRC or any trade or business (whether or not incorporated) which is treated
as a single employer with LRC (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code (the "LRC Employee Plans"), which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination from the IRS covering the provisions of the Tax Reform
Act of 1986, stating that such LRC Employee Plan is so qualified, and nothing
has occurred since the date of such letter that could reasonably be expected to
affect the qualified status of such plan. Each LRC Employee Plan has been
operated in all material respects in accordance with its terms and the
requirements of applicable law. Neither LRC nor any ERISA Affiliate of LRC has
incurred or is reasonably expected to incur any material liability under Title
IV of ERISA in connection with any LRC Employee Plan.
3.13 Employee Matters. Xxx and each of its subsidiaries has good
----------------
labor relations and there are no controversies pending, or to the knowledge of
Xxx, threatened, between Xxx or any of its subsidiaries and any of their
respective employees, which failure to have good labor relations or
controversies would have, individually or in the aggregate, a Material Adverse
Effect on LRC.
3.14 Pooling of Interests. To the knowledge of LRC, after
--------------------
consultation with its independent auditors, neither LRC nor any of its
subsidiaries, nor any of their respective directors, officers or stockholders
has taken any action or failed to take any action, which action or failure would
prevent it from accounting for the Merger as a pooling of interests.
3.15 Brokers' and Finders' Fees. Except for payment obligations to
--------------------------
Xxxxx Xxxxxx Inc. disclosed to OSI, neither LRC nor its subsidiaries have
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment bankers' fees or
any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.16 Registration Statement; Joint Proxy Statement/Prospectus. The
--------------------------------------------------------
information supplied by LRC for inclusion in the Registration Statement shall
not at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information
supplied by LRC for inclusion in the Proxy Statement to be sent to the
stockholders of LRC and stockholders of OSI in
37
connection with the LRC Stockholders Meeting and the OSI Stockholders Meeting
shall not, on the date the Joint Proxy Statement is first mailed to the
stockholders of OSI and LRC, at the time of the LRC Stockholders Meeting or the
OSI Stockholders Meeting, or at the Effective Time, contain any statement which,
at such time, is false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the LRC Stockholders Meeting or the OSI Stockholder Meeting which
has become false or misleading. The Joint Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated thereunder. If at any time prior to the
Effective Time any event or information should be discovered by LRC which should
be set forth in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement, LRC shall promptly inform OSI. Notwithstanding the
foregoing, LRC makes no representation, warranty or covenant with respect to any
information supplied by OSI which is contained in any of the foregoing
documents.
3.17 Opinion of Financial Advisor. The financial advisor of LRC,
----------------------------
Xxxxx Xxxxxx Inc., has delivered to the Board of Directors of LRC an opinion
dated the date of this Agreement to the effect that, as of the date of this
Agreement, the Exchange Ratio is fair, from a financial point of view, to LRC.
A copy of the written opinion of Xxxxx Xxxxxx Inc. will be delivered to OSI as
soon as practicable after the date of this Agreement.
3.18 Interim Operations of Merger Sub. Merger Sub was formed solely
--------------------------------
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
3.19 Agreements, Contracts and Commitments. LRC has not breached, or
-------------------------------------
received in writing any claim or threat that it has breached, any of the terms
or conditions of any material agreements, contract or commitment filed as an
exhibit to the LRC SEC Reports ("LRC Material Contracts") in such a manner as
would permit any other party to cancel or terminate the same or would permit any
other party to seek material damages from LRC under any LRC Material Contract,
except where such cancellation, termination or damages would not have a Material
Adverse Effect on LRC. Each LRC Material Contract that has not expired or been
terminated is in full force and effect and is not subject to any material
default thereunder of which LRC is aware by any party obligated to LRC pursuant
to such LRC Material Contract, except where such failure to be in full force and
effect or such default would not have a Material Adverse Effect on LRC.
3.20 Lack of Ownership of OSI Common Stock. Neither LRC nor any of
-------------------------------------
its subsidiaries owns any shares of OSI Common Stock or other securities
convertible into OSI Common Stock.
38
3.21 Interested Party Transactions. Except as disclosed in the LRC
-----------------------------
SEC Documents, neither LRC nor any of its subsidiaries is indebted to any
director, officer, employee or agent of LRC or any of its subsidiaries (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to LRC or any of its subsidiaries, and
there have been no other transactions of the type required to be disclosed
pursuant to Items 402 and 404 of Regulation S-K under the Securities Act and the
Exchange Act since June 30, 1995. To the knowledge of LRC, no director,
officer, employee or agent of LRC or any of its subsidiaries has any equity
interest or other arrangement with any entity described in the second to last
sentence of Section 3.1 or with any competitor, supplier or customer of LRC or
any of its subsidiaries, other than less than 1% equity interests in publicly
traded companies.
3.22 Representations Complete. None of the representations or
------------------------
warranties made by LRC herein or in any Schedule hereto, including the LRC
Disclosure Letter, or certificate furnished by LRC pursuant to this Agreement,
contains or will contain at the Effective Time any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of OSI and LRC. During the period from the
----------------------------------
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, each of OSI and LRC agrees (except to the
extent expressly contemplated by this Agreement or as consented to in writing by
the other), (i) to carry on its and its subsidiaries' business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, (ii) to pay and to cause its subsidiaries to pay debts and Taxes when
due subject to good faith disputes over such debts or taxes, (iii) to pay or
perform other obligations when due, and (iv) to use all reasonable efforts
consistent with past practice and policies to preserve intact its and its
subsidiaries' present business organizations, use its reasonable efforts
consistent with past practice to keep available the services of its and its
subsidiaries' present officers and key employees and use its reasonable efforts
consistent with past practice to preserve its and its subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it or its subsidiaries. Each of OSI and
LRC agrees to use its best efforts to promptly notify the other of any event or
occurrence not in the ordinary course of its or its subsidiaries' business, and
of any event which would have a Material Adverse Effect. LRC agrees that it
will not grant more than 500,000 options to purchase shares of LRC Common Stock
under the LRC Stock Option Plans between the date of this Agreement and the
Effective Time. Without limiting the foregoing, except as expressly
contemplated by this Agreement or in Section 4.1 of the LRC Disclosure Letter or
Section 4 of the OSI Disclosure Letter, neither
39
OSI nor LRC shall do, agree to do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, agree to do, cause or
permit any of the following, without the prior written consent of the other:
(a) Charter Documents. Adopt or propose any change or
-----------------
amendment in its Certificate of Incorporation or Bylaws that would have any
adverse impact on the transactions contemplated by this Agreement or which would
amend or modify the terms or provisions of the capital stock of LRC or OSI;
provided, however, that, notwithstanding any other provision of this Agreement,
-------- -------
LRC may propose the amendments to its Certificate of Incorporation described in
Section 4.1 of the LRC Disclosure Letter (the "Charter Amendments") for adoption
at the LRC Stockholders Meeting;
(b) Dividends; Changes in Capital Stock. 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 its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with existing agreements providing for the repurchase
of shares in connection with any termination of service to it or its
subsidiaries;
(c) Stock Option Plans, Etc. Waive any stock repurchase rights,
------------------------
accelerate, amend or change the period of exercisability or vesting of options
or other rights granted under its employee stock plans or director stock plans,
reprice options granted under such plans, or authorize cash payments in exchange
for any options or other rights granted under any of such plans; provided,
--------
however, that, notwithstanding any other provision of this Agreement, LRC may
-------
take all actions reasonably necessary to implement at the time of the LRC
Stockholders Meeting a new equity incentive plan permitting grants of options,
restricted stock, and other equity incentives (the "1997 Equity Incentive
Plan"), and to reserve up to 3,000,000 shares of LRC Common Stock for issuance
pursuant to such plan; or
(d) Pooling. Take any action, which to the knowledge of such
-------
party would prevent LRC from accounting for the Merger as a pooling of
interests.
4.2 Conduct of Business of OSI. During the period from the date of
--------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, OSI shall not do, cause or permit any of the
following, or allow, cause or permit any of its subsidiaries to do, cause or
permit any of the following, without the prior written consent of LRC, except as
set forth in Section 4 of the OSI Disclosure Letter:
(a) Material Contracts. Enter into any material contract or
------------------
commitment outside the ordinary course of business, or violate, amend or
otherwise modify or waive any of the terms of its material contracts other than
modifications that are not adverse to OSI and its
40
subsidiaries, or enter into or renew any distribution or representation
agreement without the written consent of LRC (such consent not to be
unreasonably withheld);
(b) Issuance of Securities. Issue, deliver or sell or authorize or
----------------------
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of OSI Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement; provided, however, that OSI may,
in the ordinary course of business consistent with past practice, grant options
for the purchase of OSI Common Stock under the OSI Stock Option Plans (not to
exceed an aggregate of 200,000 options to purchase shares of OSI Common Stock or
more than 100,000 options in each sixty day period after the date of this
Agreement);
(c) Intellectual Property. Transfer or license to any person or
---------------------
entity, or otherwise extend, amend or modify in any material respect, any rights
to its Intellectual Property other than in the ordinary course of business
consistent with past practice;
(d) Exclusive Rights. Enter into or amend any agreements pursuant to
----------------
which any other party is granted exclusive marketing, distribution or other
rights with respect to any of its business, products or technology;
(e) Dispositions. Sell, lease, license or otherwise dispose of or
------------
encumber any of its properties or assets which are material, individually or in
the aggregate, to its and its subsidiaries' business, taken as a whole;
(f) Indebtedness. 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 guarantee any debt securities or warrants or rights
to acquire debt securities of others;
(g) Leases. Enter into any operating lease, except in the ordinary
------
course of business consistent with past practice;
(h) Payment of Obligations. Pay, discharge or satisfy any claim,
----------------------
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the OSI Financial Statements or in the ordinary
course of business and consistent with past practices;
(i) Capital Expenditures. Make any capital expenditures in any
--------------------
calendar month except those made in the ordinary course of business and
consistent with past practice which, when added to all other capital
expenditures made by OSI and its subsidiaries in that month, do not exceed
$250,000 in the aggregate;
41
(j) Insurance. Materially reduce the amount of any material insurance
---------
coverage provided by existing insurance policies;
(k) Employee Benefit Plans; Pay Increases. Adopt or amend any
-------------------------------------
employee benefit or stock purchase or option plan, or enter into or amend any
employment contract, pay any special bonus or special remuneration to any
employee or director, or increase the salaries or wage rates of its officers or
employees except for reasonable salary increases to non-officer employees in
accordance with OSI's written compensation plan and consistent with past
practices;
(l) Severance Arrangements. Grant any severance or termination pay to
----------------------
any director, officer or other employee except payments made pursuant to
standard written agreements outstanding on the date hereof and disclosed to LRC,
or adopt any new severance plan;
(m) Claims; Lawsuits. Waive, release, assign, settle or compromise
----------------
any material claim or litigation, or commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with LRC prior
to the filing of such a suit, or (iii) for a breach of this Agreement;
(n) Acquisitions. Acquire or agree to acquire by merging or
------------
consolidating with, or by purchasing any equity interest in or a material
portion of the assets of, or by any other manner, any business or any
corporation, partnership interest, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any material assets
or enter into any joint ventures, strategic partnerships or alliances;
(o) Taxes. Other than in the ordinary course of business, make or
-----
change any material election in respect of Taxes, adopt or change any accounting
method in respect of Taxes, enter into any closing agreement, settle any claim
or assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
(p) Revaluation. Revalue any of its assets, including without
-----------
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(q) Other. Take or agree in writing or otherwise to take, any of the
-----
actions described in Sections 4.2(a) through (p) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
42
4.3 Acquisition Proposals.
---------------------
(a) OSI agrees that neither it nor any of its subsidiaries nor
any of the officers and directors of it or its subsidiaries shall, and that it
shall not authorize or permit its and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate (including by way of furnishing
information) any inquiries, expressions of interest or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving, or any purchase or sale of all or any
significant portion of the assets or any of the equity securities of, it or any
of its subsidiaries that, in any such case, could reasonably be expected to
interfere with the completion of the Merger or the other transactions
contemplated by this Agreement (any such inquiry, expression of interest,
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
--------------------
OSI further agrees that neither it nor any of its subsidiaries nor any of the
officers and directors of it or its subsidiaries shall, and that it shall not
authorize or permit its and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) to, directly or indirectly, have any
discussion with or provide any confidential information or data to any
individual, group, organization, corporation, partnership, or entity of any kind
(a "Person") relating to an Acquisition Proposal or engage in any negotiations
concerning an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
-------- -------
prevent OSI or its Board of Directors from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal; (B)
engaging in any discussion or negotiations with, or providing any information
to, any Person in response to an unsolicited bona fide written Acquisition
Proposal by any such Person; or (C) recommending such an unsolicited bona fide
written Acquisition Proposal to the stockholders of OSI or withdrawing or
modifying its recommendation in favor of this Agreement and the Merger in
compliance with Sections 5.1 and 7.1(f), if and only to the extent that, in any
such case as is referred to in clause (B) or (C), (i) a majority of the members
of the Board of Directors of OSI concludes in good faith (after consultation
with its financial advisors) that such Acquisition Proposal is reasonably
capable of being completed, taking into account all legal, financial, regulatory
and other aspects of the proposal and the Person making the proposal, and would,
if consummated, result in a transaction more favorable to OSI's stockholders
than the transaction contemplated by this Agreement (any such more favorable
Acquisition Proposal being referred to in this Agreement as a "Superior
--------
Proposal"), (ii) a majority of the members of the Board of Directors of OSI
-------
concludes in good faith (after consultation with outside counsel) that such
action is necessary for the Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law, (iii) prior to providing any
information or data to any Person in connection with an Acquisition Proposal by
any such Person, such Board of Directors receives from such Person an executed
confidentiality agreement on terms substantially similar to those contained in
the confidentiality agreement previously entered into between LRC and OSI in
connection with their consideration of the Merger, and (iv) prior to providing
any information or data to any Person or entering into
43
discussions or negotiations with any Person, the Board of Directors of OSI
notifies LRC of such inquiries, expressions of interest, proposals or offers
received by, any such information requested from, or any such discussions or
negotiations to be initiated or continued with, any of OSI's representatives
indicating, in connection with such notice, the name of such Person and the
terms and conditions of any proposals or offers. OSI agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. OSI agrees that it will take the necessary steps
to promptly inform the officers, directors and other representatives referred to
in the first sentence hereof of the obligations undertaken in this Section 4.3.
OSI agrees that it shall keep LRC informed, on a current basis, of the status
and terms of any such proposals or offers and the status of any such discussions
or negotiations.
(b) LRC shall not, and shall not permit any of its subsidiaries
to, authorize or enter into an agreement relating to an Alternative Transaction
(as defined in Section 7.2) involving LRC until two days after the Effective
Time. LRC shall notify OSI immediately of any proposals or offers received by
LRC relating to an Alternative Transaction involving LRC and will keep OSI
informed, on a current basis, of the status and terms of any such proposals or
offers and the status of any related discussions or negotiations and shall
consult with OSI with respect thereto. Subject to LRC's obligations described in
Section 5.1, this Agreement does not prohibit LRC from taking and disclosing to
its stockholders a position contemplated by Rule 14e-2(a) of the Exchange Act or
from making any disclosure to LRC's stockholders if, in the good faith judgment
of the Board of Directors of LRC, after consultation with outside counsel,
failure so to disclose would be inconsistent with its duties to LRC or the LRC
stockholders under applicable law.
4.4 Organization of Merger Sub; Authorization of Shares,
---------------------------------------------------
the Merger and this Agreement.
------------------------------
(a) Subject to the terms and conditions of this Agreement, LRC
shall take, and cause to be taken, all actions necessary, proper or appropriate
under applicable laws and regulations such that, at all times from the date of
this Agreement until the Effective Time: (i) Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
(ii) LRC owns all of the outstanding capital stock of Merger Sub, (iii) except
as contemplated in clause (ii) and by the terms of this Agreement, Merger Sub
has no outstanding shares of capital stock or any options, warrants, calls,
subscriptions or other rights or agreements or commitments obligating it to
issue, transfer or sell any shares of its capital stock or any other securities
convertible into or evidencing the right to subscribe for any such shares, (iv)
the Certificate of Incorporation and Bylaws of Merger Sub are in the form
provided to OSI, and (v) except as related to the Merger, this Agreement and the
consummation of the transactions contemplated hereby, Merger Sub has not or will
not engage in any business or activities (other than organizational matters) or
incur or be subject to any commitments or liabilities.
44
(b) LRC, as the sole stockholder of Merger Sub, shall take, and
shall cause to be taken, all actions necessary, proper or appropriate under
applicable laws and regulations such that LRC shall (i) approve and adopt this
Agreement and the transactions contemplated by this Agreement and (ii) cause
Merger Sub to perform, in each case, the respective duties of Merger Sub
pursuant of this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Stockholder Approvals. Subject to the terms and conditions
---------------------
contained herein, (i) this Agreement shall be submitted for approval to the OSI
stockholders at the OSI Stockholders Meeting to be duly held for this purpose by
OSI, and (ii) the issuance of LRC Common Stock in connection with the Merger
(the "Share Issuance") shall be submitted for approval to the LRC stockholders
at the LRC Stockholders Meeting to be duly held for this purpose by LRC. OSI and
LRC shall coordinate and cooperate with respect to the timing of such meetings
and shall endeavor to hold such meetings on the same day and as soon as
practicable after the date hereof (and, in any event, no later than 45 days
after the Registration Statement is declared effective). OSI and LRC shall
recommend that their respective stockholders approve such matters and such
recommendation shall be contained in the Joint Proxy Statement and shall not
modify or withdraw such recommendation in any circumstance, except, in the case
of OSI, to the extent that the Board of Directors of OSI shall have withdrawn or
modified its approval or recommendation of this Agreement and the Merger and
terminated this Agreement in accordance with Section 7.1(f).
5.2 Board of Directors and Officers of LRC. The Board of Directors
--------------------------------------
of LRC shall take all action necessary such that (a) the size of the LRC Board
of Directors shall be increased by two directors and, on the business day
following the Effective Time, Xxxxx X. Xxxxxx and Xxxxxxx X. Xxxxx, Xx. shall be
appointed to the LRC Board to fill the resulting vacancies and Xx. Xxxxx shall
be appointed to the Audit Committee of the LRC Board, and (b) an Office of the
Chairman will be created at LRC. The Office of the Chairman shall include Xxxxx
X. Xxxxxxx and Xx. Xxxxxx. Xx. Xxxxxxx shall be the Chairman of the Board, and,
on the business day following the Effective Time, Xx. Xxxxxx shall be the Chief
Executive Officer of LRC.
5.3 Cooperation.
-----------
(a) As promptly as practicable after the execution of this
Agreement, OSI and LRC shall prepare and file with the SEC preliminary proxy
materials including the Joint Proxy Statement (which shall also relate to the
approval of the 1997 Equity Incentive Plan and, if LRC elects, the Charter
Amendments) and, as promptly as practicable following receipt of SEC comments
thereon, LRC shall file the Registration Statement with the SEC, and LRC and
45
OSI shall use their reasonable best efforts to have the Joint Proxy Statement
cleared by the SEC under the Exchange Act and the Registration Statement
declared effective by the SEC under the Securities Act. Each of LRC and OSI
will notify the other promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the proxy materials, the Registration
Statement or any other filing or for additional information and will supply the
other with copies of all correspondence between such company or any of its
representatives, on the one hand, and the SEC, or its staff and any other
government officials, on the other hand, with respect to the proxy materials,
the Registration Statement or other filing. The proxy materials, Registration
Statement and the other filings shall comply in all material respects with all
applicable requirements of law. Whenever any event occurs which is required to
be set forth in an amendment or supplement to the proxy materials, the
Registration Statement or any other filing, LRC or OSI, as the case may be,
shall promptly inform the other of such occurrence and cooperate in filing with
the SEC or its staff or any other government officials and/or mailing to
stockholders of LRC and OSI, as the case may be, such amendment or supplement.
(b) As soon as is reasonably practicable, LRC and OSI shall take all
such action as may be necessary to comply with state blue sky or securities laws
in connection with the transactions contemplated by this Agreement. If any
"fair price", "moratorium", "control share acquisition" or other form of state
antitakeover statute or regulation shall become applicable to the transactions
contemplated hereby, each of OSI and LRC and the members of their respective
Boards of Directors shall grant such approvals and take such actions as are
reasonably necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby.
(c) Prior to the Effective Time, LRC will file with the Nasdaq
National Market a notification form for listing of additional shares covering
the shares of LRC Common Stock issuable in the Merger or as a result of LRC's
assumption of the OSI Stock Options described in Section 5.10.
(d) OSI and LRC shall cooperate with one another in order to lift any
injunctions or remove any other impediment to the consummation of the
transactions contemplated herein.
(e) OSI and LRC shall cooperate with one another in obtaining opinions
of Xxxxxx Xxxxxx White & XxXxxxxxx, counsel to OSI, and Shartsis, Xxxxxx &
Xxxxxxxx LLP, counsel to LRC, dated as of the Effective Time, to the effect that
the Merger qualifies as a reorganization under the provisions of Section 368(a)
of the Code. In connection therewith, each of OSI and LRC shall deliver to
Shartsis, Xxxxxx & Xxxxxxxx LLP and Xxxxxx Xxxxxx White & XxXxxxxxx
representation letters substantially in the form attached hereto as Exhibits C-1
and C-2, respectively, and OSI shall use its reasonable best efforts to obtain
the representation letter substantially in the form attached hereto as Exhibit D
from appropriate stockholders and shall
46
deliver any such letters obtained to Shartsis, Xxxxxx & Xxxxxxxx LLP and Xxxxxx
Xxxxxx White & XxXxxxxxx.
(f) Subject to any limitations contained in Section 5.4, OSI and
LRC shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions and each
represents and warrants to the other that no information furnished by it in
connection with such actions or otherwise in connection with the consummation of
the transactions contemplated by this Agreement will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in order to make any information so furnished, in light of the
circumstances under which it is so furnished, not misleading.
5.4 Access to Information.
---------------------
(a) Each of OSI and LRC shall afford to one another and to one
another's officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours,
throughout the period prior to the earlier of the Effective Time or the date of
termination of this Agreement, to its and its subsidiaries' properties,
contracts, commitments, books and records (including but not limited to tax
returns) and any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities laws and shall use
their reasonable best efforts to cause their respective representatives to
furnish promptly to one another such additional financial and operating data and
other information as to its and its subsidiaries' respective businesses and
properties as the other or its duly authorized representatives may from time to
time reasonably request. The parties hereby agree that each of them will treat
any such information in accordance with the Confidentiality Agreement, dated as
of February 25, 1997, between OSI and LRC (the "Confidentiality Agreement"),
which Confidentiality Agreement shall remain in full force and effect.
(b) Subject to compliance with applicable law, from the date
hereof until the earlier of the Effective Time or the date of termination of
this Agreement, each of LRC and OSI shall confer on a regular and frequent basis
with one or more representatives of the other party to report material
operational matters and the general status of ongoing operations.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
-----------------
LRC and OSI shall consult with each other before issuing any press release or
otherwise making any public statement or making any other public (or non-
confidential) disclosure (whether or not in response to an inquiry) regarding
the terms of this Agreement and the transactions contemplated hereby, and
neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law, or in exercise of the
fiduciary duties of the Board of Directors of LRC or OSI, or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD.
47
5.6 Consents.
--------
(a) Subject to the terms and conditions herein provided, OSI and
LRC shall (a) promptly make their respective filings and thereafter make any
other required submissions under the HSR Act, (b) use reasonable efforts to
cooperate with one another in (i) determining whether any filings are required
to be made with, or consents, permits, authorizations or approvals are required
to be obtained from any other Governmental Entity or any third party in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, permits, authorizations or
approvals, and (c) use reasonable efforts to take, or cause to be taken, all
other actions and do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby
as soon as possible, including, without limitation, taking all such further
action as reasonably may be necessary to resolve such objections, if any, as the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
state antitrust enforcement authorities or competition authorities of any other
nation or other jurisdiction or any other person may assert under relevant
antitrust or competition laws with respect to the transactions contemplated
hereby. OSI shall use all reasonable efforts to obtain all consents described in
Section 2.3(a) of the OSI Disclosure Letter prior to the Closing, and LRC shall
use all reasonable efforts to obtain all consents described in Section 3.3(a) of
the LRC Disclosure Letter prior to the Closing.
(b) Notwithstanding anything to the contrary in this Agreement,
(i) neither LRC nor any of it subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation, that could reasonably be
expected to have a Material Adverse Effect on LRC or on LRC combined with the
Surviving Corporation after the Effective Time, and (ii) neither OSI nor any of
its subsidiaries shall be required to divest any of their respective businesses,
product lines or assets, or to take or agree to take any other action or agree
to any limitation, that could reasonably be expected to have a Material Adverse
Effect on OSI.
5.7 Pooling Accounting. LRC and OSI shall each use its reasonable
------------------
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. Each of LRC and OSI shall use its
reasonable best efforts to cause its "affiliates" (as defined in Section 5.8)
not to take any action that would prevent LRC from accounting for the business
combination to be effected by the Merger as a pooling of interests.
5.8 Affiliate Agreements.
--------------------
(a) OSI shall, within five business days of the date hereof,
deliver to LRC a list (reasonably satisfactory to counsel for LRC), setting
forth the names of all persons who are expected to be, at the time of the OSI
Stockholder Meeting, in OSI's reasonable judgment, "affiliates" of OSI for
purposes of Rule 145 under the Securities Act or under applicable SEC accounting
releases with respect to pooling of interests accounting treatment.
48
OSI shall furnish such information and documents as LRC may reasonably request
for the purpose of reviewing such list. OSI shall use its reasonable best
efforts to cause each person who is identified as an "affiliate" in the list
furnished pursuant to this Section 5.8 to execute a written agreement as soon as
practicable after the date hereof, in substantially the form of Exhibit E-1
hereto.
(b) LRC shall, within five business days of the date hereof,
deliver to OSI a list (reasonably satisfactory to counsel for OSI) setting forth
the names of all persons who are expected to be, at the time of the LRC
Stockholder Meeting, in LRC's reasonable judgment, affiliates of LRC under
applicable SEC accounting releases with respect to pooling of interests
accounting treatment. LRC shall furnish such information and documents as OSI
may reasonably request for the purpose of reviewing such list. LRC shall use its
reasonable best efforts to cause each person who is identified as an affiliate
in the list furnished pursuant to this Section 5.8 to execute a written
agreement as soon as practicable after the date hereof in substantially the form
of Exhibit E-2 hereto.
5.9 Voting Agreement. Each of Xxxxxxx Xxxxxx, Xxxxxxx X'Xxxxxx,
----------------
Xxxxxx Xxxxxxx, Xxxxx Xxxxxx, Advent VII L.P., Advent Atlantic and Pacific II
L.P., Advent New York L.P., TA Venture Investors Limited Partnership, Advent
Industrial II L.P., and Chestnut Capital International III L.P. have executed
and delivered to LRC a Voting Agreement substantially in the form of Exhibit B
attached hereto concurrent with the execution of this Agreement.
5.10 Employee Benefit Plans.
----------------------
(a) At the Effective Time, each outstanding option to purchase
shares of OSI Common Stock (the "OSI Stock Options") under the OSI Stock Option
Plans, whether vested or unvested, will be assumed by LRC. Section 5.10 of the
OSI Disclosure Letter sets forth a true and complete list as of March 14, 1997
of all holders of OSI Stock Options, including the number of shares of OSI
Common Stock subject to each such option, the exercise or vesting schedule, the
exercise price per share and the term of each such option. Each such OSI Stock
Option so assumed by LRC under this Agreement shall continue to have, and be
subject to, substantially the same terms and conditions as were applicable under
the OSI Stock Option Plans and the documents governing the OSI Stock Options
immediately prior to the Effective Time, except that (i) each OSI Stock Option
will be exercisable for that number of whole shares of LRC Common Stock equal to
the product of the number of shares of OSI Common Stock that were issuable upon
exercise of such option immediately prior to the Effective Time multiplied by
the Exchange Ratio and rounded down to the nearest whole number of shares of LRC
Common Stock, and (ii) the per share exercise price for the shares of LRC Common
Stock issuable upon exercise of such OSI Stock Option will be equal to the
quotient determined by dividing the exercise price per share of OSI Common Stock
at which such option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent, and (iii) none of the
options shall accelerate by reason of the Merger except as described in Section
5.10 of the OSI Disclosure Letter. It is the intention of the
49
parties that the OSI Stock Options so assumed by LRC qualify following the
Effective Time as incentive stock options as defined in Section 422 of the Code
to the extent such options qualified as incentive stock options immediately
prior to the Effective Time. As soon as reasonably practical after the
Effective Time, LRC will issue to each person who, immediately prior to the
Effective Time was a holder of an outstanding OSI Stock Option a notice
describing the foregoing assumption of such options by LRC.
(b) Conditional on the consummation of the Merger, and only to the
extent permitted by the terms of the OSI Purchase Plan and the LRC Purchase
Plan, OSI shall take such action as is necessary to (i) preclude the granting of
additional purchase rights under the OSI Purchase Plan on or after the date
hereof (including but not limited to the commencement of any new "offering
period"), and (ii) convert each right to purchase shares of OSI Common Stock
granted under the OSI Purchase Plan pursuant to the offering period commencing
on February 1, 1997, into a right to purchase, on substantially the same terms
provided under the OSI Purchase Plan, whole shares of LRC Common Stock, except
at a price equal to 85% of the lesser of (A) the closing sale price of a share
of OSI Common Stock on the Nasdaq National Market on February 1, 1997, divided
by the Exchange Ratio, rounded up to the nearest whole cent, and (B) the closing
sale price of a share of XXX Common Stock on the last day of each applicable
purchase period during the offering period that began on February 1, 1997. A
schedule of all current participants in the OSI Purchase Plan and their
respective levels of participation in the OSI Purchase Plan as of such date is
included in Section 5.10 of the OSI Disclosure Letter. Subject to the
consummation of the Merger, no additional enrollments in the OSI Purchase Plan
shall be accepted by OSI from and after the date hereof, and no participant in
the OSI Purchase Plan shall be permitted to increase his or her level of
participation in such plan. Notwithstanding any other provision of this
Agreement, rights to acquire LRC Common Stock acquired by OSI employees after
the Closing pursuant to the terms of this paragraph 5.10(b) shall count against
all purchase limitations applicable to individual participants (including dollar
value limitations, number of share limitations, etc.) contained in the LRC
Purchase Plan (or any similar plan adopted by LRC) for all purposes, and LRC
shall be permitted to amend the LRC Plan in any respect to reflect this
limitation. The parties agree that in no event shall they be required to take
any action which would preclude either the OSI Purchase Plan or the LRC Purchase
Plan to qualify for treatment under Section 423 of the Code or cause any other
material negative tax consequences to LRC. If the actions described in this
paragraph would have the effect of disqualifying either such plan per such
treatment or causing such material negative tax consequences, the parties shall
negotiate in good faith to attempt to carry out the purpose of this paragraph in
such a manner that would not so disqualify either plan.
(c) OSI and LRC agree that each of their respective employee equity
incentive plans, programs and arrangements and non-employee director plans shall
be amended, to the extent necessary and appropriate, to reflect the transactions
contemplated by this Agreement, including, but not limited to the conversion of
shares of OSI Common Stock held or to be awarded or paid pursuant to such plans,
programs or arrangements into shares of LRC Common Stock on a basis consistent
with the transactions contemplated by this Agreement. The
50
actions to be taken by OSI and LRC pursuant to this Section 5.10 shall include
the submission by OSI or LRC of the amendments to the plans, programs or
arrangements referred to herein to their respective stockholders at the OSI
Stockholder Meeting or the LRC Stockholder Meeting, respectively, if such
submission is determined to be necessary or advisable by counsel to OSI or LRC
after consultation with one another; provided, however, that such approval shall
-------- -------
not be a condition to the consummation of the Merger.
(d) As of the Effective Time, LRC shall take all corporate action
necessary to reserve for issuance the number of shares of LRC Common Stock that
will become subject to the benefit plans, programs and arrangements referred to
in this Section 5.10.
(e) Employees of OSI who become employees of the Surviving
Corporation at the Effective Time shall be credited with years of service at OSI
for purposes of determining eligibility, vesting and benefit accrual under all
benefit plans of LRC, except that with respect to retirement benefits under
plans maintained by LRC, such years of service shall be credited for purposes of
determining eligibility and vesting but not for purposes of benefit accrual.
5.11 Consents of LRC's and OSI's Accountants. LRC and OSI will each
---------------------------------------
use reasonable best efforts to cause to be delivered to each other consents from
their respective independent auditors, dated the date on which the Registration
Statement shall become effective, in form reasonably satisfactory to the
recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form S-4 under the Securities Act.
5.12 Form S-8. LRC agrees to file, no later than three business days
--------
after the Closing, a registration statement on Form S-8 covering the shares of
LRC Common Stock issuable pursuant to outstanding options and purchase rights
under the OSI Stock Option Plans assumed by LRC. OSI shall cooperate with and
assist LRC in the preparation of such registration statement.
5.13 Indemnification.
---------------
(a) LRC and the Surviving Corporation shall defend, exculpate,
indemnify and reimburse expenses for acts or omissions occurring prior to the
Effective Time by the current or former directors, officers, employees or agents
(the "Indemnified Parties") of OSI on the same terms provided in the current
Certificate of Incorporation or Bylaws of OSI and/or in any indemnification
agreement existing on the date hereof; provided that such indemnification shall
be subject to any limitation imposed from time to time under applicable law.
Without limiting the foregoing, in the event any such Indemnified Party is or
becomes involved in any capacity in any actual or threatened action, suit,
claim, proceeding or investigation (a "Claim") in connection with any matter
relating to this Agreement or the transactions contemplated hereby occurring at
or before the Effective Time, OSI, and after the Effective Time, the Surviving
Corporation and LRC, to the extent permitted by applicable law,
51
shall periodically advance to the Indemnified Party as incurred expenses
incurred in connection with the Claim, provided that the Indemnified Party to
whom the expenses are advanced provides an undertaking to repay such advances if
it is ultimately determined that such Indemnified Party is not entitled to
indemnification, provided further that such determination shall be made by
independent legal counsel selected by the Indemnified Party and reasonably
acceptable to LRC.
(b) For six years from the Effective Time, LRC shall or shall
cause the Surviving Corporation to maintain in effect OSI's current directors'
and officers' liability insurance (provided that LRC or the Surviving
Corporation may substitute therefor policies of substantially the same coverage
containing terms and conditions issued by responsible companies of national
reputation which are no less advantageous so long as no lapse in coverage occurs
as a result of such substitution) covering those persons who are currently
covered by OSI's directors' and officers' liability insurance policy (a copy of
which has been heretofore made available to LRC); provided, however, that in no
-------- -------
event shall LRC be required to expend in any one year an amount in excess of
300% of the annual premiums currently paid by OSI for such insurance, and,
provided, further, that if the annual premiums of such insurance coverage exceed
-------- -------
such amount, LRC shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount.
(c) In the event LRC or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any person, then in such case, proper provision shall
be made so that the successors and assigns of LRC or the Surviving Corporation,
as the case may be, honor the indemnification obligations of LRC and the
Surviving Corporation to the extent set forth in this Section 5.13.
(d) The obligations of LRC and the Surviving Corporation under
this Section 5.13 shall not be terminated or modified in such manner as to
adversely affect any director, officer, employee, agent or other person to whom
this Section 5.13 applies without the consent of such affected director,
officer, employee, agent or other person (it being expressly agreed that each
such director, officer, employee, agent or other person to whom this Section
5.13 applies shall be a third-party beneficiary of this Section 5.13).
5.14 Employment Agreements. LRC shall use reasonable efforts, and
---------------------
OSI shall use reasonable efforts to cause Xx. Xxxxxx, to negotiate prior to the
filing of the Registration Statement, and thereafter to execute and deliver an
Employment Agreement between LRC and Xx. Xxxxxx relating to his employment by
LRC on mutually satisfactory terms.
52
5.15 Pooling Letters.
---------------
(a) OSI shall use its reasonable best efforts to cause to be
delivered to OSI a letter of OSI's independent auditors, dated as of the date of
this Agreement and confirmed in writing two business days before the date of the
Proxy Statement, to the effect that no condition exists that would preclude LRC
from accounting for the Merger as a pooling of interest as such conditions
relate to OSI if the Merger is consummated in accordance with this Agreement,
and in a form reasonably satisfactory to LRC and customary in scope and
substance for letters delivered by independent public accountants in connection
with transactions of this type.
(b) LRC shall use its reasonable best efforts to cause to be
delivered to LRC a letter of LRC's independent auditors, dated as of the date of
this Agreement and confirmed in writing two business days before the date of the
Proxy Statement, regarding LRC's auditors' concurrence with LRC management's and
OSI management's conclusions, respectively, as to the appropriateness of pooling
of interests accounting for the Merger under Accounting Principles Board Opinion
No. 16 if closed and consummated in accordance with this Agreement.
(c) Each of OSI and LRC shall promptly make available to the
other party the letter from its independent auditors described above in
paragraph (a) or (b), respectively.
5.16 Reasonable Best Efforts and Further Assurances. Each of the
----------------------------------------------
parties to this Agreement shall use its reasonable best efforts to effectuate
the transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to closing under this Agreement. 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 this Agreement and the
transactions contemplated hereby.
5.17 Additional Reports. OSI and LRC shall each furnish to the other
------------------
copies of any reports of the type referred to in Sections 2.4 and 3.4 which it
files with the SEC on or after the date hereof, and OSI and LRC, as the case may
be, covenant and warrant that as of the respective dates thereof, such reports
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any unaudited consolidated interim financial statements included in
such reports (including any related notes and schedules) will fairly present the
financial position of OSI and its consolidated subsidiaries or LRC and its
consolidated subsidiaries, as the case may be, as of the dates thereof and the
results of operations and changes in financial position or other information
included therein for the periods or as of the date then ended (subject, where
appropriate, to normal year-end adjustments), in each case in accordance with
past practice and GAAP consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto).
53
ARTICLE 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 consummate and
effect 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 by agreement of all the parties hereto:
(a) Stockholder Approval. The holders of issued and outstanding
--------------------
shares of OSI Common Stock shall have duly approved this Agreement and the
Merger, and the holders of issued and outstanding shares of LRC Common Stock
shall have approved the Share Issuance, all in accordance with Delaware Law and
the rules of the Nasdaq National Market.
(b) Registration Statement Effective. The SEC shall have
--------------------------------
declared the Registration Statement effective and it shall not be the subject of
any stop order suspending such effectiveness or proceedings seeking a stop
order.
(c) No Injunctions. No statute, rule, regulation, executive
--------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or enforced by any court or other tribunal or governmental body or
authority which prohibits the consummation of the Merger or otherwise makes it
illegal. In the event any order, decree or injunction shall have been issued,
each party shall use reasonable best efforts to remove any such order, decree or
injunction.
(d) Governmental Approval. The waiting period applicable to
---------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated. Other than the filing of the Certificate of Merger which shall be
accomplished as provided in Section 1.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity the failure of which to obtain or comply
with would be reasonably likely to have a Material Adverse Effect on LRC or OSI
shall have been obtained or filed.
(e) Tax Opinion. LRC and OSI shall have received substantially
-----------
identical written opinions of Shartsis, Xxxxxx & Xxxxxxxx LLP, legal counsel to
LRC, and Xxxxxx Xxxxxx White & XxXxxxxxx, legal counsel to OSI, respectively, in
form and substance reasonably satisfactory to them to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code, and such opinions shall not have been withdrawn. If counsel to either LRC
or OSI does not render such opinion, this condition shall nonetheless be deemed
to be satisfied with respect to such party if counsel to the other party renders
such opinion in the required form to such party. In rendering such opinions,
counsel shall be entitled to rely upon, among other things, reasonable
assumptions as well as representations of LRC, Merger Sub and OSI and certain
stockholders of OSI. LRC and OSI
54
shall use all reasonable efforts to make such representations as the above-named
counsel may request in support of their opinions.
(f) Listing of Additional Shares. The filing with the Nasdaq
----------------------------
National Market of a Notification Form for Listing of Additional Shares with
respect to the shares of LRC Common Stock issuable in the Merger and upon
exercise of the OSI Stock Options assumed by LRC shall have been made.
(g) Pooling Letters. At the Effective Time, each of LRC and
---------------
OSI shall have received a letter of its independent accountants, dated as of the
Effective Time, in form and substance reasonably satisfactory to it, confirming
that the Merger will qualify as a transaction to be accounted for by the parties
hereto in accordance with the pooling of interests method of accounting.
6.2 Additional Conditions to Obligations of OSI. The obligations of
-------------------------------------------
OSI to consummate and effect 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 by OSI:
(a) Representations and Warranties. The representations and
------------------------------
warranties of LRC and Merger Sub contained in this Agreement (without regard to
any materiality exceptions or provisions therein) shall be true and correct as
of the Effective Time, with the same force and effect as if made on and as of
the Effective Time, except (i) for changes specifically permitted by the terms
of this Agreement, (ii) that the accuracy of representations and warranties that
by their terms speak as of the date of this Agreement or some other date will be
determined as of such date, and (iii) for such inaccuracies as individually or
in the aggregate would not reasonably be expected to have a Material Adverse
Effect on LRC; OSI shall have received a certificate to such effect signed on
behalf of LRC by its Chief Executive Officer, President or any Senior Vice
President;
(b) Agreements and Covenants. LRC and Merger Sub shall have
------------------------
performed or complied in all material respects with all covenants, obligations,
conditions and agreements required by this Agreement to be performed or complied
with by them on or prior to the Effective Time; OSI shall have received a
certificate to such effect signed on behalf of LRC by its Chief Executive
Officer, President or any Senior Vice President; and
(c) No Material Adverse Changes. There shall have been no
---------------------------
events, changes or effects with respect to LRC or its subsidiaries having, or
which could reasonably be expected to have, a Material Adverse Effect on LRC,
and at the Closing LRC shall have delivered to OSI a certificate to that effect.
6.3 Additional Conditions to the Obligations of LRC and Merger Sub.
--------------------------------------------------------------
The obligations of LRC and Merger Sub to consummate and effect the transactions
contemplated
55
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 by LRC:
(a) Representations and Warranties. The representations and
------------------------------
warranties of OSI contained in this Agreement (without regard to any materiality
exceptions or provisions therein) shall be true and correct as of the Effective
Time, with the same force and effect as if made on and as of the Effective Time,
except, (i) for changes specifically permitted by the terms of this Agreement,
(ii) that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be determined as
of such date, and (iii) for such inaccuracies as individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect on
OSI; LRC shall have received a certificate to such effect signed on behalf of
OSI by its Chief Executive Officer and President or any Senior Vice President;
(b) Agreements and Covenants. OSI shall have performed or
------------------------
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied with by it
on or prior to the Effective Time, LRC shall have received a certificate to such
effect signed on behalf of OSI by its Chief Executive Officer, President or any
Senior Vice President;
(c) No Material Adverse Changes. There shall have been no
---------------------------
events, changes or effects with respect to OSI or its subsidiaries having, or
which could reasonably be expected to have, a Material Adverse Effect on OSI or
the Surviving Corporation, and at the Closing OSI shall have delivered to LRC a
certificate to that effect.
(d) Employment Agreements. Xx. Xxxxxx shall have executed and
---------------------
delivered to LRC an Employment Agreement relating to his employment by LRC on
terms satisfactory to LRC in LRC's discretion.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Notwithstanding anything contained in this
-----------
Agreement to the contrary, this Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of OSI and LRC.
(a) by mutual written consent duly authorized by the Board of
Directors of LRC and OSI;
56
(b) by either LRC or OSI if the Effective Time shall not have occurred
on or before August 31, 1997; provided, that the party seeking to terminate this
--------
Agreement pursuant to this clause 7.1(b) shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the failure to consummate the Merger on or before
such date;
(c) by either LRC or OSI if (i) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated prohibiting the
consummation of the Merger substantially on the terms contemplated hereby or
(ii) a court of competent jurisdiction or other Governmental Entity shall have
issued an order, decree, ruling or injunction, or taken any other action, having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger substantially on the terms contemplated hereby and such order, decree,
ruling, injunction or other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
--------
clause 7.1(c)(ii) shall have used its reasonable best efforts to remove such
order, decree, ruling, or injunction;
(d) by either LRC or OSI if the approvals of the stockholders of
either LRC or OSI described in Section 6.1(a) shall not have been obtained at
the LRC Stockholders Meeting or the OSI Stockholders Meeting, provided that the
party seeking to terminate this Agreement pursuant to this clause 7.1(d) shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to obtain
either of such approvals;
(e) by LRC if (i) the Board of Directors of OSI shall have withdrawn
or modified its recommendation of this Agreement or the Merger in a manner
adverse to LRC or shall have publicly announced its intention to do so; or (ii)
a tender offer (to which Rule 14e-2 applies) for any of the outstanding shares
of capital stock of OSI is commenced prior to the OSI Meeting, and the Board of
Directors of OSI fails to recommend against acceptance of such tender offer
within the time period required by Rule 14e-2 (including by taking no position
with respect to acceptance of such tender offer by its stockholders);
(f) by either LRC or OSI if the Board of Directors of OSI determines
in good faith that an Acquisition Proposal constitutes a Superior Proposal;
provided, however, that OSI may not terminate this Agreement pursuant to this
-------- -------
clause 7.1(f) unless and until four calendar days have elapsed following
delivery to LRC of a written notice of such determination by the Board of
Directors of OSI and during such four day period OSI (i) informs LRC of the
terms and conditions of the Acquisition Proposal and the identity of the Person
making the Acquisition Proposal and (ii) otherwise fully cooperates with LRC
(subject, in the case of this clause (ii), to the condition that the OSI Board
of Directors shall not be required to take any action that it believes, after
consultation with outside legal counsel, would violate its obligations to OSI or
OSI's stockholders under applicable law) with the intent of enabling LRC to
agree to a modification of the terms and conditions of this Agreement so that
the transactions contemplated hereby may be effected; provided, further, that
-------- -------
OSI may not terminate this Agreement pursuant to this clause 7.1(f) unless at
the end of such four day period the Board of
57
Directors of OSI continues reasonably to believe that the Acquisition Proposal
constitutes a Superior Proposal and simultaneously with such termination OSI
pays to LRC the amount specified under Section 7.2; and provided, further, that
-------- -------
this Agreement shall not terminate pursuant to this clause 7.1(f) unless
simultaneously with such termination LRC enters into a definitive acquisition,
merger or similar agreement to effect the Acquisition Proposal;
(g) by LRC or OSI if there shall have been a material breach by
the other of any of its representations, warranties, covenants or agreements
contained in this Agreement such that the closing condition set forth in Section
6.2(a) or 6.3(a) as appropriate would not be satisfied as of the time of such
breach and such breach shall not have been cured within 30 days after notice
thereof shall have been received by the party alleged to be in breach; and
(h) by OSI if (i) the LRC Closing Value is less than $30.00 per
share, (ii) the LRC Closing Value is less than the OSI Walk Away Threshold,
(iii) LRC shall not exercise the LRC Adjustment Option, and (iv) OSI shall
---
deliver a written termination notice prior to the close of business on the third
trading day prior to the date of the scheduled OSI Stockholder Meeting.
In the event of termination of this Agreement pursuant to this Section
7.1, this Agreement shall terminate (except for the confidentiality agreement
referred to in Section 5.4 and for the provisions of Sections 7.2 and 8.2), and
there shall be no other liability on the part of LRC or OSI to the other except
liability arising out of a willful or knowing breach of this Agreement or as
provided for in the Confidentiality Agreement.
7.2 Expenses and Termination Fees.
-----------------------------
(a) If this Agreement is terminated (i) by LRC or OSI pursuant to
Section 7.1(b) at a time that the OSI Stockholders Meeting has not been held and
completed (and a vote on this Agreement and the Merger by the OSI Stockholders
recorded) and an Alternative Transaction involving OSI shall have been announced
and the Alternative Transaction shall not have been absolutely and
unconditionally withdrawn and abandoned, (ii) by LRC or OSI pursuant to Section
7.1(d) as a result of the failure to receive the requisite vote for approval of
this Agreement and the Merger by the stockholders of OSI at the OSI Stockholders
Meeting, (iii) by LRC as a result of a breach by OSI within the scope of Section
7.1(g) if, at the time of such breach, an Alternative Transaction involving OSI
shall have been announced which shall not have been absolutely and
unconditionally withdrawn and abandoned, (iv) by LRC pursuant to 7.1(e), or (v)
by LRC or OSI pursuant to 7.1(f), then OSI shall pay to LRC a termination fee of
$8.4 million in cash, such payment to be made simultaneously with such
termination in the case of a termination by OSI pursuant to 7.1(f) and within
one business day after any other such termination.
(b) If this Agreement is terminated (i) by LRC or OSI pursuant to
Section 7.1(b) at a time that the LRC Stockholders Meeting has not been held and
completed
58
(and a vote on the Share Issuance by the LRC Stockholders recorded) if an
Alternative Transaction involving LRC shall have been announced and the
Alternative Transaction shall not have been absolutely and unconditionally
withdrawn and abandoned, (ii) by LRC or OSI pursuant to Section 7.1(d) as a
result of the failure to receive the requisite vote for approval of the Share
Issuance by the stockholders of LRC at the LRC Stockholders Meeting, or (ii) by
OSI as a result of a breach by LRC within the scope of Section 7.1(g) if, at the
time of such breach, an Alternative Transaction involving LRC shall have been
announced which shall not have been absolutely and unconditionally withdrawn and
abandoned, then LRC shall pay to OSI a termination fee of $8.4 million in cash,
such payment to be made within one business day after any such termination.
(c) As used in this Agreement, an "Alternative Transaction"
involving OSI or LRC or any company in the Semiconductor Equipment Group Closing
Index ("Target") means (i) a transaction or series of transactions pursuant to
which any person or group (as such term is defined under the Exchange Act) other
than LRC, OSI or Merger Sub, or any affiliate thereof (a "Third Party") acquires
or would acquire (upon completion of such transaction or series of transactions)
shares (or securities exercisable for or convertible into shares) representing
more than twenty percent (20%) of the outstanding shares of the Target common
stock, pursuant to a tender offer or exchange offer or otherwise, (ii) a merger,
consolidation, share exchange or other business combination involving the Target
or any of its subsidiaries if, upon consummation of such merger, consolidation,
share exchange or other business combination, such Third Party (or its
shareholders) owns or would own more than twenty percent (20%) of the
outstanding equity securities of the Target or any of its subsidiaries or the
entity surviving such merger or business combination or resulting from such
consolidation, (iii) any other transaction or series of transactions pursuant to
which any Third Party acquires or would acquire (upon completion of such
transaction or series of transactions) control of assets of the Target or any of
its subsidiaries (including, for this purpose, outstanding equity securities of
subsidiaries of the Target) having a fair market value equal to more than twenty
percent (20%) of the fair market value of all the consolidated assets of the
Target immediately prior to such transaction or series of transactions, or (iv)
any transaction or series of transactions pursuant to which any Third Party
acquires or would acquire (upon completion of such transaction or series of
transactions) control of the Board of Directors of the Target or by which
nominees of any Third Party are (or would be) elected or appointed to a majority
of the seats on the Board of Directors of the Target.
(d) If either OSI or LRC (the "Delinquent Party") fails to
promptly pay to the other party any fee or expense due hereunder, the Delinquent
Party shall pay the costs and expenses (including reasonable documented legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the account of any unpaid fee at the publicly announced prime rate of
Citibank, N.A. plus three percent (3%) from the date such fee was required to be
paid.
7.3 Amendment. The boards of directors of the parties hereto may
---------
cause this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf
59
of each of the parties hereto, except that following adoption of the Agreement
by the stockholders of OSI or LRC there shall be no amendment to alter or change
the amount or kind of consideration to be received on conversion of the OSI
Common Stock nor any amendment or change that by applicable law would require
approval of such stockholders, without further approval by such stockholders of
LRC and OSI.
7.4 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.
ARTICLE 8
GENERAL PROVISIONS
8.1 No Survival of Representations and Warranties. The
---------------------------------------------
representations, warranties and agreements set forth in this Agreement shall
terminate at the Effective Time, except that the agreements set forth in Article
1, the agreements of "affiliates" of LRC and OSI to be delivered pursuant to
Section 5.8, the provisions of Sections 5.10, 5.12, 5.13, 5.16 and this Article
8 shall survive the Effective Time.
8.2 Expenses. Except as described in Section 7.2, whether or not the
--------
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, except that OSI and LRC shall share equally: (i) the
filing fee in connection with any HSR Act filing and the filing of the Proxy
Statement materials and Registration Statement and (ii) the expenses incurred in
connection with the printing and mailing of the Joint Proxy Statement.
8.3 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 facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
60
(a) if to LRC or Merger Sub, to:
Xxx Research Corporation
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: M. Xxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Skadden, Arps, Slate, Xxxxxxx & Xxxx
LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to OSI, to:
OnTrak Systems, Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
61
with a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxx X. X'Xxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
8.4 Interpretation. When a reference is made in this Agreement to
--------------
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule 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 phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrase "to the
knowledge of" a party shall mean the actual knowledge of any executive officers
of such party or its subsidiaries after due inquiry. The term "subsidiary",
when used in this Agreement with respect to any Person, means any corporation or
other organization, whether incorporated or unincorporated, (A) of which at
least a majority of the securities or other interests having by their terms
voting power to elect a majority of the board of directors, trustees or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person, or
(B) which is controlled, directly or indirectly, by such Person through
ownership of securities, by contract or otherwise. 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.
8.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered (by facsimile or otherwise) to the other parties, it
being understood that all parties need not sign the same counterpart.
8.6 Entire Agreement; Nonassignability; Parties in Interest. This
-------------------------------------------------------
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits and
Schedules (including the OSI Disclosure Letter and the LRC Disclosure Letter)
(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, except for the Confidentiality Agreement, which shall continue in full
force and effect and shall survive any termination of this Agreement or the
Closing in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Section
5.13; and (c) shall not be assigned by operation of law or otherwise without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be
62
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
8.7 Severability. Any term or provision of this Agreement that is,
------------
or whose application is, or is declared by a court of competent jurisdiction to
be, invalid or unenforceable in any jurisdiction, shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability and the remainder of this Agreement shall continue in full
force and effect. 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.
8.8 Enforcement. The parties hereto agree that money damages or
-----------
other remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or default under, this Agreement by them and that in addition to
all other remedies available to them, each of them shall be entitled, to the
fullest extent permitted by law, to an injunction restraining such breach,
violation or default or threatened breach, violation or default and to any other
equitable relief, including, without limitation, specific performance, without
bond or other security being required.
8.9 Remedies Cumulative. 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 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.
8.10 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.
8.11 Rules of Construction. The parties hereto agree that they have
---------------------
been represented by counsel during the negotiation, preparation 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.
63
IN WITNESS WHEREOF, OSI, LRC and Merger Sub have caused this Agreement
to be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
ONTRAK SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive
Officer
XXX RESEARCH CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and Chief Executive
Officer
OMEGA ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President, General
Counsel and Secretary
64
EXHIBIT A
CERTIFICATE OF MERGER
MERGING
OMEGA ACQUISITION CORPORATION
WITH AND INTO
OTTER
Pursuant to Section 251 of the General Corporation Law of
the State of Delaware
Omega Acquisition Corporation, a Delaware corporation ("Merger Sub") and
OTTER Systems, Inc., a Delaware corporation ("OTTER"), DO HEREBY CERTIFY AS
FOLLOWS:
FIRST: That Merger Sub was incorporated on March 18, 1997, pursuant to the
Delaware General Corporation Law (the "Delaware Law"), and that OTTER was
incorporated on October 24, 1996, pursuant to the Delaware Law.
SECOND: That an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of March ___, 1997, among WOOL, a Delaware corporation, Merger Sub and
OTTER, setting forth the terms and conditions of the merger of Merger Sub with
and into OTTER (the "Merger"), has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with
Section 251 of the Delaware Law.
THIRD: That the name of the surviving corporation (the "Surviving
Corporation") shall be "OTTER Systems, Inc."
FOURTH: That pursuant to the Merger Agreement, the Certificate of
Incorporation of the Surviving Corporation is amended to read in its entirety as
set forth in Exhibit A hereto.
FIFTH: That an executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Corporation at the following
address:
______________________________
______________________________
______________________________
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: That the Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, each of Merger Sub and OTTER has caused this
Certificate of Merger to be executed in its corporate name this __ day of
______, 1997.
Exhibit B
(All Other Stockholders)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of March 24, 1997,
by and among Xxx Research Corporation ("Parent"), Omega Acquisition Corporation,
a Delaware corporation and wholly owned subsidiary of Parent (the "Merger Sub"),
and the person or entity whose name appears on the signature page hereto as a
stockholder or optionholder of Ontrack Systems, Inc., a Delaware corporation
(the "Company") acting in his, her, or its capacity as a stockholder of the
Company and not in any other capacity ("Stockholder").
WHEREAS, immediately prior to the execution of this Agreement, Parent,
Merger Sub and the Company have entered into an Agreement and Plan of Merger of
even date herewith (the "Merger Agreement"), pursuant to which the parties
thereto have agreed, upon the terms and subject to the conditions set forth
therein, to merge the Company with and into Merger Sub (the "Merger"); and
WHEREAS, as of the date hereof, Stockholder is the record and
Beneficial Owner (as defined hereinafter) of the number of Existing Shares (as
defined hereinafter) of the Common Stock, $0.001 par value, of the Company (the
"Company Common Stock") set forth on the signature page hereto; and
WHEREAS, as inducement and a condition to entering into the Merger
Agreement, Parent has required Stockholder to agree, and Stockholder has agreed,
to enter into this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
Section 1. CERTAIN DEFINITIONS. In addition to the terms defined
elsewhere herein, capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement. For purposes of
this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities as determined
pursuant to Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a person
include securities Beneficially Owned by all other persons with whom such person
would constitute a "group" within the meaning of Section 13(d) of the Exchange
Act with respect to the securities of the same issuer.
(b) "Existing Shares" means shares of Company Common Stock
Beneficially Owned by Stockholder as of the date hereof.
(c) "Securities" means the Existing Shares together with any shares
of Company Common Stock or other securities of the Company acquired by
Stockholder in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution, split-up, recapitalization, combination,
exchange of shares or the like, gift, bequest, inheritance or as a successor in
interest in any capacity or otherwise.
Section 2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.
Stockholder represents and warrants to Parent and Merger Sub as follows:
(a) Ownership of Shares. On the date hereof, Stockholder is the sole
-------------------
record and Beneficial Owner of the Existing Shares consisting of the number of
shares of Company Common Stock set forth on the signature page hereto. On the
date hereof, the Existing Shares constitute all of the shares of Company Common
Stock owned of record or Beneficially Owned by Stockholder. There are no
outstanding options or other rights to acquire from Stockholder or obligations
of Stockholder to sell or to acquire, any shares of Company Common Stock.
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 5, 7 and 8 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
2
(b) Power; Binding Agreement. Stockholder has the legal capacity,
------------------------
power and authority to enter into and perform all of Stockholder's obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by Stockholder and constitutes a valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) No Conflicts. Except for filings under the Xxxx-Xxxxx-Xxxxxx
------------
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the Exchange
Act, no filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority ("Governmental Entity") is necessary
for the execution of this Agreement by Stockholder and the consummation by
Stockholder of the transactions contemplated hereby, none of the execution and
delivery of this Agreement by Stockholder, the consummation by Stockholder of
the transactions contemplated hereby or compliance by Stockholder with any of
the provisions hereof shall (i) conflict with or result in any breach of any
organizational documents applicable to Stockholder, (ii) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Stockholder is a party or by which
Stockholder or any of its properties or assets may be bound, or (iii) violate
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to Stockholder or any of Stockholder's properties or
assets.
(d) No Encumbrance. Except as permitted by this Agreement, the
--------------
Existing Shares are now and, at all times during the term hereof, and the
Securities will
3
be, held by Stockholder, or by a nominee or custodian for the benefit of
Stockholder, free and clear of all mortgages, claims, charges, liens, security
interests, pledges or options, proxies, voting trusts or agreements,
understandings or arrangements or any other rights whatsoever ("Encumbrances"),
except for any such Encumbrances arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial
----------------
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Stockholder.
(f) Reliance by Parent. Stockholder understands and acknowledges
------------------
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon Stockholder's execution and delivery of this
Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Each of Parent and Merger Sub hereby, jointly and severally, represents and
warrants to Stockholder as follows:
(a) Power; Binding Agreement. Parent and Merger Sub each has the
------------------------
corporate power and authority to enter into and perform all of its obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a valid and binding
agreement of Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) No Conflicts. Except for filings under the HSR Act, the Exchange
------------
Act, no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by Parent
and Merger Sub and the consum-
4
mation by Parent and Merger Sub of the transactions contemplated hereby, and
none of the execution and delivery of this Agreement by each of Parent and
Merger Sub, the consummation by each of Parent and Merger Sub of the
transactions contemplated hereby or compliance by each of Parent and Merger Sub
with any of the provisions hereof shall (i) conflict with or result in any
breach of any organizational documents applicable to either Parent or Merger
Sub, (ii) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either Parent
or Merger Sub is a party or by which either Parent or Merger Sub or any of their
respective properties or assets may be bound, or (iii) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable to
either Parent or Merger Sub or any of their respective properties or assets.
Section 4. DISCLOSURE. Stockholder hereby agrees to permit Parent to
publish and disclose in the Registration Statement and the Joint Proxy Statement
(including all documents and schedules filed with the Securities and Exchange
Commission), and any press release or other disclosure document which Parent, in
its sole discretion, determines to be necessary or desirable in connection with
the Merger and any transactions related thereto, Stockholder's identity and
ownership of Company Common Stock and the nature of Stockholder's commitments,
arrangements and understandings under this Agreement.
Section 5. CERTAIN RESTRICTIONS.
(a) No Solicitation. Stockholder will not, and will cause its
---------------
affiliates, if any, and partners, investment bankers, attorneys, accountants and
other agents and representatives of Stockholder and such affiliates (such
affiliates, partners investment bankers, attorneys, accountants, agents and
representatives of any person are hereinafter collectively referred to as the
"Representatives" of such person) not to, directly or indirectly (i) initiate,
solicit or encourage, or take
5
any action to facilitate the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Acquisition Proposal or any inquiry with
respect thereto or (ii) in the event of any unsolicited Acquisition Proposal for
the Company or any affiliate of the Company, engage in negotiations or
discussions with, or provide any information or data to, any person (other than
Parent, any of its affiliates or representatives) relating to any Acquisition
Proposal. Stockholder will notify Parent orally and in writing of any such
offers, proposals, or inquiries relating to the purchase or acquisition by any
person of Securities (including, without limitation, the terms and conditions
thereof and the identity of the person making it), within 24 hours of the
receipt thereof. Stockholder will and will cause its Representative to
immediately cease and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any parties conducted heretofore
without respect to any Acquisition Proposal relating to the Company, other than
discussions or negotiations with Parent and its affiliates and their
Representatives. For purposes of this Agreement, the Company is not deemed to
be an Affiliate of Stockholder.
(b) Certain Actions. Prior to the termination of this Agreement,
---------------
Stockholder agrees not to, directly or indirectly, take any other action that
would make any representation or warranty of Stockholder contained herein untrue
or incorrect.
Section 6. COMPANY OPTIONS. If Stockholder holds Company Options to
acquire shares of Company Common Stock, Stockholder shall, if requested by the
Company, consent to the cancellation or substitution of Stockholders Company
Options in accordance with the terms of the Merger Agreement and shall execute
all appropriate documentation in connection with such cancellation or
substitution.
Section 7. VOTING OF COMPANY COMMON STOCK.
Stockholder hereby agrees that, during the period commencing on the date hereof
and continuing until the first to occur of (a) the Effective Time or (b)
termination of this Agreement in accordance with its terms, at any meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
of the holders of Company Common Stock, however called, or in connection with
any
6
written consent of the holders of Company Common Stock, Stockholder will appear
at the meeting or otherwise cause the Securities to be counted as present
thereat for purposes of establishing a quorum and vote or consent (or cause to
be voted or consented) the Securities in favor of the adoption of the Merger
Agreement and the approval of other actions contemplated by the Merger Agreement
and this Agreement and any actions required in furtherance thereof and hereof.
Section 8. PROXY.
(a) Stockholder hereby irrevocably grants to, and appoints, Parent
and Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx or any of them in their respective
capacities as officers of Parent and any individual who shall hereafter succeed
to any such office of Parent and each of them individually, such Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of Stockholder, to vote the Securities, or grant a consent
or approval in respect of the Securities, in favor of the merger, as specified
in Section 7 hereof.
(b) Stockholder represents that any proxies heretofore given in
respect of the Existing Shares are not irrevocable, and that such proxies are
hereby revoked.
(c) Stockholder understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon such Stockholder's execution and
delivery of this Agreement. Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 8 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of Stockholder under this Agreement. Stockholder
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be done by
virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
7
Section 9. DISTRIBUTIONS. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of share or the like
other than pursuant to the Merger, the terms "Existing Shares and Securities"
will be deemed to refer to and include the shares of Company Common Stock as
well as all such stock dividends and distributions and any shares into which or
for which any or all of the Securities may be changed or exchanged and
appropriate adjustments shall be made to the terms and provisions of this
Agreement.
Section 10. BEST REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its best
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the Merger Agreement and the
transactions contemplated hereby and thereby.
Section 11. TERMINATION. This Agreement shall terminate on the
earlier to occur of: (a) the termination of the Merger Agreement; (b) the
agreement of the parties hereto to terminate this Agreement; or (c) the
consummation of the Merger.
Section 12. MISCELLANEOUS.
(a) Entire Agreement. This Agreement (including the documents and
----------------
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
(b) Successors and Assigns. This Agreement shall not be assigned by
----------------------
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement shall be binding upon,
8
inure to the benefit of and be enforceable by each party and such party's
respective heirs, beneficiaries, executors, representatives and permitted
assigns.
(c) Amendment and Modification. This Agreement may not be amended,
--------------------------
altered, supplemented or otherwise modified or terminated except upon the
execution and delivery of a written agreement executed by the parties hereto.
(d) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Parent or Merger Sub, to:
Xxx Research Corporation
0000 Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
with a copy to:
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: M. Xxxx Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
If to Stockholder, to the address set forth on the signature page hereto.
9
(e) Severability. Any term or provision of this Agreement which is
------------
held to be invalid, illegal or unenforceable in any respect in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
(f) Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges a breach by it of any covenants or agreements contained in this
Agreement will cause the other party to sustain damages for which it would not
have an adequate remedy at law for money, damages, and therefore in the event of
any such breach the aggrieved party shall be entitled to the remedy of specified
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
(g) No Waiver. The failure of any party hereto to exercise any
---------
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, will not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(i) Governing Law. This Agreement will be governed and construed in
-------------
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
(j) Descriptive Heading. The descriptive headings used herein are
-------------------
for reference purposes only and
10
will not affect in any way the meaning or interpretation of this Agreement.
(k) Expenses. All costs and expenses incurred in connection with
--------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
(l) Further Assurances. From time to time, at any other party's
------------------
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
(m) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11
IN WITNESS WHEREOF, Parent, Merger Sub, and Stockholder have caused
this Agreement to be duly executed as of the day and year first written above.
XXX RESEARCH CORPORATION
By: ____________________________
Name:
Title:
OMEGA ACQUISITION CORPORATION
By: ____________________________
Name:
Title:
By: ____________________________
*
NUMBER OF EXISTING SHARES
BENEFICIALLY OWNED BY
STOCKHOLDER: ____________
ADDRESS OF STOCKHOLDER:
_____________________
* In the event this agreement covers shares held jointly or held individually
by related parties who will sign this together, each joint or related party
shall sign.
12
Exhibit B
(TA Associates)
STOCKHOLDER AGREEMENT
---------------------
STOCKHOLDER AGREEMENT (this "Agreement"), dated as of March 24, 1997,
by and among Xxx Research Corporation ("Parent"), Omega Acquisition Corporation,
a Delaware corporation and wholly owned subsidiary of Parent (the "Merger Sub"),
and the person or entity whose name appears on the signature page hereto as a
stockholder or optionholder of Ontrack Systems, Inc., a Delaware corporation
(the "Company") acting in his, her, or its capacity as a stockholder of the
Company and not in any other capacity ("Stockholder").
WHEREAS, immediately prior to the execution of this Agreement, Parent,
Merger Sub and the Company have entered into an Agreement and Plan of Merger of
even date herewith (the "Merger Agreement"), pursuant to which the parties
thereto have agreed, upon the terms and subject to the conditions set forth
therein, to merge the Company with and into Merger Sub (the "Merger"); and
WHEREAS, as of the date hereof, Stockholder is the record and
Beneficial Owner (as defined hereinafter) of the number of Existing Shares (as
defined hereinafter) of the Common Stock, $0.001 par value, of the Company (the
"Company Common Stock") set forth on the signature page hereto; and
WHEREAS, as inducement and a condition to entering into the Merger
Agreement, Parent has required Stockholder to agree, and Stockholder has agreed,
to enter into this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
Section 1. CERTAIN DEFINITIONS. In addition to the terms defined
elsewhere herein, capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement. For purposes of
this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities as determined
pursuant to Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a person
include securities Beneficially Owned by all other persons with whom such person
would constitute a "group" within the meaning of Section 13(d) of the Exchange
Act with respect to the securities of the same issuer.
(b) "Existing Shares" means shares of Company Common Stock
Beneficially Owned by Stockholder as of the date hereof.
(c) "Securities" means the Existing Shares together with any shares
of Company Common Stock or other securities of the Company acquired by
Stockholder in any capacity after the date hereof and prior to the termination
of this Agreement whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution, split-up, recapitalization, combination,
exchange of shares or the like, gift, bequest, inheritance or as a successor in
interest in any capacity or otherwise.
Section 2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.
Stockholder represents and warrants to Parent and Merger Sub as follows:
(a) Ownership of Shares. On the date hereof, Stockholder is the sole
-------------------
record and Beneficial Owner of the Existing Shares consisting of the number of
shares of Company Common Stock set forth on the signature page hereto. On the
date hereof, the Existing Shares constitute all of the shares of Company Common
Stock owned of record or Beneficially Owned by Stockholder. There are no
outstanding options or other rights to acquire from Stockholder or obligations
of Stockholder to sell or to acquire, any shares of Company Common Stock.
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 5, 7 and 8 hereof, sole power of
disposition, sole power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of the Existing Shares with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
2
(b) Power; Binding Agreement. Stockholder has the legal capacity,
------------------------
power and authority to enter into and perform all of Stockholder's obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by Stockholder and constitutes a valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) No Conflicts. Except for filings under the Xxxx-Xxxxx-Xxxxxx
------------
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the Exchange
Act, no filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority ("Governmental Entity") is necessary
for the execution of this Agreement by Stockholder and the consummation by
Stockholder of the transactions contemplated hereby, none of the execution and
delivery of this Agreement by Stockholder, the consummation by Stockholder of
the transactions contemplated hereby or compliance by Stockholder with any of
the provisions hereof shall (i) conflict with or result in any breach of any
organizational documents applicable to Stockholder, (ii) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Stockholder is a party or by which
Stockholder or any of its properties or assets may be bound, or (iii) violate
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to Stockholder or any of Stockholder's properties or
assets.
(d) No Encumbrance. Except as permitted by this Agreement, the
--------------
Existing Shares are now and, at all times during the term hereof, and the
Securities will
3
be, held by Stockholder, or by a nominee or custodian for the benefit of
Stockholder, free and clear of all mortgages, claims, charges, liens, security
interests, pledges or options, proxies, voting trusts or agreements,
understandings or arrangements or any other rights whatsoever ("Encumbrances"),
except for any such Encumbrances arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial
----------------
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Stockholder.
(f) Reliance by Parent. Stockholder understands and acknowledges
------------------
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon Stockholder's execution and delivery of this
Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Each of Parent and Merger Sub hereby, jointly and severally, represents and
warrants to Stockholder as follows:
(a) Power; Binding Agreement. Parent and Merger Sub each has the
------------------------
corporate power and authority to enter into and perform all of its obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a valid and binding
agreement of Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) No Conflicts. Except for filings under the HSR Act, the Exchange
------------
Act, no filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution of this Agreement by Parent
and Merger Sub and the consum-
4
mation by Parent and Merger Sub of the transactions contemplated hereby, and
none of the execution and delivery of this Agreement by each of Parent and
Merger Sub, the consummation by each of Parent and Merger Sub of the
transactions contemplated hereby or compliance by each of Parent and Merger Sub
with any of the provisions hereof shall (i) conflict with or result in any
breach of any organizational documents applicable to either Parent or Merger
Sub, (ii) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either Parent
or Merger Sub is a party or by which either Parent or Merger Sub or any of their
respective properties or assets may be bound, or (iii) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable to
either Parent or Merger Sub or any of their respective properties or assets.
Section 4. DISCLOSURE. Stockholder hereby agrees to permit Parent to
publish and disclose in the Registration Statement and the Joint Proxy Statement
(including all documents and schedules filed with the Securities and Exchange
Commission), and any press release or other disclosure document which Parent, in
its sole discretion, determines to be necessary or desirable in connection with
the Merger and any transactions related thereto, Stockholder's identity and
ownership of Company Common Stock and the nature of Stockholder's commitments,
arrangements and understandings under this Agreement.
Section 5. CERTAIN RESTRICTIONS.
(a) No Solicitation. Stockholder will not, and will cause its
---------------
affiliates, if any, and partners, investment bankers, attorneys, accountants and
other agents and representatives of Stockholder and such affiliates (such
affiliates, partners investment bankers, attorneys, accountants, agents and
representatives of any person are hereinafter collectively referred to as the
"Representatives" of such person) not to, directly or indirectly (i) initiate,
solicit or encourage, or take
5
any action to facilitate the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Acquisition Proposal or any inquiry with
respect thereto or (ii) in the event of any unsolicited Acquisition Proposal for
the Company or any affiliate of the Company, engage in negotiations or
discussions with, or provide any information or data to, any person (other than
Parent, any of its affiliates or representatives) relating to any Acquisition
Proposal. Stockholder will notify Parent orally and in writing of any such
offers, proposals, or inquiries relating to the purchase or acquisition by any
person of Securities (including, without limitation, the terms and conditions
thereof and the identity of the person making it), within 24 hours of the
receipt thereof. Stockholder will and will cause its Representative to
immediately cease and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any parties conducted heretofore
without respect to any Acquisition Proposal relating to the Company, other than
discussions or negotiations with Parent and its affiliates and their
Representatives. For purposes of this Agreement, the Company is not deemed to
be an Affiliate of Stockholder.
(b) Certain Actions. Prior to the termination of this Agreement,
---------------
Stockholder agrees not to, directly or indirectly, take any other action that
would make any representation or warranty of Stockholder contained herein untrue
or incorrect.
Section 6. COMPANY OPTIONS. If Stockholder holds Company Options to
acquire shares of Company Common Stock, Stockholder shall, if requested by the
Company, consent to the cancellation or substitution of Stockholders Company
Options in accordance with the terms of the Merger Agreement and shall execute
all appropriate documentation in connection with such cancellation or
substitution.
Section 7. VOTING OF COMPANY COMMON STOCK.
Stockholder hereby agrees that, during the period commencing on the date hereof
and continuing until the first to occur of (a) the Effective Time or (b) August
31, 1997; or (c) termination of this Agreement in accordance with its terms, at
any meeting (whether annual or special and whether or not an adjourned or
postponed meeting) of the holders of Company Common Stock, however called, or
6
in connection with any written consent of the holders of Company Common Stock,
Stockholder will appear at the meeting or otherwise cause the Securities to be
counted as present thereat for purposes of establishing a quorum and vote or
consent (or cause to be voted or consented) the Securities in favor of the
adoption of the Merger Agreement and the approval of other actions contemplated
by the Merger Agreement and this Agreement and any actions required in
furtherance thereof and hereof.
Section 8. PROXY.
(a) Stockholder hereby irrevocably grants to, and appoints, Parent
and Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxx or any of them in their respective
capacities as officers of Parent and any individual who shall hereafter succeed
to any such office of Parent and each of them individually, such Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of Stockholder, to vote the Securities, or grant a consent
or approval in respect of the Securities, in favor of the merger, as specified
in Section 7 hereof.
(b) Stockholder represents that any proxies heretofore given in
respect of the Existing Shares are not irrevocable, and that such proxies are
hereby revoked.
(c) Stockholder understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon such Stockholder's execution and
delivery of this Agreement. Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 8 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of Stockholder under this Agreement. Stockholder
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be done by
virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 212(e) of the Delaware
General Corporation Law.
7
Section 9. DISTRIBUTIONS. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of share or the like
other than pursuant to the Merger, the terms "Existing Shares and Securities"
will be deemed to refer to and include the shares of Company Common Stock as
well as all such stock dividends and distributions and any shares into which or
for which any or all of the Securities may be changed or exchanged and
appropriate adjustments shall be made to the terms and provisions of this
Agreement.
Section 10. BEST REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its best
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement and the Merger Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the Merger Agreement and the
transactions contemplated hereby and thereby.
Section 11. TERMINATION. This Agreement shall terminate on the
earlier to occur of: (a) the termination of the Merger Agreement; (b) the
agreement of the parties hereto to terminate this Agreement; or (c) the
consummation of the Merger.
Section 12. MISCELLANEOUS.
(a) Entire Agreement. This Agreement (including the documents and
----------------
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
(b) Successors and Assigns. This Agreement shall not be assigned by
----------------------
operation of law or otherwise without the prior written consent of the other
parties hereto. This Agreement shall be binding upon,
8
inure to the benefit of and be enforceable by each party and such party's
respective heirs, beneficiaries, executors, representatives and permitted
assigns.
(c) Amendment and Modification. This Agreement may not be amended,
--------------------------
altered, supplemented or otherwise modified or terminated except upon the
execution and delivery of a written agreement executed by the parties hereto.
(d) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by like notice):
If to Parent or Merger Sub, to:
Xxx Research Corporation
0000 Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
with a copy to:
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: M. Xxxx Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
If to Stockholder, to the address set forth on the signature page hereto.
9
(e) Severability. Any term or provision of this Agreement which is
------------
held to be invalid, illegal or unenforceable in any respect in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
(f) Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges a breach by it of any covenants or agreements contained in this
Agreement will cause the other party to sustain damages for which it would not
have an adequate remedy at law for money, damages, and therefore in the event of
any such breach the aggrieved party shall be entitled to the remedy of specified
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
(g) No Waiver. The failure of any party hereto to exercise any
---------
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, will not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(h) No Third Party Beneficiaries. This Agreement is not intended to
----------------------------
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(i) Governing Law. This Agreement will be governed and construed in
-------------
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof.
(j) Descriptive Heading. The descriptive headings used herein are
-------------------
for reference purposes only and
10
will not affect in any way the meaning or interpretation of this Agreement.
(k) Expenses. All costs and expenses incurred in connection with
--------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
(l) Further Assurances. From time to time, at any other party's
------------------
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
(m) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11
IN WITNESS WHEREOF, Parent, Merger Sub, and Stockholder have caused
this Agreement to be duly executed as of the day and year first written above.
XXX RESEARCH CORPORATION
By: ____________________________
Name:
Title:
OMEGA ACQUISITION CORPORATION
By: ____________________________
Name:
Title:
By: ____________________________
*
NUMBER OF EXISTING SHARES
BENEFICIALLY OWNED BY
STOCKHOLDER: ____________
ADDRESS OF STOCKHOLDER:
______________________
* In the event this agreement covers shares held jointly or held individually
by related parties who will sign this together, each joint or related party
shall sign.
12
Exhibit C-1
[Letterhead of
WOOL]
___________, 1997
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of March __,
1997, by and among ________________ [WOOL], a Delaware corporation ("Parent"),
___________________ [OTTER], a Delaware corporation (the "Company"), and OTTER
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), WOOL represents, to the best of its knowledge and belief, after
due inquiry and investigation, as follows (any capitalized term used but not
defined herein shall have the meaning given to such term in the Merger
Agreement):
1. The fair market value of the Parent stock and other consideration
received by each Company shareholder will be approximately equal to the fair
market value of the Company stock surrendered in the exchange.
2. Following the transaction, Company will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair market
value of its gross assets and at least 90 percent of the fair market value of
Sub's net assets and at least 70 percent of the fair market value of the Sub's
gross assets held immediately prior to the transaction. For purposes of this
representation, amounts paid by Company or Sub to dissenters, amounts paid by
Company or Sub to shareholders who receive cash or other property, amounts used
by Company or Sub to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by Company will be
included as assets of Company or Sub, respectively, immediately prior to the
transaction.
3. To the best of the knowledge of the management of Parent, there is no
plan or intention on the part of the shareholders of Company to sell, exchange,
or otherwise dispose of a number of shares of Parent stock received in the
transaction that would reduce the Company shareholders' ownership of Parent
stock to a number of shares having a value, as of the date of the transaction,
of less than 50 percent of the value of all of the formerly outstanding stock of
Company as of the same date. Shares of Company stock and shares of Parent stock
held by Company shareholders and otherwise sold, redeemed, or disposed of prior
to or subsequent to the transaction will be considered as formerly outstanding
stock of Company for purposes of making this representation.
4. The facts relating to the contemplated merger (the "Merger") of Sub
with and into the Company pursuant to the Merger Agreement, as described in the
Merger Agreement, the documents described in Section 8.6 of the Merger Agreement
and the joint proxy statement/prospectus prepared by Parent and the Company,
are, insofar as such facts pertain to Parent and Sub, true, correct and complete
in all material respects.
5. Except pursuant to the Merger, neither Parent nor Sub (nor any other
subsidiary of Parent) has acquired or prior to the Merger will acquire, or has
owned in the past five years, any shares of common stock of the Company
("Company Common Stock").
6. Cash payments to be made to stockholders of the Company in lieu of
fractional shares of common stock of Parent ("Parent Common Stock") that would
otherwise be issued to such stockholders in the Merger will be made for the
purpose of saving Parent the expense and inconvenience of issuing and
transferring fractional shares of Parent Common Stock, and do not represent
separately bargained for consideration
7. Prior to the Merger, Parent will own all the capital stock of Sub.
Parent has no plan or intention to cause the Company to issue additional shares
of its stock that would result in Parent owning less than all the capital stock
of the Company after the Merger.
8. Parent has no plan or intention, following the Merger, to reacquire any
of the Parent Common Stock issued in the Merger.
9. Parent has no plan or intention, following the Merger, to liquidate the
Company, to merge the Company with and into another corporation, to sell or
otherwise dispose of any of the stock of the Company, or to cause the Company to
sell or
2
otherwise dispose of any of the assets held by the Company at the time of the
Merger, except for dispositions of such assets in the ordinary course of
business; provided, however, that Parent may transfer assets or stock of the
Company in a manner that is consistent with Section 368(a)(2)(C) of the Internal
Revenue Service Code of 1986, as amended (the "Code").
10. Sub will have no liabilities assumed by Company, and will not transfer
to Company any assets subject to liabilities, in the Merger.
11. Except as provided in Sections 7.2 and 8.2 of the Merger Agreement,
Parent and Sub will each pay their respective expenses, if any, incurred in
connection with the Merger.
12. Following the Merger, Parent intends to cause the Company to continue
its historic business or use a significant portion of its historic business
assets in a business.
13. Neither Parent nor Sub is an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
14. Neither Parent nor Sub will take any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local income or franchise tax law.
15. None of the compensation received by any stockholder-employee of the
Company in respect of periods after the Effective Time represents separate
consideration for, or is allocable to, any of their Company Common Stock. None
of the Parent Common Stock that will be received by Company stockholder-
employees in the Merger represents separately bargained for consideration which
is allocable to any employment agreement or arrangement. The compensation paid
to any shareholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
16. No stock of Sub will be listed in the Merger.
17. There is no intercorporate indebtedness existing between Parent and
the Company or between Sub and the Company that was issued or acquired, or will
be settled, at a discount.
18. The Merger Agreement and the documents described in Section 8.6 of the
Merger Agreement represent the entire understanding of the Company, Parent and
Sub with respect to the Merger.
3
19. Sub is a corporation newly formed for the purpose of participating in
the Merger and at no time prior to the Merger has had assets (other than nominal
assets contributed upon the formation of Sub, which assets will be held by the
Company following the Merger) or business operations. Sub will have no
liabilities assumed by the Company, and will not transfer to the Company any
assets subject to liabilities in the Merger.
20. The Company Common Stock will be surrendered pursuant to the Merger in
an arms-length exchange, and the Parent Common Stock received in exchange
therefor represents the sole bargained-for consideration therefor.
21. In the Merger, shares of Company stock representing control of
Company, as defined in Section 368(c) of the Code, will be exchanged solely for
voting stock of Parent. For purposes of this representation, any shares of
Company stock exchanged for cash or other property originating with Parent will
be treated as outstanding Company stock on the date of the transaction.
22. Company will pay any of its dissenting shareholders the value of their
shares out of its own funds. No funds will be supplied for that purpose,
directly or indirectly, by Sub or Parent, nor will Sub or Parent directly or
indirectly reimburse Company for any payments to dissenters.
23. At the time the Parent Rights Plan was adopted, the possibility of
exercise of the rights under such plan was remote and speculative, and such
possibility is remote and speculative as of the date of this letter.
The above representations are given for the benefit of Parent, Company and
the shareholders of Company, with the understanding that such representations
will form a basis for your opinions regarding certain of the federal income tax
consequences of the Merger, and that you will rely upon these representations
without attempting independently to verify their accuracy or completeness.
WOOL,
By: ___________________________
Its:___________________________
4
Exhibit C-2
[Letterhead of
OTTER]
___________, 1997
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of March __,
1997, by and among _________________, a Delaware corporation [WOOL] ("Parent"),
___________________, a Delaware corporation [OTTER] (the "Company"), and OTTER
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), OTTER represents, to the best of its knowledge and belief, after
due inquiry and investigation, as follows (any capitalized term used but not
defined herein shall have the meaning given to such term in the Merger
Agreement):
1. The fair market value of the Parent stock and other consideration
received by each Company shareholder will be approximately equal to the fair
market value of the Company stock surrendered in the exchange.
2. The facts relating to the contemplated merger (the "Merger") of Sub
with and into the Company pursuant to the Merger Agreement, as described in the
Merger Agreement, the documents described in Section 8.6 of the Merger Agreement
and the joint proxy statement/prospectus prepared by Parent and the Company,
are, insofar as such facts pertain to the Company, true, correct and complete in
all material respects.
3. Neither the Company nor any of its subsidiaries has acquired any shares
of the common stock of the Company ("Company
Common Stock") in contemplation of the Merger, or otherwise as part of a plan of
which the Merger is a part. For purposes of this representation, Company Common
Stock acquired in the ordinary course of business in connection with employee
incentive and benefit plans, programs or arrangements in existence on the date
hereof shall not be treated as an acquisition in contemplation of the Merger or
otherwise as part of a plan of which the Merger is a part.
4. The Company knows of no present plan or intention on the part of the
holders of Company Common Stock to sell, exchange or otherwise dispose of,
substantially eliminate the risk of loss or the opportunity for gain (by short
sale or otherwise) from the holding of, enter into any contract or other
arrangement with respect to, the sale, exchange or other disposition of (each of
the foregoing, a "disposition"), any interest in the shares of common stock of
the Parent ("Parent Common Stock") received in the Merger in exchange for such
Company Common Stock that would reduce the ownership of Parent Common Stock by
former holders of Company Common Stock to a number of shares having a value, as
of immediately prior to the merger, of less than 50% of all of the outstanding
shares of Company Common Stock as of such date. For purposes of this
representation, any disposition of Parent Common Stock will be treated as a
reduction in ownership thereof. In addition, for purposes of this
representation, shares of Company Common Stock exchanged by holders of Company
Common Stock for cash in lieu of fractional shares of Parent Common Stock will
be treated as outstanding Company Common Stock immediately prior to the Merger.
Moreover, for purposes of this representation, shares of Company Common Stock
and shares of Parent Common Stock received in the Merger and sold, redeemed or
disposed of prior to or subsequent to the Merger, in contemplation thereof or as
part of a plan therewith, will be considered in making this representation.
5. Except as provided in Sections 7.2 or 8.2 of the Merger Agreement, the
Company and the stockholders of the Company will each pay their respective
expenses, if any, incurred in connection with the Merger.
6. Following the Merger, the Company will hold at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair market
value of the gross assets the Company held immediately prior to the Merger. For
purposes of this representation, amounts paid by Company or Sub to dissenters,
amounts paid by Company or Sub to shareholders who receive cash or other
property, amounts used by Company or Sub to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by
Company will be included as assets of Company or Sub, respectively, immediately
prior to the transaction.
2
7. Except pursuant to the OTTER 1992 Stock Option Plan, the OTTER 1995
Director Stock Option Plan, the OTTER 1996 Equity Incentive Plan, or the OTTER
1995 Employee Stock Purchase Plan, immediately prior to the time of the Merger,
the Company will not have outstanding any warrants, options, convertible
securities or any other type of right pursuant to which any person could acquire
stock of the Company ("Company Stock").
8. In the Merger, shares of Company Stock representing at least 80% of the
total combined voting power of all classes of Company Stock outstanding on the
date of the Merger, and at least 80% of the total number of each other class of
Company Stock outstanding on the date of the Merger will be exchanged solely for
Parent Common Stock. For purposes of this representation, shares of Common
Stock exchanged for cash or other property originating with Parent will be
treated as outstanding stock of the Company on the date of the Merger.
9. The Company has no plan or intention to issue additional shares of its
stock that would result in Parent losing control of Company within the meaning
of Section 368(c) of the Code.
10. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code").
11. The Company will not take, and the Company is not aware of any plan or
intention of Company stockholders to take, any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local income or franchise tax law.
12. None of the compensation received by any stockholder-employee of the
Company in respect of periods at or prior to the Effective Time represents
separate consideration for, or is allocable to, any of their Company Common
Stock. None of the Parent Common Stock that will be received by Company
stockholder-employees in the Merger represents separately bargained for
consideration which is allocable to any employment agreement or arrangement.
The compensation paid to any shareholder-employees will be for services actually
rendered and will be determined by bargaining at arm's-length.
13. There is no intercorporate indebtedness existing between Parent and
the Company or between Sub and the Company that was issued or acquired, or will
be settled, at a discount.
3
14. The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. The Merger Agreement and the documents described in Section 8.6 of the
Merger Agreement represent the entire understanding of the Company, Parent and
Sub with respect to the Merger.
16. The Company Common Stock will be surrendered pursuant to the Merger in
an arms-length exchange, and the Parent Common Stock received in exchange
therefor represents the sole bargained-for consideration therefor.
The above representations are given for the benefit of Parent, Company and
the shareholders of Company, with the understanding that such representations
will form a basis for your opinions regarding certain of the federal income tax
consequences of the Merger, and that you will rely upon these representations
without attempting independently to verify their accuracy or completeness.
OTTER,
By:____________________________
Its:___________________________
4
Exhibit D
[Letterhead of
OTTER Stockholder]
___________, 1997
Shartsis, Xxxxxx & Xxxxxxxx LLP
Xxx Xxxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Heller, Ehrman, White & XxXxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") dated as of March __,
1997, by and among ___________________ [WOOL], a Delaware corporation
("Parent"), ___________________ [OTTER], a Delaware corporation (the "Company"),
and OTTER Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), the undersigned certifies (to the best of his, her
or its knowledge and belief, where indicated), after due inquiry and
investigation, as follows:
1. The undersigned has no present plan or intention to sell, exchange or
otherwise dispose of, substantially eliminate the risk of loss or the
opportunity for gain (by short sale or otherwise) of the holding of, enter into
any contract or other arrangement with respect to, the sale, exchange or other
disposition of (each of the foregoing, a "disposition"), any interest in the
shares of Parent common stock received in the merger contemplated by the Merger
Agreement (the "Merger"). For purposes of this representation, shares of
Company common stock and shares of Parent common stock received in the Merger
and sold, redeemed or disposed of prior to or subsequent to the Merger, in
contemplation thereof or as part of a plan therewith, will be considered in
making this representation.
2. The undersigned will not take any position on any Federal, state or
local income or franchise tax return, or take any
other tax reporting position, that is inconsistent with the treatment of the
Merger as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local income or franchise tax law.
[OTTER
STOCKHOLDER]
By: _______________________
2
Exhibit E-1
______________, 1997
Wool Corporation
[Address]
Ladies and Gentlemen:
I* am a holder of shares of common stock, par value $0.0001 per
share ("Company Common Stock"), of Otter Corporation, a Delaware corporation
(the "Company"). I am aware that pursuant to the terms of the Agreement and
Plan of Merger, dated as of March __, 1997 (the "Merger Agreement") among the
Company, Wool Corporation, a Delaware corporation ("Parent"), and Otter
Acquisition Corp., a wholly-owned subsidiary of Parent ("Merger Sub"), Merger
Sub will be merged (the "Merger") with and into the Company with the Company
continuing as the surviving corporation, and each of the shares of Company
Common Stock owned by me as of the time of such Merger shall be converted into
shares of common stock, par value $0.001 per share ("Parent Common Stock"), of
Parent.
I understand and agree that it is intended that the Merger will be
treated as a "pooling-of-interests" in accordance with generally accepted
accounting principles and the applicable General Rules and Regulations ("Rules
and Regulations") published by the Securities and Ex change Commission ("SEC").
I have been advised that as of the date hereof, I may be deemed an "affiliate"
of the Company, (i) for application of the pooling-of-interests requirements and
(ii) within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), although nothing
contained herein should be construed as an admission of either such fact.
If in fact I am deemed an "affiliate" under the Securities Act, my
ability to sell, assign or transfer Parent Common Stock received by me in
exchange for any shares of Company Common Stock pursuant to the Merger may be
restricted unless such transaction is registered under the Securities Act or an
exemption from such registration is available. I understand that such
exemptions are limited and I have obtained advice of counsel as to the
provisions of this letter agreement as well as the nature and conditions of such
exemptions, including information
_______________________
* To be conformed for institutional holders.
_________________, 1997
Page 2
with respect to the applicability to the sale of such securities of Rule 145(d)
promulgated under the Securities Act, to the extent applicable.
I have been informed and understand that the treatment of the Merger
as a pooling-of-interests for financial accounting purposes is dependent upon
the accuracy of my representations and warranties set forth herein, and upon my
compliance with the covenants set forth herein. I understand that the
representations and warranties and covenants set forth herein will be relied
upon by the Company, Parent, their respective counsel and accounting firms and
stockholders of the Company and Parent.
In connection with the above transactions, I represent and warrant to
Parent and agree that:
A. I have full power and authority to execute this agreement, to make
the representations, warranties and covenants herein contained and to perform my
obligations hereunder.
B. I have been advised that the issuance of Parent Common Stock to me
pursuant to the Merger will be registered with the SEC under the Securities Act
on a Registration Statement on Form S-4. I have also been advised, however,
that because I may be deemed to have been an "affiliate" of the Company at the
time the Merger was submitted for a vote of the stockholders of the Company, and
because any distribution by me of Parent Common Stock has not been registered
under the Securities Act, I may not sell, transfer, exchange, pledge, or
otherwise dispose of, or make any offer or agreement relating to any of the
foregoing with respect to, any Restricted Securities, or any option, right or
other interest with respect to any Restricted Securities, (as defined
hereinafter) unless (i) such transaction is permitted pursuant to Rules 145(c)
and 145(d) under the Securities Act, (ii) counsel reasonably satisfactory to
Parent shall have advised Parent in a written opinion letter satisfactory to
Parent and Parent's legal counsel, and upon which Parent and its legal counsel
may rely, that no registration under the Securities Act would be required in
connection with the proposed sale, transfer or other disposition, (iii) a
registration statement under the Securities Act covering the Restricted
Securities proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a
2
______________, 1997
Page 3
current prospectus, shall have been filed with the SEC and made effective under
the Securities Act, or (iv) an authorized representative of the SEC shall have
rendered written advice to me (sought by me or counsel representing me, with a
copy thereof and all other related communications delivered to Parent) to the
effect that the SEC would take no action, or that the Staff of the SEC would not
recommend that the SEC take action, with respect to the proposed disposition if
consummated.
C. I have no present plan or intent to dispose of the Parent Common
Stock acquired by me pursuant to the Merger, or any securities that may be paid
as a dividend or otherwise distributed thereon or with respect thereto or issued
or delivered in exchange or substitution therefor (all such shares and other
securities of Parent being herein sometimes collectively referred to as
"Restricted Securities") and I shall not formulate prior to the Effective Time
any such plan or intent to dispose of such Restricted Securities.
D. I will not make any sale, transfer or other disposition of
Restricted Securities in violation of the Securities Act or the Rules and
Regulations.
E. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of Restricted Securities by me or on my
behalf under the Securities Act or to take any other action necessary in order
to make compliance with an exemption from such registration available.
F. Notwithstanding any other provision of this Agreement to the
contrary, except (i) with the prior written consent of Parent, for sales of a de
minimus number of shares of Restricted Securities, which, in the judgment of
Parent, would not prevent the Merger from being accounted for as a pooling of
interests under the requirements of Staff Accounting Bulletin No. 76 of the SEC
or (ii) as otherwise permitted by the Merger Agreement, I will not sell,
transfer, exchange, pledge or otherwise dispose of, or in any other way reduce
my risk of ownership or investment in, or make any offer or agreement relating
to any of the foregoing with respect to any Restricted Securities or other
securities of Parent (i) during the 30-day period immediately preceding the
Effective Time and (ii) until such time after the Effective Time as Parent has
publicly announced the combined financial results of Parent for a period of at
least 30 days of combined operations of Parent and the
3
__________________, 1997
Page 4
Company within the meaning of Accounting Series Release No. 135, as amended, of
the SEC.
G. From and after the Effective Time and for so long as is necessary
in order to permit me to sell the Restricted Securities held by and pursuant to
Rule 145 and, to the extent applicable, Rule 144 under the Securities Act,
Parent will use its best efforts to file on a timely basis all reports required
to be filed by it pursuant to Section 13 of the Securities Exchange Act of 1934,
as amended, referred to in paragraph (c)(1) of Rule 144 under the Securities
Act. Parent is under no obligation to register the sale, transfer or other
disposition of any Restricted Securities by me or on my behalf.
H. I understand that, in addition to the restrictions imposed under
this agreement, the provisions of Rule 145 limit any public resale by me of
Restricted Securities and that the restrictive legends described below will be
placed upon the Restricted Securities.
1. I understand that stop transfer instructions will be given to
the registrar of the certificates for the shares of Parent Common Stock and
that there will be placed on the certificates for the shares of Parent Common
Stock, or any substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION (THE ACQUISITION OF OTTER CORPORATION) TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
APPLIES AND MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE
WITH THE LIMITATIONS OF SUCH RULE 145, OR UPON RECEIPT BY WOOL
CORPORATION, OF AN OPINION OF COUNSEL ACCEPTABLE TO IT THAT SOME OTHER
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE, OR PURSUANT
TO A REGISTRATION STATEMENT UNDER THE ACT. THE SHARES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED PRIOR TO THE
PUBLICATION BY WOOL CORPORATION OF FINANCIAL RESULTS COVERING AT LEAST
30 DAYS OF OPERATIONS SUBSEQUENT TO THE EFFECTIVE DATE OF THE MERGER.
4
________________, 1997
Page 5
Parent agrees to remove such legend to the extent that shares
evidenced by such certificates may properly be sold by me pursuant to this
agreement.
2. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.
I. I hereby agree that, for a period of one (1) year following the
effective date of the Merger, I will obtain an agreement similar to this
agreement from each transferee of the shares of Parent Common Stock sold or
otherwise transferred by me, but only if such sale or transfer is effected other
than in a transaction involving a registered public offering or as a sale
pursuant to Rule 145.
It is understood and agreed that this agreement will terminate and be
of no further force and effect and the legends set forth in Paragraph H above
will be re moved by delivery of substitute certificates without such legends,
and the related transfer restrictions shall be lifted forthwith, if the period
of time specified in Paragraph F of this agreement has passed and (i) my shares
of Parent Common Stock shall have been registered under the Securities Act for
sale, transfer, or other disposition by me or on my behalf, (ii) I am not at the
time an "affiliate" of Parent and have held the shares of
5
_____________, 1997
Page 6
Parent Common Stock for at least one (1) year** (or such other period as may be
prescribed by the Securities Act and the Rules and Regulations) and Parent has
filed with the SEC all of the reports it is required to file under the
Securities Exchange Act of 1934, as amended, during the preceding 12 months,
(iii) I am not and have not been for at least three (3) months an "affiliate" of
Parent and I have held the shares of Parent Common Stock for at least two (2)
years,/1/ or (iv) Parent shall have received a letter from the staff of the SEC,
or an opinion of counsel acceptable to Parent, to the effect that the stock
transfer restrictions and the legend are not required.
This agreement may be executed in several counterparts, each of which
shall constitute one in the same instrument.
This agreement shall be binding on my heirs, legal representatives,
and successors.
Very truly yours,
------------------------------------------
Name***:
Title:
Accepted this __ day of March, 1997
WOOL CORPORATION
By:
---------------------------------
_______________
** The Holding Period provisions of Rule 145(d) for Restricted Securities have
been amended to a one-year, rather than a two-year, holding period for
affiliates, and non-affiliates may resell after a two-year, rather than a three-
year, holding period; Amendments take effect in 60 days from February 26, 1997.
In the event this undertaking covers shares held jointly or held
individually by related parties who will sign this together, each joint or
related party shall sign.
6
Exhibit E-2
__________________, 1997
Xxx Research Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Xxx Research Corporation, a Delaware corporation
("Parent"), as the term "affiliate" is defined for purposes of Accounting
Series Releases 130 and 135, as amended, of the Securities and Exchange
Commission ("SEC"). Pursuant to the terms of the Agreement and Plan of Merger
dated as of March 24, 1997 (the "Merger Agreement") among Parent, OnTrak
Systems, Inc. (the "Company"), and Omega Acquisition Corporation, a wholly-
owned subsidiary of Parent ("Merger Sub"), Merger Sub will be merged with and
into the Company (the "Merger").
I understand and agree that it is intended that the Merger will be
treated as a "pooling-of-interests" in accordance with generally accepted
accounting principles and the applicable General Rules and Regulations ("Rules
and Regulations") published by the SEC. I have been advised that as of the date
hereof, I may be deemed an "affiliate" of Parent, (i) for application of the
pooling of interests requirements and (ii) within the meaning of Rule 145 ("Rule
145") promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), although nothing contained herein should be construed as an admission of
either such fact.
I have been informed and understand that the treatment of the Merger
as a pooling-of-interests for financial accounting purposes is dependent upon
the accuracy of my representations and warranties set forth herein, and upon my
compliance with the covenants set forth herein. I understand that the
representations and warranties and covenants set forth herein will be relied
upon by Parent, the Company, their respective counsel and
__________________, 1997
Page 2
accounting firms and stockholders of Parent and the Company.
I represent to, and covenant with, Parent that, except (i) with the
prior written consent of Parent for sales of a de minimus number of shares of
common stock of Parent ("Parent Common Stock"), which, in the judgment of
Parent, would not prevent the Merger from being accounted for as a pooling of
interests under the requirements of Staff Accounting Bulletin No. 76 of the SEC
or (ii) as otherwise permitted by the Merger Agreement, I will not sell,
transfer, exchange, pledge or otherwise dispose of, or in any other way reduce
my risk of ownership or investment in, or make any offer or agreement relating
to any of the foregoing with respect to any Parent Common Stock or other
securities of Parent (i) during the 30-day period immediately preceding the
Effective Time and (ii) until such time after the Effective Time as the Company
has publicly announced the combined financial results of the Company for a
period of at least 30 days of combined operations of Parent and the Company
within the meaning of Accounting Series Release No. 135, as amended, of the SEC.
2
___________________, 1997
Page 3
This agreement may be executed in several counterparts, each of which
shall constitute one in the same instrument.
This agreement shall be binding upon my heirs, legal representatives,
and successors.
Very truly yours,
-----------------------------------------
Name/1/:
Agreed this ___ day
of _________, 1997, by
XXX RESEARCH CORPORATION
By
------------------------
Name:
Title:
------------------------
/1/ In the event this undertaking covers shares held jointly or held
individually by related parties who will sign this together, each joint or
related party shall sign.
3
